Go Your Own Way!                                                                        25 December 2020

For the latest week ending 24 December, real estate and properties transactions were valued at US$ 1.25 billion, including 92 plots selling for US$ 131million, along with 808 apartments/villas for US$ 360 million. The top two land deals involved a US$ 16 million sale in Palm Jumeirah and one for US$ 15 million in Saih Shuaib 4. When it came to villas/apartments, the top three deals all involved apartments – Marsa Dubai (US$ 63 million), Business Bay (US$ 29 million) and Burj Khalifa (US$ 26 million). Total value of mortgages was US$ 817 million, with one mortgage, (for land at Al Yelayiss 2), at US$ 272 million, whilst there were 43 properties involving first-degree relatives worth US$ 53 million.

A week earlier, for the week ending 17 December,  there had been 1.3k real estate transactions, valued at US$ 872 million; in the week, 857 apartments/villas were sold, totalling US$ 411 million, and 74 plots for US$ 81 million. The leading land sales was seen in Saih Shuaib (US$ 6.7 million) whilst the top three sales for residential units were for a Business Bay apartment selling for US$ 56 million in Business Bay, another one in Marsa Dubai (US$ 51 million) for AED 186 million, and a US$ 25 million villa in Dubai Investment Park First. The amount of mortgaged properties for the week was US$ 272 million, with a total of 70 properties were granted between first-degree relatives, worth US$ 48 million.

The latest Property Finder report confirms what many already knew – that there has been an increase in user demand for units in the suburbs this year as tenants sought more spacious homes amid the Covid-19 pandemic, noting that certain communities – including Tilal Al Ghaf, Al Muhaisnah, Wasl Gate, Town Square, Mira, Rukan and Dubai Harbour – reported increases. It also notes that, with prices falling, prime locations such as The Springs, Dubai Marina, JLT and Arabian Ranches saw a rise in demand as they became more affordable.

According to Property Finder, November saw the highest number of sales registrations since February – 3.9k, valued at US$ 2.1 billion – bringing the YTD total to 33.5k at US$ 18.8 billion. More interestingly, secondary property sales registered last month reached their highest level in nearly seven years – and the highest ready apartment sales in sixteen months. Based on the number of property listings on their portal, the greatest number of apartments currently available are in Al Jaddaf, Jumeirah Heights, Al Barari and Al Kifaf, while the most villas and townhouses can be found in Nad Al Sheba, Meydan and Mudon. It was also noted that demand increased for 3-4 B/R villas. JLL estimate that a further 26k new homes were scheduled for completion in Q4 – this figure does seem on the high side

Hussain Sajwani, Chairman of Damac Properties, reckons that 2021 is going to be yet another challenging one for the property market and that big developers should avoid “dumping” properties in an already oversupplied market. He notes that his company will “not be going to bring new products to the market, maybe a few hundred or less than a hundred just to keep the momentum going. We have no intention of expanding because the situation doesn’t look rosy going forward.” With the government having set up a committee to oversee supply and demand, this has helped the market to try to attain a demand-supply balance, which he expects to be achieved by 2022.

Magic has hit the local property sector with Kleindienst Group announcing that prices of its US$ 5 billion The Heart of Europe project have more than quadrupled; it noted that the cost of a Floating Seahorse Villa at US$ 5.4 million (Dhs 20 million), has now increased to US$ 24.5 million (Dhs 90 million), while a Beach Palace on the Sweden island has jumped from US$ 21.8 million (Dhs 80 million) to US$ 97.5 million (Dhs 358 million). The developer noted that these prices are becoming more in synch other with sought-after global property hubs such as Monaco, London, Moscow, Geneva, Vienna and Paris, where prime property prices can range between US$ 16k up to US$ 64k per sq mt.  According to recent research by Knight Frank, luxury properties in Dubai are almost 10 times cheaper than in some of the world’s most expensive cities, with US$ 1 million buying 16.4 sq mt in Monaco, 21.3 sq mt in Hong Kong and 30.4 sq mt in London, whereas it would be 154 sq mt in the emirate.

