Tuesday, October 07, 2008

Nakheel Is Holding back the tide

Chris O'Donnell left Sydney in the Spring of 2006 to become CEO of Nakheel, the government-owned developer of some of Dubai's most ostentatious projects. Two and a half years later, he faces his toughest challenge yet in protecting the company's $30bn development pipeline from cooling global real estate demand.

He is the man in charge of the world's biggest real estate developments. As CEO of Dubai government-controlled Nakheel, he oversees the construction of vast islands built from sand dredged from the seabed - projects of unprecedented scale that have kept most of the world's big dredging fleets busy for the last seven years.

The Palm, World and the planned Universe islands are transforming the relatively straight and featureless coast of the emirate into huge and intricately interconnecting fronds and breakwaters designed to add 500 km of coastline while holding back the tides of the Arabian Gulf.

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Nakheel timeline

October 2008

Nakheel announces plans to build the world's tallest tower, at over a dizzying one kilometre high

Jan 2008

Nakheel unveils concept plans for ‘The Universe', its latest planned offshore island project modelled on the solar system. It also reveals its intention to redevelop Dubai's Port Rashid docks district.

June 2007

Nakheel pays $100m to Cunard Line to buy the QE2. From 2009, the famous vessel will be berthed at the Palm Jumeirah. The 40 year-old QE2 was the longest-serving ship in Cunard's 168-year history.

Dec 2006

Nakheel lists the world's largest Islamic bond on the Dubai International Financial Exchange (DIFX). The $3.52bn sale comes with rights to invest in any future share sale by Nakheel.

June 2006

Chris O'Donnell joins as CEO from Australia's Investa Property Group where he has worked since December 2000 - helping the company become the largest listed owner of property.

Oct 2005

Donald Trump unveils plans to develop the $400m Palm Trump International Hotel and Tower. The tower is to be the first development in an exclusive joint venture between the developer and property tycoon and includes exclusive rights for 19 countries in the Middle East region.

Dec 2004

Nakheel develops Dragon Mart in Dubai, the largest trading hub of products from China outside the Chinese mainland. The 1.2km building quickly becomes a cathedral of bargain-hunters.

June 2002

When the England football squad arrived in Dubai in the run up to the 2002 World Cup, some of the players, including David Beckham and Michael Owen left with their very own villas on Nakheel's debut Palm-Jumeirah. How much did they pay? The price was never disclosed, but whatever it was (or wasn't) it achieved its purpose in generating the hype needed to ensure the project was completely sold off-plan.

April 2001

Nakheel awards contracts to build the first Palm island in Dubai using reclaimed sand dredged from the seabed off the coast of the emirate. The project makes headlines around the world.

Nervousness in Dubai property market amid global economic crisis

Cityscape still captures headlines in the local media with more announcements on billions worth of property projects across the region. Dubai is still leading the pack with more spectacular projects.
The foreign media plays different tune.


By Robert F. Worth
Published: October 5, 2008
On the surface, this glittering Arabian boom town seems immune to the financial crisis plaguing the global economy.
The skyline still bristles with cranes - an estimated 20 percent of the world's total - and the papers are full of ads promoting spectacular new building projects. Just two weeks ago, tourists from around the world flocked to the opening of Atlantis, a gargantuan, pink, $1.5 billion resort hotel built on an artificial, palm-tree-shaped island.
There was no shortage of people willing to pay as much as $25,000 a night for a room, to gaze at the sharks and rays in a vast glass-lined aquarium in the lobby, and to dine at marquee restaurants like Nobu and Brasserie Rostang.
But as recession looms in the West, cracks are appearing in the oil-fueled boom that has made Dubai, with its futuristic skyscrapers on the turquoise waters of the Gulf, a global byword for unfettered growth.

Atlantis, a $1.5 billion resort hotel that opened two weeks ago on an artificial island in Dubai. Other local building projects are now in doubt as world credit jitters take a toll. (Jumanah El-Heloueh/Reuters)

Banks are reining in lending, casting a pall over corporate finance and building plans. Oil prices have been dropping. Stock markets across the region have been falling since June. After insisting for days that the oil-rich Gulf region was fully "insulated" from financial troubles abroad, the central bank of the United Arab Emirates made about $13.6 billion available two weeks ago to ease credit problems, in an echo of bailout measures in the United States.

