Up Against The Wall!

To help finance its recently unveiled US$ 365 million Dorchester Collection project at Dubai Water Canal in Business Bay, Omniyat has signed a US$ 136 million loan facility contract with Ajman Bank. Similar agreements with the iconic London hotel brand are expected, as the 13-year old Dubai-based developer seeks to expand its US$ 6.2 million portfolio, to include a number of high-end lifestyle partnerships.

According to its chairman, PNC Menon, Sobha is hoping to double its annual revenue stream to US$ 681 million by 2021 (equating to 1.2k units), as well planning an IPO. The developer is currently involved in building the US$ 1.1 billion Sobha Hartland project in Mohammed bin Rashid City and the US$ 2.3 billion District One with Meydan Group. The company will start work in June on the US$ 1.1 billion lifestyle project, Firdaus Sobha, in association with the government. It also hopes to announce another mega mid-market development in Downtown Dubai. With regard to the local real estate market, Mr Menon is confident that it will continue to grow and that recent price falls have bottomed out.

Azizi Development expects its Healthcare City project, Aliyah by Azizi, to be handed over by the end of July. The 17-floor building will house 346 units, ranging from studio – 2 B/R, and will have a retail space of 16k sq ft. The company also announced that it has started accepting prequalification applications for US$5.4 billion, including the world’s fifth tallest tower; construction on the various projects will commence in Q2.

Two Azizi contracts, totalling 409 million, have been awarded to Green Modelling Contracting and Modern Civil International Contracting Company for the construction of phase 1 of Azizi Victoria. This stage of the development encompasses 32 buildings housing 4k units and should be completed by the end of 2019. Located in MBR City, the whole project, covering an area of 33 million sq ft, will have 105 mid and high-rise residential buildings, with 30k apartments, two hotels and a retail district.

Dubai’s Seven Tides has signed a US$ 3.2 billion agreement with Revolution Precrafted to design, supply, and install 2-3 B/R condominium apartments and hotel villas in nine of The World Islands. The exact number of units is being finalised but the Philippines-based developer expects total sales to be worth up to US$ 500 million.

Following the success of its initial property foray in the emirate, (the US$ 108 million Continental Tower in Dubai Marina), Continental Investments is to develop a 2.6 million sq ft plot, located adjacent to Arabian Ranches. The US$ 272 million Rukan Residence in Dubailand will comprise a range of apartments, townhouses and villas, alongside commercial and recreational facilities.

Work has started on the US$ 79 million Cassation Court, with the project being managed by Dubai Courts along with a private entity. The building, comprising the court’s sessions (including the Appeals Court), a legal library, offices and a sports club, will be completed by 2021.

MAG Robotics International has signed a contract with Emaar to develop a fully automated parking facility at Dubai Marina. With a capacity of 700 vehicles, it will see the MAG subsidiary run the business on a BOT (build, operate and transfer) basis.

US courts threw out all claims made by Dubai-based Five Holdings against the Viceroy Hotel Group over its running of the Viceroy Palm Jumeirah Dubai. The hotel operator is not only trying to retake control of the 5* star property but is also instigating recovery of attorney fees as well as filing claims for fraud, extortion, conversion and unfair business practices against Kabir Mulchandani’s Five Holdings which maintains that it is still the legal operator of the hotel. In 2013, a 30-year agreement was signed by Viceroy for Five Holdings to manage a luxury hotel on the Palm Jumeirah Island. The show goes on.

A JLL report indicates that Dubai is among the world’s top cities for foreign realty investments, with the local sector making great inroads to tighten up regulations, and the market more transparent. The consultancy classifies the emirate as a “hybrid city” – one which “competes in specialised markets, which benefits from access to large domestic markets .   .   .   . and has a superior liveability equation compared to their national and regional peers.”

The Dubai Land Department had a record 2017, carrying out 8.2k real estate valuations, worth over US$ 78.2 billion.

Both Dubai and Abi Dhabi will host new Microsoft data centres, making them the first such offices for cloud services in the Middle East. No figures were given but the US tech giant has made a “significant investment” to offer cloud-based service to its network of some 17.8k regional partners as from 2019.

Several of the 150 new outlets in the one million sq ft expansion of Dubai Mall have opened for business in what was already known as the world’s largest shopping destination. The three levels of the extension, so far started, have expanded the mall’s high-end Fashion Avenue, now housing the likes of Cartier, D&G, Gucci, Hermes and Rolex. Work is still continuing with the fountain-facing restaurants, still closed.

Local retailer, Lulu, is set to spend US$ 81 million on a logistics hub in Dubai Wholesale City. When completed by 2020, the development, covering 1.3 million sq ft, will service the group’s growing number of malls and hypermarkets in the country; including the wider region, Lulu has 144 outlets and is in the global top 50 of fastest growing retailers, according to a recent Deloitte report.

Having seen its pharmacy chain increase by over 10% last year to 100, UAE-based chain BinSina is to open fifteen new outlets across the country this year.