HH Sheikh Mohammed bin Rashid Al Maktoum has issued Decree No. (32) of 2020, transferring the ownership of certain educational lands (granted to government entities and real estate developers, including lands leased to third parties, and undeveloped lands granted to individuals and private entities that have not been developed within five years of the date of the grant or those that have ceased to have education activity) in Dubai, to the Knowledge Fund Establishment. The educational lands excluded from the articles of this Decree included those granted to public education facilities, lands within education zones like Dubai Academic City and Dubai Knowledge Park, mortgaged lands and common lands that include educational lands. However, developers can retain these lands if they are willing to pay 75% of the land’s market value (determined by the Department of Land and Property in Dubai) to the Knowledge Fund Establishment, in annual instalments, within a period not exceeding 34 years.

UAE-based Blends & Brews Coffee Shoppe has signed an agreement with Sultan Saad Seed Al Qahtani Trading Est, to open its first outlet in Saudi Arabia. The brand, part of the Thumbay Group’s Hospitality Division, already has a number of coffee shops in the UAE and in Hyderabad.

This week saw DP World sign an agreement, its biggest ever African port investment, with Senegal. DP World Dakar will invest a total of US$ 1.1 billion over two phases of the project, to develop its Ndayane deep-water port; it is located about 50 km from the existing Port of Dakar and near the Blaise Diagne international airport. The first phase, costing US$ 837 million, will include a new container terminal with 840 mt of quay and a new 5 km marine channel. It is expected to invest a further US$ 290 million during the second phase which will include 410 mt of additional container quay and a further dredging of the marine channel. This will boost Dakar’s position as a major logistics hub and gateway to west and north-west Africa, and, according to Sultan bin Sulayem, DP World’s Chairman, “will create jobs, attract new foreign direct investment to the country and enable new trading opportunities that bring about economic diversification.”

Etihad Credit Insurance has estimated that the UAE has extended US$ 114 million worth of trade credit to support SMEs in the first eleven months of the year to help companies protect their liquidity amid the coronavirus-induced economic slowdown. It also noted that this figure translated into US$ 272 million “secured turnover” for the firms. ECI’s measures have been able to support exporters by helping those businesses, impacted by the pandemic facing payment and supply chain disruptions, with export credit insurance and additional funding. The two-year old firm provides credit guarantees and insurance to mitigate the political and commercial risks of exporting by offering financing or refinancing for export transactions on behalf of the UAE government.

The ECI came out with interesting SME statistics and their contribution to the national economy. In 2018, such firms contributed 49% to the UAE GDP, rising to 53% a year later. It was noted that “their delicate lifespan is the reason SMEs are considered as high-risk by financial institutions, leading these businesses to have difficulty getting access to credit.” It estimates that only 50% of “new” firms survive more than five years, with only a third making it past a decade in business.

Following an agreement with NMC administrators, Germany’s Fresnius Helios is expected to pay US$ 526 million for the Eugin Group, comprising Spain’s Luarmia group of fertility clinics and US-based Boston IVF. This is in line with administrators’ aim to focus on NMC Health’s core local assets and divest of other “non-essential” assets to pay off debts or fund ongoing operations. UAE’s biggest privately-owned healthcare group was placed into administration last April, following the discovery of more than US$ 4 billion worth of previously undeclared debts at the group. A final decision on whether there will be a lender-led restructuring, or an outright sale, will take place before April, but in the meantime, an investigation report into missing money from the company will be concluded by the end of December and a litigation strategy recommended to recover assets.

It is reported that local start-up, Trukker could be considering a potential listing, as it aims to raise fresh funds to propel regional growth. The company provides an Uber-like service for trucks and averages more than 1.2k daily transactions. Earlier in the month, it raised US$ 10 million venture debt from Silicon Valley-based Partners for Growth. The firm is looking at a further funding round early next year, to be mainly used for enhancing payroll numbers and regional expansion. The company has a fleet of more than 25k trucks and 500 B to B operators, with some of the funds being used to finance the “instant payment of thousands of transporters” operating on the firm’s network in the UAE, Saudi Arabia and Egypt.