Already, some bankers are saying it is not enough.
Some of Dubai's more extravagant building projects - the ever bigger malls, islands and indoor ski slopes - are likely to be dropped if they do not already have financing lined up, bankers say.
The credit crisis could also reduce demand from buyers, who will have a harder time getting mortgages.
The shrinkage will be more severe if the financial crisis worsens in the West. Real estate prices and rents, which have remained steady until now, are widely expected to start dropping soon.
At the same time, investor confidence has been harmed by a long string of high-level corporate scandals, jeopardizing Dubai's long-term ambition of becoming a regional financial capital.
"Plenty of people are worried," said Gilbert Bazi, 25, a real estate broker from Lebanon who moved here a year ago. "They are waiting to see if what happened in the United States will happen here."
When he first arrived, Bazi said, making money was almost absurdly easy. "Iranians, Russians, Europeans - everybody was buying," he said. "I didn't have to call people; they were calling me."
Now, Bazi stalks the lobbies of hotels, trying to find clients.

"The market is sleeping," he said.
In fairness, Dubai still looks rosy when set against the financial turmoil elsewhere. Although it lacks the oil wealth of its fellow emirate Abu Dhabi, Dubai has huge budget and current-account surpluses, and the government of the Emirates federation is able and willing - like its Gulf neighbors - to inject an almost unlimited amount of money into the system to ease credit problems.

The governments of Saudi Arabia and Qatar have reaped so much profit from oil and natural gas in recent years that they are more worried about how to spend it than about managing any downturn. But the Gulf governments face real economic challenges, albeit ones that are profoundly different from those in the West.
Until recently, credit in Dubai was growing by 49 percent a year, according to the central bank of the Emirates - a rate almost double that of bank deposits' growth. That unnerved some bankers here, who felt it could lead to a collapse.
"In the U.S., the challenge is about keeping the banks going," said Marios Maratheftis, chief economist for Standard Chartered Bank. "Here, the economy has been overheated, a correction is needed, and it's about making sure the slowdown happens in a smooth, orderly manner."
If that sounds like an easy problem to have, consider the manic vicissitudes of Dubai's real estate market. Speculators often got bank loans to put down 10 percent on a property that had not yet been built, only to flip it for a huge profit to another buyer, who would do the same thing, and on and on.
That was easy to do when housing prices here were surging so fast that some properties multiplied tenfold in value in just a few years.
But the Dubai authorities began getting nervous about this and imposed new regulations this summer to limit speculation.
Many analysts say the slowdown in Dubai's economy, assuming it does not worsen to a slump, will make the city's growth more sustainable and healthy by reducing its dependence on loans and speculation.

Similarly, the authorities hope that recent arrests in corporate scandals will root out the culture of corruption that plagues so many Arab countries. Some of those arrested have been Emiratis with connections to the ruling family, in a gesture clearly intended to send the message that no one is exempt.
As Dubai's frenzied growth slows, whether there is a hard or soft landing will depend in great part on the banks, the link between the region's declining stock markets and its still-thriving real estate sector.
"Banks will have to start lending to end-users," said Robert McKinnon, a real estate analyst and head of equity research at Al Mal Capital here, referring to people who actually plan on occupying properties as opposed to trading them for profit. "There are some questions about how the banks will handle that transition."
At worst, if the global economy worsened and some Dubai banks failed, there would be a firm crutch to lean on. In the early 1980s, after several Dubai banks stumbled, the government rescued them and relaunched them as Emirates Bank International. In the early 1990s, two more banks were rescued.
At that time, of course, Dubai was far smaller. The repercussions of such a government bailout today would be far more damaging to Dubai's image as the epicenter of Gulf development.
The government cushion appears to be part of the reason most local people do not seem anxious right now.
"We don't worry about it," said Hassan al-Hassani, 26, a civil engineer and an Emirati citizen, who was drinking coffee Wednesday night with relatives and friends at a faux-Bedouin-style tent, set up among Dubai's hypermodern skyscrapers in honor of the Muslim holy month of Ramadan. "Maybe it's good for things to calm down."
A few meters away, guests admired a miniature model of a new residential and commercial Dubai development called the City of Arabia, which includes what will be - if it is really built - the biggest mall in the world.
"Sometimes we wonder, will people really come to live in these places?" Hassani asked. But he quickly brushed off the thought with a smile, reminding his listener that native Emiratis - unlike the foreigners who make up a majority of Dubai's 1.3 million residents - have a different perspective.
"Remember, 30 years ago almost nobody had phones here," he said. "There was maybe one tall building. My family only had one car."

