You’ve Got A Friend

Another survey notes the softening in Dubai’s realty sector and expectations that it will continue into 2018. Core Savills points to increased competition between older and new units and weak tenant demand as drivers for modest rental declines in Dubai. However, it does expect sales prices, at the higher end of the market, to remain resilient. The consultancy reported that Q3 handovers of 6k were noticeable higher than the 3.5k in Q2; their forecast for 2017 is 17.8k, largely in the mid-market segment.

Similar figures are coming from Asteco’s latest report that estimates that just under 15k apartments will be handed over by the end of the year, compared to 8.8k in 2016. The company expects that Q1 2018 will see a significant amount of supply that had been previously forecast for 2017 but delayed either intentionally, through phasing considerations, or because of construction / financial issues. Q3 apartment prices remained flat but on an annual basis were 4% off. However certain locations showed some bigger losses – such as 8% lower in Business Bay and Dubai Marina and 7% down in Dubai Sports City, International City and Jumeirah Village. On the other side, The Greens and DIFC remained almost the same year on year.

A third report by Chestertons MENA indicated that the value of off-plans sales surged 118% to US$ 1.1 billion in Q3, with transactions 86% higher. This had a negative knock-on effect on completed units which witnessed a 19.0% decline in value and 11.0% fall in transaction numbers. The consultancy reported that The Greens (at 13%) and Dubai Marina, 2%, were the only Dubai locations where apartment prices rose in Q3; the average decline for the quarter was 2%, with one of the worst performers being Dubai Silicon Oasis, off 9%. Rentals fell on average by 3%. It also confirmed that villa sales prices had been relatively resilient, although The Meadows and The Springs had seen falls of 7%. There were marginal falls in villa rentals, except for 3 BR registering a 4% hike.

Business in New Dubai and Dubai South appears to be going well for Damac Properties, as it announces that it has sold over 80% of its hotel apartment projects there. They include two buildings in the former location – Damac Maison de Ville Tenora and Damac Maison de Ville Celestia – and in Jumeirah Village Circle, Tower 108 and Ghalia. All are due for completion next year. (Dubai South is expected to be home for more than one million residents when completed). Damac has also announced, that as phase 1 of its Just Cavalli villas has also sold out, it will launch the second phase this Saturday, with prices starting at US$ 354k. The project is located in Damac’s golf development, Akoya Oxygen.

Binghatti Developers has announced that it will complete five projects, totalling US$ 272 million, by the end of the year. One of the projects was a juice and food factory in Abu Dhabi but the others are to be found in Dubai, including three residential – Binghatti Views, Binghatti Horizon and Binghatti Court in Jumeirah Village Circle – and a factory in Dubai Silicon Oasis. Currently, the developer has 30 projects underway in various Dubai locations that will add 6k units to the emirate’s property portfolio.

Azizi Developments has announced a massive 33 million sq ft US$ 6.8 billion community project, located in the heart of Dubai. Work will start on the yet unnamed project next month with completion slated by 2020. It will comprise of 105 mid-rise and high-rise residential buildings, with 30k apartments, as well as retail, hospitality and educational facilities.

The Mohammad Bin Rashid Housing Establishment is to build 523 residential units in Khwaneej Second and Al Warqaa Fourth, at a cost of US$ 141 million. Completion is expected by 2020. The organisation is planning to build a total of 1.8k units over the next four years under the grants and loans system.

Multiplex Constructions has won an Emaar contract to build a 77-storey twin tower project. The mixed use development will comprise a 217-key Address Jumeirah Resort + Spa hotel, Address Residences Jumeirah Resort + Spa and The Residences Jumeirah Dubai. Emaar Properties has also launched its twin-tower Vida Zabeel project to be completed by 2020.