Because of recent changes to local governance rules of public companies, (by the market regulator, the Securities and Commodities Authority), that company chairmen should not hold executive positions, former chairman of Emaar Developments, Mohammed Alabbar, has had to stand down. He is to be replaced by Emirates airline executive Adnan Kazim. Only last week, Jamal Al Theniyah took over the same position from him with Emaar Properties. The former chairman will “continue to be devoted to the executive management matters and the day-to-day affairs of Emaar”, as well as continuing as an executive board member. Although it has moved higher in recent weeks, Emaar Properties’ share value had fallen 12% YTD, trading on Sunday at US$ 0.97; over the same period, the market has seen a 14.4% decline.

Following their September request to all its creditors to submit proof forms to register their claims, Drake & Scull International announced that it had completed the first phase of a restructuring plan and will present the second phase next month. These claims, currently under review by their Financial Reorganisation Committee, will shortly be published in local newspapers. The company will share the results with its creditors in January and then have a vote on it. DSI posted a US$ 35 million nine-month profit to September, compared to a US$ 330 million loss a year earlier; for Q3 there was a US$ 19 million loss.

In a statement to the local bourse, Damac Properties has advised it is looking at increasing its shareholding in the Nine Elms project in London. The UAE’s third-biggest property developer by market capitalisation, posted a Q3 loss of US$ 148 million, following a US$ 158 million write-down, amid the coronavirus pandemic, although revenue was markedly higher at US$ 349 million.

There are reports that indebted theme parks operator DXB Entertainments will benefit from a capital restructuring exercise led by its 52.29% majority shareholder, Meraas Leisure and Entertainment; this will inevitably lead to the company to undertake a capital restructuring plan, by converting most of the company’s outstanding debt into newly issued shares. This will lead the Dubai Holding subsidiary to holding 93.92% of the park operator, in a move that would also lead to it taking the company private, as it will also launch a tender offer to buy out remaining stakeholders, who will be offered US$ 0.0218 a share.  Meraas will convert their US$ 403 million bond into new DXBE shares at a conversion rate of US$ 0.283 and will also take on nearly US$ 1.2 billion of senior debt owed by DXB Entertainments in return for new shares and will also take on US$ 1.17 billion of senior debt owed by DXB Entertainments in return for new shares. As of 30 September, DXB Entertainments had accumulated losses of US$ 1.7 billion, including a YTD deficit of US$ 289 million.

The bourse opened on Sunday 20 December and, 263 points (17.9%) to the good the previous six weeks, finally gave up a little of that gain, slipping 22 points (0.9%) to close on 2,528 by Thursday 24 December. Emaar Properties, US$ 0.02 lower the previous week, traded US$ 0.02 higher at US$ 0.98, whilst Arabtec is now in the throes of liquidation, with its last trading, late in September, at US$ 0.14. Thursday 24 December saw the market trading at 154 million shares, worth US$ 57 million, (compared to 160 million shares, at a value of US$ 59 million, on 17 December).

By Thursday, 24 December, Brent, US$ 10.27 (22.6%) higher the previous five weeks, was almost flat in this week’s trading to close US$ 0.06 on US$ 51.29. Gold, US$ 43 (2.3%) higher the previous week, gained a further US$ 46 (2.5%) to close on US$ 1,883 by Thursday 24 December.

It has taken copper seven years to return to a value of over US$ 8k – a possible indicator of the start of a new commodities super-cycle, (the last one being earlier in the century), as supply-side investment falls short of an expected surge in demand. The metal’s price has rallied 80% since its March low, driven by China’s appetite for commodities, supply snags in the early stages of the pandemic, expectations for a deficit, the weaker greenback, and copper’s role in green technology. In line with other industrial commodities, including oil and iron ore, copper will benefit from China’s increasing economic activity, after its apparent success at containing the coronavirus pandemic and optimism about global economic growth.

