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Friday, 1 April 2011

INSEAD Knowledge: Real Estate in the UAE

When the flashy Emirate of Dubai asked for a six-month moratorium on its debt obligations just over a year ago, the world trembled. In reality, the problems of Dubai had been well-known in the region for over a year: unfinished developments, redundancies with expatriates returning to their home countries and the collapse of the property market.

According to international real estate agent Jones Lang La Salle, total real estate transaction values in Dubai plunged 65 percent in 2010. And while demand fell, oversupply kept on rising as builders completed their contracts. As the region’s centre for finance, Dubai is regarded as the barometer for the region’s real estate sector and so it’s no surprise the bleak scenario is replicated in varying degrees throughout the United Arab Emirates (UAE).

Today, the UAE finds itself caught between being the centre of economic opportunity in the Gulf Cooperation Council (GCC) and at the same time surrounded by the political turmoil in the Middle East. The UAE’s stability could prove to be an incentive for businesses and investors to re-locate there – thereby providing a ready-made solution to the real estate crash. But there are still a few obstacles in the way.

TPG to Sell Stake to Kuwait, Singapore - MarketWatch

Private-equity powerhouse TPG Holdings has reached a deal to sell nearly 5% of itself to sovereign-wealth funds operated by Kuwait and Singapore. The deal values the firm at about $11 billion and allows it to raise several hundred million dollars, according to people close to the matter.

TPG sent a letter to its investors Thursday night informing them of the transaction, although the firm didn't name the purchasers. People close to the matter say the buyers are the Kuwait Investment Authority, the Gulf country's sovereign-wealth fund, and the Government of Singapore Investment Corp., among the world's most active sovereign-wealth funds. KIA and GIC will pay several hundred million dollars for the roughly 4.5% stake, according to these people, a sum that places a value on TPG that is close to the $11 billion market value of rival Kohlberg Kravis Roberts (KKR 16.75, +0.34, +2.07%) & Co.

The move gives TPG a pot of so-called permanent capital that it will plow into new investments. It underscores how the asset-management business is becoming more global, and that foreign investors often have deeper pockets, and a more upbeat outlook for U.S. firms, than do domestic institutions.

Occidental firms up deal to develop UAE gas field - BusinessWeek

Occidental Petroleum has signed a partnership agreement to jointly develop a $10 billion natural gas field project in the United Arab Emirates, firming up a deal announced earlier in the year.

Los Angeles-based Oxy agreed to develop the Shah gas field with government-run Abu Dhabi National Oil Company in January. The companies said at the time only that they had agreed in principle to the deal.

Emirates state news agency WAM announced the formal signing of the partnership agreement Thursday. It says the field should begin production in 2014.

Kuwait's Al Mazaya posts $30.6m loss as provisions rise - Real Estate - ArabianBusiness.com

Kuwait-listed developer Al Mazaya Holding on Friday said it made a loss of AED112.5m ($30.6m) in 2010 after booking provisions totalling AED181.8m.

Company chairman Rashid Yaqoob Al Nafisi said the past year had been challenging in most regional market, especially Dubai, where it was taking back properties where investors had defaulted.

He said the real estate firm was currently collecting all outstanding amounts from sales in its projects, making payments for construction work, and acquiring all defaulted residential and office units "in accordance with Dubai's acquisition regulations".

Nasdaq, ICE bid $11.3 billion to buy NYSE - Hurriyet Daily

Nasdaq OMX Group and IntercontinentalExchange offered to buy NYSE Euronext for about $11.3 billion as the companies teamed up in an attempt to snatch the New York Stock Exchange from Deutsche Boerse.

The companies offered $42.50 in cash and stock for each NYSE Euronext share, according to a statement Friday. The bid is a 19 percent premium to Deutsche Boerse’s February offer. It is also 27 percent higher than NYSE Euronext’s stock price on Feb. 8, the day before the company's announcement of discussions with Deutsche Boerse.

The offer comes after Frankfurt-based Deutsche Boerse struck a $9.5 billion deal for NYSE Euronext in February. More than $20 billion of exchange acquisitions have been announced in the past five months as venues in North America, Europe and Asia try to cut costs and offset declining profits from equity trading with options, futures and derivatives.

Tatarstan to become Russia's test case for Islamic finance - Hurriyet Daily

Officials meeting in the shadow of the snowy towers of Kazan's 16th century white Kremlin are in an unlikely site for hatching groundbreaking financial plans. But Kazan in Russia's Tatarstan region aims to be the first place in Russia to launch an Islamic bond, with a test case in July that will test the appetite for Islamic financial products in Russia, bne has reported.

Countries ranging from France to the United Kingdom, and Thailand to Brazil are all exploring how to use Islamic financial investment to draw gulf petrodollars into their economies. The Islamic finance industry has boomed in recent years, growing at a rate of over 14 percent per annum from around $150 billion during the 1990s to a total of $14.1 trillion in 2009, according to Jamelah Jamaluddin, chief executive officer of Kuwait Finance House in Malaysia.

Tatarstan officials hope to forge ahead with a $100 million-200 million sukuk issue.