So as to focus more on projects that would be ready for Expo 2020, Dubai Holding has put its US$ 20 billion Jumeirah Central project on hold and are “re-evaluating” plans. The massive 47 million sq ft project, launched last year, was planned to comprise 278 buildings including 3k apartments, 2.8k hotel rooms, 9 million sq ft commercial space and 33 parks. One project that is going ahead is the US$ 1.8 billion Marsa Al Arab, the man-made island adjacent to the Burj Al Arab.

Oriental Pearls has started work on a US$ 954 million residential project in Dubai.

Reign Holdings’ subsidiary, Arthur & Hardman, is planning a US$ 1 billion investment in regional realty. Prior to Expo 2020, the Dubai-based company hopes to have delivered 1k 4-star hotel apartment units in Jumeirah Village Circle; it has already 400k units in its Dubai Sports City Giovanni Boutique Suites portfolio. Future plans will see developments in Business Bay, Dubai Marina, Meydan and Palm Jumeirah.

DP World is investing a further US$ 17 million for a 2.7km dual carriage way in its Jebel Ali Free Zone. The road, to be designed and built by the Dutch Royal BAM Group, will connect the port’s latest Container Terminal 4 to the city’s existing road network, and will include two bridges.

As part of the National Innovation Strategy, DEWA became the first regional entity to set up a Silicon Valley investment company to study opportunities linked to R&D and innovation. JEI Silicon Valley will act as a conduit to develop commercial relationships with US R&D networks and universities.

UAE’s first hydrogen plant was opened in Dubai Festival City. An Al Futtaim Motors’ initiative – with France’s Air Liquide – it is part of an experimental programme to test the utility of zero-emission technology on the country’s roads.

In August, Dubai Aerospace Enterprise, a major global aircraft lessor, acquired Dublin-based Awas for which it secured financing of US$ 2.3 billion, through a senior bond issue. Now it is reported that the government-controlled company is preparing to soon seek an Islamic bond issue as part of a strategy to diversify its funding.

This year’s November Dubai Air Show is expected to be much bigger than the last one in 2015. There will be 20% more exhibitors – at 1.2k -with visitor numbers slated to be 15% more at 72.5k. Whether deals will match the 2015 mark of US$ 37.3 billion remains to be seen but Boeing may see some orders as it will be displaying its first 787-10X test aircraft and flydubai will have a new 737 MAX on display.

According to Payfort, the ME witnessed a 22.1% jump in on-line transactions last year to US$ 30.4 billion, with Saudi Arabia showing a 27% increase, Egypt (22%) and UAE (21%). Trade from the UAE, at US$ 12.4 billion, accounted for 40.8% of the total in the seven countries surveyed, with Saudi Arabia (US$ 8.3 billion) and Egypt (US$ 6.2 billion) some way behind. “Events and entertainment” was the fastest growing sector with a 33.0% year on year increase.

Brand Finance has ranked the UAE, at US$ 594 billion, as the 21st in the world when it comes to international brand value and the best in the region. However, it is still some way behind the inevitable number one – US, with a value of US$ 21.1 trillion, followed by China and Germany.

A UK court, in agreeing with EU legislation, has found against Emirates (and other international airlines) that passengers can claim compensation for flight delays. The decision was based on a 2004 law that entitles up to US$ 700 for passengers whose flights have been delayed. The common perception among international airlines was that the legislation did not apply to long-haul flights with connections at EU airports. Not surprisingly, the Dubai airline is reportedly taking further legal advice.

The Investment Corporation of Dubai has listed a US$ 200 million bond on Nasdaq Dubai that follows a similar US$ 300 million facility set up in May 2014. The issuance was made under the sovereign wealth fund’s Euro Medium Note Programme of US$ 2.5 billion.

CBD posted a 5.1% decline in nine-month profit to US$ 181 million, driven by higher general provisions, as a result of loan growth and a 45.3% hike in additional net impairment provisions of US$ 178 million. However, operating income was 10.9% higher at US$ 540 million, of which net interest income accounted for US$ 368 million. There were marked year on year increases in the bank’s total assets (10.9% higher at US$ 18.8 billion) and loans/advances, up 14.9% to US$ 12.9 billion.