Last week, Tesla’s share value topped US$ 600 billion and now it has unveiled its second US$ 5 billion capital raise Investors in three months, as the Elon Musk company cashes in on a stellar rise in its shares this year. By the end of last week, Tesla shares had skyrocketed by 670%, which in turn saw Elan Musk’s net worth nearly sextuple to US$ 155 billion. Depending on which source is used, when it comes to global production, last year, the number of vehicles dipped 5.2% to 91.8 million, with the five biggest manufacturers – Toyota, VW, Hyundai, GM and Ford – accounting for 41.3 million (45.0%) of the total; the next ten accounted for 36.6 million (39.9%), so that almost 85% of global production was carried out by the fifteen of them. Tesla, in that period, managed to produce 367.5k or just 0.4% of the global total.

Although its production levels fell well short of the legacy car makers, it is by far the most valuable auto company in the world, with its value more than the combined market cap of the nine largest car companies globally. The jury is out on the future value of Tesla, with many analysts forecasting even more upside for the electric vehicle maker heading into 2021. On the other side, are those who believe Tesla’s share value is in a bubble and will head south now that it has been added to the S&P 500 index since Monday, 21 December, where it now accounts for about 1% of the total index value; it has replaced property firm, Apartment Investment, which was worth 0.02% of the index.

The US Securities and Exchange Commission has charged crypto-currency, Ripple with conducting investments without proper licences, indicating that Ripple XRP is a tradeable asset, known as a security, and thus subject to its regulations; the firm counterclaims that XRP is a currency and therefore does not have to be registered as an investment contract, with digital currencies being under the umbrage of another US regulator – the Commodity Futures Trading Commission. When news was broken, the value of XRP, the third largest crypto currency after Bitcoin and Ether, fell by more than 30%. Whilst the two major currencies have been ruled out of trading exchanges, following a 2018 decision by the US Commodity Futures Trading Commission ruling that both could be traded as commodities, like currencies or oil, XRP has not.

Tech giant Alibaba is being investigated by China’s State Administration for Market Regulation over monopolistic practices, having previously warned Jack Ma’s company about forcing merchants to sign exclusive deals which prevent them from offering products on rival platforms. The alleged monopolistic behaviour involves pressure over the so-called “choosing one from two” practice which sees sellers signing exclusive cooperation pacts, preventing them from offering products on rival platforms. On another front, regulators are also meeting to discuss Alibaba’s financial technology offshoot Ant Group.  In November, the firm was just launching what would have been the largest IPO in the world, only to be ordered to halt its listing about its micro-lending services. The People’s Bank of China noted that the meeting was “to guide Ant Group to implement financial supervision, fair competition and protect the legitimate rights and interests of consumers”. Chinese authorities, worried about the growing size and power of mega tech firms such as Alibaba and Tencent, have since introduced new anti-trust laws.

Within a fortnight of its 13 October launch, Apple’s iPhone 12, priced at US$ 817, became the world’s best-selling 5G smartphone, with a 16% share of the total sales, ahead of Samsung and Huawei that had launched their rival models a year earlier. By the end of that month, it had captured 16% of the 5G smartphone market. By the end of October, Samsung’s Galaxy Note 20 Ultra had lost its September number one placing to drop to third place, with only 4% of the market, behind iPhone 12 Pro that grabbed 8% of the market.

Apart from being the dominant force in the 5G smartphone sector, Apple, utilising its own LFP (lithium iron phosphate) battery technology – that could radically reduce the cost of batteries and increase the vehicle’s range – is targeting 2024 to produce its first electric car. Apple aims to be a major player in the electric car market, joining the likes of Tesla, Audi and General Motors, and will use a third-party manufacturing partner to build the vehicles. Other tech giants, such as Amazon and Alphabet, are also backing autonomous-electric initiatives but they are more focused on mass transport. The former has Zoox, an autonomous ride-hailing fleet Industry which can also use automated cars to deliver goods to customers. Meanwhile, Alphabet’s Waymo is operating a commercial self-driving taxi service.

SsangYong, 75% owned by Indian automaker, Mahindra & Mahindra, has filed for bankruptcy after failing to repay US$ 55 million to creditors. The South Korean carmaker has warned of massive disruptions to its operations and is highly unlikely to receive state aid, because of its overseas ownership; however, it is possible that the company’s suppliers may receive public financial support. Any further investment from its Indian owners, who acquired the company that specialises in SUVs a decade ago, has been looking for a buyer since June, is improbable, bearing in mind that SsangYong had posted losses for the past fifteen quarters.