Emirates sees bumpy ride - Emirates 24/7

Unrest in the Middle East and North Africa could hit revenue at Emirates by 3-5 per cent and Japan's nuclear crisis will slam the air travel market there, the head of Dubai-based airline said.

But unlisted Emirates, one of the Arab world's biggest carriers and a sector bellwether, has been able to shift capacity away from the turmoil sweeping the region and expects business in Japan to roar back, President Tim Clark said.

As tumult grew when protests swelled, Emirates halted service to Libya and cut back flights to Tunis and Egypt.

Oil rises ahead of U.S. payrolls and Libya conflict - Maktoob News

Oil prices rose on Friday, with Brent nearing $118, as investors anticipated U.S. payrolls data later in the session will confirm the improving economic outlook of the world's largest oil importer.

Fighting in Libya, where Muammar Gaddafi's forces appear to have regained the upper hand, also supported crude prices as the prospect of a drawn-out conflict reduced expectations of lost Libyan oil returning to the market in the near future.

Brent futures for May delivery rose 19 cents to $117.55 by 4:01 a.m. ET, close to the highest level in almost four weeks. U.S. crude futures were up 35 cents to $107.07 after earlier hitting $107.65, an intraday peak last touched in September 2008.

Not even empire built on oil immune to energy shortage - San Antonio Express-News

From the arching observation deck atop the Kingdom Tower, the 100-story skyscraper built by Prince Alwaleed bin Talal a few years ago, this entire city splays out in all directions, a blanket of lights unfurled to the horizon.

Seventy years ago, there was no tower, no lights — and almost all of the land was empty desert. The development is testament to the frenetic growth that oil brought to Saudi Arabia, but it's also a warning of what it holds for the kingdom's future.

All the lights, the roadways teeming with cars and the ambitious construction projections represent growing demand for its own energy. The more oil Saudi Arabia pumps, the more it uses. Petrodollars spawn development that, in turn, spawns consumption.

Brent steady above $117, investors look to US March jobs data | Reuters

Brent crude was steady above $117, after earlier touching near a four-week high, as investors awaited an expected positive U.S. March payroll report due later on Friday for clues to demand prospects by the world's largest oil importer.

Brent for May shed 10 cents to $117.26 a barrel at 0324 GMT after earlier touching $117.90, the highest price since March 7 and less than $2 from a 2-1/2-year high of almost $120 reached in February.

U.S. crude rose 36 cents to $107.08 after earlier touching $107.65, an intraday peak since September 2008.

Saudi Arabia embarks on mortgage reform - The National

After years of false starts the Saudi Arabian government has approved a draft law expected to spark sweeping changes in the country's mortgage laws.

The kingdom's Shura Council earlier this week approved a the law that would create a traditional mortgage system, providing a boost to both the financing and construction sectors.

"It's obvious this time it is very real," said Imad Damrah, country director for Colliers International.

gulfnews : Wataniya Airways incurs losses after ending leases

Kuwait National Airways, which suspended its operations last month, yesterday, said it lost 6.42 million Kuwaiti dinars (Dh85.14 million) for terminating leasing agreements for four aircraft from International Lease Finance Corp and AerCap Aviation Solutions.

The carrier, better known as Wataniya Airways, said in a statement posted on the Kuwait bourse website that the local Alafco Aviation Lease and Finance Co also has demanded that Wataniya pay $70 million for terminating lease agreements for three airplanes. Wataniya said it will enter negotiations with Alafco over the claim.

The airline said in the statement that its board, which met on Wednesday, has postponed to Monday a decision on whether it should resume its operations.

Libya-Owned Bank Drew at Least $5 Billion From Fed - Bloomberg

Arab Banking Corp., the lender part- owned by the Central Bank of Libya, used a New York branch to get 73 loans from the U.S. Federal Reserve in the 18 months after Lehman Brothers Holdings Inc. collapsed.

The bank, then 29 percent-owned by the Libyan state, had aggregate borrowings in that period of $35 billion -- while the largest single loan amount outstanding was $1.2 billion in July 2009, according to Fed data released yesterday. In October 2008, when lending to financial institutions by the central bank’s so- called discount window peaked at $111 billion, Arab Banking took repeated loans totaling more than $2 billion.

Fed officials say all the discount window loans made during the worst financial crisis since the 1930s have been repaid with interest.

Saudi Arabia to Target Solar Power, Nuclear in $100 Billion Energy Plan - Bloomberg

Saudi Arabia, with 20 percent of the world’s oil reserves, is targeting renewable energy and nuclear power in a $100 billion spending drive aimed at meeting a surge in electricity demand and curbing its dependence on crude.

The kingdom sees solar power and other non-hydrocarbon sources as crucial parts of a plan to boost generating capacity by 50 percent in this decade, said Abdullah al-Shehri, governor of the Electricity and Co-Generation Regulatory Authority. The government may announce details of a renewable-energy strategy at a conference in the capital Riyadh on April 3.