Damac posted a 20.3% decline in Q3 profit to US$ 196 million – its third consecutive quarterly fall – despite a 31.0% surge in revenue to US$ 624 million, as cost of revenue rose to US$ 354 million. YTD, the developer has delivered 1.9k units of which 1.1k were in Damac Hills, whilst the balance were delivered in Riyadh and Amman.

The robust 96.2% growth in 9-months’ revenue to US$ 140 million was not reflected in Deyaar Development’s bottom line of US$ 27 million, down 40.1% year on year. The main driver behind this decline was a write-back of provision for impairment of investment in an associated entity. The company announced that two of its flagship projects – The Atria and Mont Rose – were more than 80% complete.

Nine-month profit for Mashreq saw a 12.0% jump to US$ 463 million, helped by a 30% fall in impairment provisions. As at 30 September, both the bank’s total assets and customer deposits remained stable at US$ 33.2 billion and US$ 20.7 billion, with a 6.0% hike in advances to US$ 17.6 billion. Q3 figures showed a 35.2% increase in profit to US$ 152 million, as impairment allowances fell by 44% to US$ 72 million.

The DFM opened Sunday (15 October), at 3660 and by the end of the week had only moved by 13 points to close on Thursday, 19 October, at 3673. Volumes also improved this week, with trading of 709 million shares, valued at US$ 250 million, (cf 467 million shares for US$ 144 million, on Thursday, 12 October). Emaar Properties was flat at US$ 2.38, with Arabtec nudging US$ 0.01 lower to US$ 0.81.

By Thursday, Brent Crude was US$ 0.98 (1.7%) higher on the week, closing at US$ 57.23, with gold moving US$ 7 lower to US$ 1,290 by 19 October 2017.

Mining behemoth Rio Tinto’s troubles from its 2011 Mozambique US$ 3.7 billion coal purchase continue. It has already been fined US$ 35 million by UK authorities for breaches of disclosure rules and now a US law suit has been filed.  It accuses the company – as well as its then chief executive, Thomas Albanese, and CFO, Guy Elliott – of failing to follow accounting standards to accurately value the assets. It is alleged that following the purchase, the mining company realised that both production and quality were less than expected and so hid losses by inflating the value of these coal assets which were subsequently sold for a mere US$ 50 million!

Another mining giant, BHP, also has hassles. It is involved in an on-going US$ 875 million tax dispute with the Australian Tax Office relating to its Singapore marketing hub; in a parliamentary debate, former Treasurer, Wayne Swan, said that BHP had operated at the ‘evasion end’ of the tax spectrum for over a decade.

The UK’s FCA (Financial Conduct Authority) is still investigating the role Barclays Plc’s CEO, Jes Staley, played in attempting to unmask a whistle-blower. In the possible (but unlikely) event that the authorities find that he is unfit to lead a financial institution, Barclays will be looking for a new leader. This is not the only problem facing the international lender as it has legal fights on two fronts. The first is the multi-billion-dollar fine from the US Justice Department for its role in selling mortgage bonds prior to the GFC. The other involves four executives set to stand trial in 2019 on fraud allegations over the bank’s 2008 fund-raising with Qatar.

After 10 months of waiting to find out whether its US$ 15.8 billion bid for affiliated satellite giant Sky has been successful, 21st Century Fox is still awaiting the final decision. Even though the EC regulators approved the deal in April, the UK government will not sign off until the Competitions and Markets Authority (CMA) completes an investigation that was only launched last week.

In a surprise and significant move, Airbus is to take a 50.1% stake in Bombardier’s C-Series jet project, based in Belfast, that has been involved in a trade spat with the US that has seen a 300% import tariff levied. The French plane-maker, which has not had to hand over any cash for the part acquisition, has the option to acquire the remaining stake in 2023. Whether this new “arrangement” fixes the tariff dispute remains to be seen.