Dubai-based Al Banna Engineering has been awarded an Enoc Group two-year engineering, procurement and construction contract for a 16.2 km jet fuel pipeline to link its Jebel Ali storage facility with Al Maktoum International Airport. No costs were readily available but the pipeline will have the capacity to carry 2k cb mt of jet fuel per hour to DWC – an airport that will eventually be capable of handling 220 million passengers and 16 million tonnes of cargo annually.

There are reports that local businessman, Saeed Al Falasi, may bid for AC Milan. His International Triangle Group could acquire the Italian football club from China’s Yonghong Li, who only took over last April.

The Multinational Companies Business Group has been established in Dubai, comprising thirty companies from a range of industry sectors. Its prime aim is reportedly to assist the government in shaping its strategy, particularly trade and fiscal policy.

DP World posted a 13.2% hike in 2017 revenue (6.0% on a like-for-like basis), as profit increased by 15.1% to US$ 1.2 billion; container volumes were 10.1% higher. The major factors behind the welcome figures were a marked improvement in efficiency as well as the company’s increased focus in other areas expanding into areas such as port-related, maritime, transportation and logistics sectors.

Dubai Silicon Oasis Authority reported a 9.5% hike in 2017 profits to US$ 56 million on the back of an 11.5% improvement in revenue to US$ 161 million. 339 new companies in 2017 resulted in a 16.0% hike in numbers to 2.5k, 82% of which specialise in technology.

Takaful Emarat posted a 25.3% increase in 2017 profit to US$ 5 million, as net income came in 35.6% higher at US$ 33 million and Takaful contributions rose 30.2% to US$ 175 million. During the year, the Islamic insurance company’s assets were 14.9% higher at US$ 229 million.

A subsidiary of troubled Dubai-based construction services company, Drake & Scull International has won a US$ 30 million contract in Moldova. Germany’s Passavant Energy & Environment (PE&E) will carry out rehabilitation works on a wastewater treatment plant and new sludge treatment facilities. The DSI group’s total bank debt at the end of Q3 last year got to US$ 796 million and it reached agreement with nine of its lenders to restructure US$ 154 million of corporate debt, by extending maturities by up to three years. It also expects to finalise a US$ 272 million restructure of debt, raised for projects in Saudi Arabia by the end of the month.

Emirates NBD, whose major shareholder is the Investment Corporation of Dubai, announced plans to increase its capital base by 32.4% to US$ 2.0 billion, by way of a new share issue; shares will be offered at a 10% discount at the appropriate time, with existing shareholders having priority.The bank is also awaiting shareholders’ approval to increase foreign ownership from 5% to 20%. The bank’s shares jumped more than 13.6% to US$ 2.70 on the news.

The DFM opened on Sunday (11 March), at 3157, and having lost 538 points (9.1%) over the past nine weeks bucked the trend this week and was 40 points higher (1.2%), to close at 3197 by Thursday, 15 March. Emaar Properties traded US$ 0.01 lower at US$ 1.62 – a two-year low – with Arabtec also down – by US$ 0.02 to close on US$ 0.63. Volumes traded lower at 173 million shares on Thursday, valued at US$ 98 million (compared to 382 million shares worth US$ 139 million the previous Thursday – 08 March).

By Thursday, Brent Crude had traded northwards over the week, gaining US$ 1.51 (2.4%) to US$ 65.12, with gold heading the other direction – down US$ 3 (0.2%) at US$ 1,318 by 15 March 2018.  Oil markets bounced back as the number of active US rigs dropped to 796 but the US economy, steaming north, will almost inevitably increase their need for higher fuel.

It is reported that Shell and private equity firm, Blackstone, are interested in purchasing BHP’s US shale division for a reported US$ 10 billion. This JV could be just one of several interested parties in acquiring the world’s biggest miner’s assets. The shale auction should be finalised by year-end but the Australian giant will probably go ahead with a separate IPO for the division if the final bid does not meet their expectation.

JCB, the construction equipment giant, is planning to add a further 600 jobs to its UK payroll because of growing global demand for its plant and machinery.

GKN’s board has rejected Melrose’s third and final offer of US$ 11.2 billion, indicating that the hostile takeover bid “fundamentally undervalued” the FTSE 100 engineering company. The unsuccessful bid would have given GKN shareholders a 60% stake in the new entity. As an aside, Airbus has come out stating that it would be “practically impossible” to give new business to GKN if Melrose were to take over the company, as the plane maker relies on long-term investment and strategic vision.

PZ Cussons lost 25% of its share value in one day after issuing a profits warning that reduced an earlier forecast by 20% to US$ 110 million for the year end of 31 May. The maker of Imperial Leather and Original Source has blamed falling sales in the UK soap market and its Nigerian milk business, caused by the “usual suspects” – increased competition, consumer caution, as UK inflation continues to outstrip wage growth, and, of course, Brexit.

The 70-year old Toys R Us is slowly dying and not only is it to close all its UK stores by the end of next month but also close or sell all its 885 US stores in the US, after failing to find a buyer (and the loss of 30k jobs).