Just when they have the troubled 737 Max aircraft flying again, after a twenty-month hiatus, Boeing has been accused of “inappropriately coaching” test pilots during efforts to recertify the company’s troubled plane. US Senate investigators have accused both the manufacturer and Federal Aviation Administration officials of “attempting to cover up important information”. The Senate Commerce Committee’s report noted that based on “corroborated whistle-blower information and testimony during interviews of FAA staff”, it concluded that FAA and Boeing officials involved in the test had “established a pre-determined outcome to reaffirm a long-held human factor assumption related to pilot reaction time” and that “Boeing officials inappropriately coached test pilots in the MCAS simulator testing contrary to testing protocol.” If this were to be true, it will be another damaging blow to the integrity and already-tarnished reputations of both Boeing and the US watchdog, the FAA.

One company is in hot water with the Australian consumer watchdog for trying to sell clothes they said could protect against coronavirus. Activewear brand Lorna Jane has been prosecuted for trying to sell clothes they said could protect against coronavirus. In June it claimed that “LJ Shield breaks through the membrane shell of any toxic diseases, bacteria or germs that come into contact with it, not only killing that microbe but preventing it from multiplying into anymore,” and was fined US$ 30k for making these claims. Now, the Australian Competition and Consumer Commission is taking the private company to the Federal Court over alleged false or misleading claims, alleging “that the statements made by Lorna Jane gave the impression that the COVID-19 claims were based on scientific or technological evidence when this was not the case.” The twenty-year old company, with 108 stores in Australia, as well as a number of international stores, is to defend itself in Court.

Another month and another record for the UK economy – with government borrowing topping US$ 96 billion, this was the highest ever November figure, as well as the third-highest figure for any month. In the first eight months of the UK fiscal year, starting in April, borrowing has almost tripled to a massive US$ 335 billion, compared to a year earlier. By the end of the year in March, it is estimated that the annual borrowing will top US$ 500 billion. The government has also seen tax receipts slump by US$ 51 billion in the eight months to November year-on-year. The increase has resulted in the national debt rising to US$ 2.8 trillion, with the current debt now reaching 99.5% of GDP. Revised figures by the Office of National Statistics show that the UK economy slumped 18.9% in the June quarter (slightly lower than the initially posted one of 19.8%) with a bounce back of 16.0% in the next quarter. With everything dependent on the vaccine efficacy, the UK could go into a double dip recession – if restrictions and lockdowns extend into early 2021 – or could stage a monumental rebound in H2 2021.

After many months of bitter wrangling, US lawmakers have finally agreed to a US$ 900 billion pandemic aid package which includes financial help for businesses and unemployment programmes; this is expected to run in tandem with a US$ 1.4 trillion funding for government operations over the next nine months. This arrives as many Covid-19 economic relief programmes were set to expire at year end which would have seen twelve million Americans at risk of losing access to unemployment benefits. The latest funding will be spent on supporting business (US$ 300 billion), direct stimulus payments to most citizens (US$ 600 billion) and money for vaccine distribution, schools and renters facing eviction. The bill does not include substantial aid to local governments, which had been a top priority for many Democrats.  Last March, US$ 2.4 trillion was injected in economic relief, including US$ 1.2k stimulus cheques, funds for businesses and money to boost weekly unemployment payments by US$ 600.

1,664 days after the UK voted to leave the EU, a trade deal has been finally agreed that will ensure tariff and quota free trade between the two. The deal still needs approval from the UK parliament and the 27 EU member states. The 500-page agreement will mean there are no quotas or tariffs on the goods trade that makes up half of the annual commerce between the UK and EU, worth more than US$ 1 trillion. The deal will also support the Northern Ireland peace agreement which will please the incoming US President-elect Joe Biden, who had warned Mr Johnson the Irish status quo had to be maintained. However, it must be remembered that it does not include services which account for about 80% of the UK economy so this may cause problems for UK financial institutions requiring access to the EU stage. A euphoric Downing Street commented “Deal is done,” and “We have taken back control of our money, borders, laws, trade and our fishing waters.” Time To Go Your Own Way!