In a bid to slash costs by US$ 650 million, Sainsbury’s is planning to cut up to 2k jobs from its human resources staff. The “difficult decision” made by the UK’s second biggest supermarket chain will impact across the board – both outlets and central office.

Although no financial details were made available, Richard Branson has joined the board of Hyperloop One as his Virgin Group invests in the superfast rail concept. The brainchild of Elon Musk, the company has already raised US$ 160 million (with investors such as DP World, GE, the French national rail company SNCF and Russia’s RDIF) and aims to have a pod transport system capable of near-supersonic speeds.

The new owner of Vauxhall, the French PSA Group, is set to retrench 400 UK employees because it is “facing challenging European market conditions.” Falling sales of the Astra model has resulted in the car maker, that also produces Peugeot and Citroen, moving from the current two daily shifts to just one. Vauxhall employs 4.5k in its two UK plants, at Luton and Ellesmere Port, with the job cutting taking place at the latter which will see a 22.2% fall in the work force to 1.4k.

Despite Samsung Electronics announcing record quarterly profits, driven by higher memory chip prices, the South Korean conglomerate is still in managerial upheaval following the August imprisonment of the group’s heir apparent Lee Jae-yong, following corruption charges. This week, its chief executive, Kwon Oh-hyun resigned citing an “unprecedented crisis”.

US consumer prices continue on the up with the September index 0.5% following August’s 0.4% hike. The favourable Labour Department’s data is in line with the 1.6% surge in September retail sales.

To the surprise of many, the US stock markets continue heading north and by Monday all three indices were in record territory; the S&P 500 and the Nasdaq closed on Monday at 2,559 and 6,624 whilst the following day the Dow Jones Industrial Average topped the 23,000 level. By Thursday the three bourses closed at 2,564, 6,605 and 23,162.

Driven by the fall in the pound sterling, along with price increases in both transport and food, UK’s CPI reached 3.0% in September – its highest level in over five years. The three-month August unemployment level fell again – by 52k – to 1.4 million, as the jobless rate stays at 4.3%. Again the problem remains of the real value of earnings down over the year at 0.3% not keeping pace with inflation. One consequence is the distinct possibility of a November rate hike.

The People’s Bank of China Governor Zhou Xiaochuan is confident that the recent uptick in the economy will continue for the rest of 2017 as a raft of indicators point to “stabilised and stronger growth”. It seems certain that the doom at the beginning of the year has disappeared and there is every chance of 2017 growth nearing 7.0% – good news not only for the country but also for the global economy. September figures were encouraging with Q3 GDP 1.7% (6.9% on an annual basis) higher, and major improvements in industrial production, retail sales and fixed asset investment at 6.6%, 10.3% and 7.5% respectively.  The authorities are closely monitoring the risks that may emanate from the shadow banking sector and the burgeoning real estate market.

Antonio Tajani, the president of the European parliament, has warned the UK that tits Brexit divorce bill offer of US$ 23.6 billion is “peanuts” and that a figure of US$ 70 billion is more realistic. He is just one of many in Brussels who are trying to ramp up the pressure on the UK prior to the actual start of trade negotiations. This is the same person who, in 2013, was warned in a letter from the Environment commissioner, Janez Potocnik,   about “widespread concerns that [car] performance has been tailored tightly to compliance with the test cycle in disregard of the dramatic increase in emissions outside that narrow scope”. The Italian bureaucrat took no action, until the VW scandal came to light in 2015, at which time he reportedly claimed that he was not informed of the issue at the time.

Today, PM Theresa May will meet the other 27 leaders of the EU as well as officials such as Antonio Tajani, Jean Claude Juncker, Michel Barnier and Donald Tusk whose  immediate aim in life seems to be to extract as much money as they can from the departing Brits. There is no doubt that, both in Brussels (as well as London), Mrs May is struggling and it is unlikely her song is You’ve Got A Friend.

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