At least one retailer has come in with impressive 2017 results, helped by an increase in online sales to 10%. Inditex, which includes Berksha, Massimo Dutti, Pull & Bear and Zara in its portfolio, posted net profits 7.0% higher at US$ 4.2 billion, on the back of a 9.0% hike in revenue to US$ 31.4 billion. During the year, store numbers increased by 2.5% to 7.5k.

Disgraced CEO and founder of drugs company, Theranos, Elizabeth Holmes has been fined US$ 500k and forced to surrender 19 million shares in her company. She has been found guilty by the US Securities and Exchange Commission of conning investors of US$ 700 million to keep the company afloat. She had duped people by wrongly claiming that Theranos had the technology to run thousands of medical tests using the blood from a tiny finger prick.

As expected, the US President has played the security issue card to block the massive US$ 140 billion takeover of Qualcomm by Singapore-based rival Broadcom. The deal would have seen the expanded company move into third spot of the world’s largest makers of microchips, behind Intel and Samsung, One other reason is that the US company is considered a leader in the lucrative 5G wireless technology race and there were fears that a takeover could see Huawei take the lead. (In January, the Chinese telecoms giant was unable to seal a deal to sell its new smartphone via a US carrier, thought to be AT&T).

Just two months after BAE Systems retrenched 2k staff because demand for the Typhoon had slowed, Saudi Crown Prince Mohammed bin Salman placed an order for 48 of these fighter jets. This will come as a welcome boost for the UK’s aerospace industry, as BAE Systems and its UK supply chain have a 37.5% work share in the Typhoon programme. It is reported that a target of US$ 90 billion worth of trade and investment had been agreed between UK and Saudi officials during the Crown Prince’s three-day visit.

IATA reported that January ME air passenger demand fell at its slowest pace since September 2008, at only 0.5% higher than a year previously, with one factor being the North American ban on some electronic devices; this compared to a 4.6% hike on a global scale. On a regional basis, capacity was 4.6% higher, with load factor 3.1% lower to 76.8% compared to 5.3% and load factor down 0.5% to 79.6%, wordlwide.

Chinese inflation levels rose more than expected to 2.9%, compared to 1.5% a month earlier – its highest level since November 2013. However, the Producer Price Index was down in February at 3.7%, from 4.3% a month earlier.

Even after nine years of on-going growth, US job creation continues unbounded, with February figures indicating 313k new jobs – far in excess of market forecasts; the unemployment rate stayed at 4.1%. However, wage growth dipped by 0.2% to 2.6% but as the labour market tightens, it is almost inevitable that these figures will start heading north again, as the impact of both an uptick in global growth and the recent tax cuts take effect. The positive labour news makes a March rate hike of 0.25% all but certain, as the Fed keeps a close watch on wage growth data.

In a case of the pot calling the kettle black, the EU has indicated that it will stand up to the bullies, meaning President Trump and his Commerce team.  The EU has been hit with a 25% tariff on imported steel products and 10% on aluminium. Even EC head Jean-Claude Juncker has indicated that they would match “stupid with stupid” – and the Luxembourgian poacher turned gamekeeper should know better than most.

There was a marked increase in the UK’s January trade balance deficit – up US$ 835 million from a month earlier and US$ 4.7 billion to US$ 12.0 billion YTD; the main drivers were a US$ 1.8 billion increase in imports, coupled with a US$ 1.6 billion fall in exports, to and from non-EU countries.

In his Spring Statement, the UK chancellor has claimed there is “light at the end of the tunnel”, with the economy due to grow by 1.5% this year but marginally lower for subsequent years. This puts the UK at the lower end of major economies, where average growth could be as high as 3.9%, compared to say China, Japan, Germany and the US where growth will be 6.5%, 1.5%, 2.4% and 2.9% respectively. Government debt for the current financial year, ending April, has fallen from November’s forecast of US$ 69.3 billion to US$ 62.8 billion – the first annual decline in 17 years.

The woes bedeviling the local F&B market are not confined to Dubai, as a 15-group of restaurant bosses have petitioned the UK Chancellor of the Exchequer to highlight problems facing the industry there. This comes after a string of chains hit the buffers including the likes of Jamie Oliver’s Barbecoa going into administration, the Italian chain, Carluccio’s calling in KPMG and pizza chain, Prezzo, closing 94 outlets. There is a warning that the government must act to avoid “damaging closures and job losses” and that a “perfect storm” had hit their sector; the main drivers being “soaring business rates, rising employment costs and Brexit-fuelled inflation”. It is reported that over a third of the top 100 chains are in a loss-operating environment, where sluggish consumer spending power sees less people eating out.

The problems for the UK industry – and probably here in Dubai – are that there is over capacity in the market, with consumers having too much choice, changing eating habits and reduced spending power. (That being the case, it seems a brave move that the Dinner by Heston Blumenthal restaurant is to open in the new Royal Atlantis Resort & Residences next year).

The other sector that seems to be facing headwinds in Dubai may be private education. Supply and demand will never be in equilibrium and judging by the number of school ads appearing in local media, there is every possibility that supply is currently outstripping demand. Whether this is a short-term problem remains to be seen but for the time being, some schools must be operating Up Against The Wall.

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