Persian Gulf oil producers need to produce more electricity to sustain a regional economic growth rate averaging about 10 percent a year, Jarmo Kotilaine, chief economist at National Commercial Bank in Jeddah, Saudi Arabia, said on March 29. At the same time, countries in the region are hungry for new ways to generate power because they prefer exporting crude to maximize income and allocating natural gas to make petrochemicals.

Saudi Government’s Break-Even Oil Price Rises $20 In A Year - Real Time Economics - WSJ

Another reason to brace for higher oil prices in coming years: big oil exporters are increasingly dependent on the income.

Saudi Arabia, due to higher government spending this year, will need its oil to sell for $88 a barrel in 2011 for its government to break even–up from $68 last year, according to a new estimate from the Institute of International Finance, a global bankers’ trade group.

The kingdom, in response to the unrest spreading throughout the Middle East and North Africa, is boosting government spending to provide new social benefits for its people. The support for housing units, unemployment benefits and wage hikes for public workers (among a long list of measures) will contribute to a 31% increase in government spending in 2011 from a year earlier.

Oman now owns Blue City project - The National

The fate of the troubled US$20 billion (Dh73.45bn) Blue City project is now in the hands of the Omani government after its sovereign wealth fund acquired the debts of the developer.

Onyx Investments, a company fully owned by the Oman Investment Fund (OIF), bought from Essdar Capital Managers nearly all of the class A1 and A3 notes issued by Blue City, the companies said.

Essdar, an investment company in Dubai that is part-owned by members of the Abu Dhabi and Dubai Royal Families, bought $655.5 million of the debt at a steep discount last year as the Blue City project faltered.

PROFILE-Oman's Minister of Finance Darwish al-Balushi | Reuters

-- He is in charge of the country's finances after a third cabinet reshuffle in March led to the dismissal of then Minister of Finance and National Economy, Ahmad bin Abdul-Nabi Mekki, and eliminated the ministry altogether.

-- Some said the reshuffle was expected in response to protesters' grievances about corruption.

-- Protesters had pressed for political and labour reforms across Oman, where a series of concessions from Omani ruler Sultan Qaboos have failed to bring unrest to an end.

United Arab Emirates Population Rises 65% Over Four Years - Bloomberg

The population of the United Arab Emirates grew 65 percent to 8.26 million people in the first half of 2010 compared with the same period in 2006, the U.A.E. Statistics Bureau said on its website today.

Emirati nationals accounted for 11.5 percent of the population at the end of June, or about 948,000 people, the data showed. The country’s expatriate population rose 75 percent from 2006 to the end of June, to 7.3 million people.

The majority of U.A.E. nationals, more than 42 percent, lived in Abu Dhabi, the U.A.E. capital, at the end of June. The data doesn’t provide a breakdown of expatriates in Abu Dhabi or the other emirates in the federation, which includes Dubai, Sharjah, Ajman, Ras al Khaimah, Fujairah and Umm al-Quwain.

IMF warns Dubai over $31bn debt - The National

Dubai faces "significant rollover risks" from having to repay US$31 billion (Dh113.85bn) of debt this year and next, the IMF has warned.

The emirate would probably have to pay higher borrowing costs because of the absence of a well-defined and transparent strategy to address financing for government-related companies, it said.

"With an estimated US$31bn of debt due in 2011-2012, of which at least $5bn is in the real estate sector, Dubai continues to face significant rollover risks in the short term," the IMF, based in Washington, said yesterday, following a mission to the UAE which concluded last month.

FT.com - Access to housing troubles Arab youth

Young Arabs are increasingly concerned about access to affordable housing, according to the results of an opinion poll released on Thursday.

Forty-three per cent of those surveyed in the Silatech survey conducted by the Gallup Centre for Muslim Studies said economic conditions in their communities were improving, but fewer than a third were satisfied with the availability of affordable housing – down from half in 2009.

Gallup interviewed 36,000 people aged between 15 and 29 in 20 countries across the Arab world and including the Comoros Islands, Djibouti and Somaliland last year before the regional uprisings.

Brent steady above $117, investors look to March jobs data - Maktoob News

Brent crude was steady above $117, after earlier touching near a four-week high, as investors awaited an expected positive U.S. March payroll report due later on Friday for clues to demand prospects by the world's largest oil importer.

Brent for May shed 10 cents to $117.26 a barrel at 0324 GMT after earlier touching $117.90, the highest price since March 7 and less than $2 from a 2-1/2-year high of almost $120 reached in February.

U.S. crude rose 36 cents to $107.08 after earlier touching $107.65, an intraday peak since September 2008.

Egypt: retail after Mubarak | beyondbrics – FT.com

The heady excitement on Cairo’s streets which followed the ouster last month of Hosni Mubarak, the former president, has been replaced by gloom, at least if you are an Egyptian shopkeeper having to cope with a dramatic drop in business.

As tourists fled and local and foreign investors took fright at the political uncertainty which followed the fall of the Mubarak regime, the economy has taken a hit.

“I used to sell five televisions a day, now I sell two every three days,” said Hussein Radwan al-Ogeil, the owner of an electrical appliances shop in the upscale area of Zamalek.