YB Lim Guan Eng in Dubai

Penang is keen to draw lessons from UAE
by Regina William

GEORGE TOWN: Penang is keen to draw lessons from the United Arab Emirates (UAE) experience to help transform it into an international city and location of choice for investors, a destination of choice for tourists and a habitat of choice for those who desire sustainable living.

“Instead of making this as a final goal, making quality as a way of life can help to promote a culture of excellence. Perhaps this is why so many talented Malaysians and Penangites from all races are working or doing business in United Arab Emirates. From 200 only 10 years ago, the number of Malaysians has increased 30 times to 6,000,” said Penang Chief Minister Lim Guan Eng in a statement yesterday.
Lim is on a visit to the UAE with InvestPenang executive committee chairman Datuk Lee Kah Choon and InvestPenang director and Jelutong member of parliament Jeff Ooi.
He added that the breakneck economic growth in Abu Dhabi and Dubai was remarkable.
Lim would be visiting the Dubai Cityscape 2008, a four-day international real estate exhibition and reputedly the largest in the world. There are two huge projects, namely the 350 billion dirham (RM330.6 billion) Jumeirah Gardens, to be built over 12 years by Meraas Development in Dubai, and the construction of a 140 billion dirham structure by Dubai developers Nakheel.
The 1,000-metre tall building will surpass the emirate’s 807-metre Burj Dubai. The total cost of these projects is close to US$1 trillion (RM3.48 trillion).
Lim said that stressing on quality economic growth did not mean core values would be ignored.
“The local population are well taken care off with their huge oil revenues and are also devout Muslims.
“Tourists and foreigners from all over the world, especially Caucasians outnumber the locals four to one because of an open and liberal lifestyle.”

More HERE and HERE and HERE

Arab stock markets crashed by more than $158 billion (Dh580bn)

Not sure whether you follow the stock markets worldwide.

Life is down for some investors. Billions have been wiped out in the region (while trillions Dirham of property development projects are being announced in the Cityscape). I am still trying to figure it out in terms of how many zeroes required to make more money out of dreams.

I have not heard any suicide news yet but hopefully would be no more heart breaking news on the trading floors as Asian stocks were mixed today. A big interest rate cut in Australia helped spur recoveries in several regional markets, sparking hopes that other central banks will lower rates to help loosen the global credit crunch.

According to Emirates Business, Arab stock markets crashed by more than $158 billion (Dh580bn) in September, their largest collective monthly loss since they began share dealing some decades ago, according to dealers and official figures.

GCC bourses emerged as the main victim of the decline as they collapsed by $153bn, nearly 96 per cent of the total capital loss, showed the figures by the Arab Stocks Data Base at the Arab Monetary Fund in Abu Dhabi.

Saudi Arabia plummeted by nearly $82bn to account for over half the decline. From around $1.2 trillion at the end of August, the market capitalisation of the Arab bourses dipped to one of their lowest levels in nearly a year to reach $1.1trn on September 30, a loss of around $158.14bn and a daily average fall of about $5.2bn.

In October, GCC stock markets have posted a combined decline of more than $85 billion (Dh312bn) in the first two trading days this month. This is over and above the combined decline of $127.25bn that the GCC markets witnessed in the month of September

Saudi Arabia, the largest Arab market, posted a decline of 9.8 per cent yesterday, with its benchmark Tadawul All-Share Index (Tasi) shedding more than 731.90 points to close at 6,726.60, its worst close since October 11, 2004, or almost 48 months.

The Saudi stock market was capitalised at $386.73bn on September 28, its last trading day before Eid break. Its market cap stood at $349.5bn at close yesterday, a loss of $37.23bn (-9.6 per cent) in a single day.

Dubai Financial Market (DFM) lost a massive 7.61 per cent yesterday, exacerbating the previous day's fall of 6.86 per cent.

The DFM alone has seen more than $10bn wiped off in market value in the two trading days since markets opened on Sunday after the Eid break.

While the DFM closed with a market cap of $82.03bn on September 29, before the Eid break, that figure stood at $71.96bn yesterday, signalling a decline of 12.27 per cent in just two days. The index closed yesterday at 3,551.79, its worst close since April 2, 2005, or more than 42 months. The index is down more than 40 per cent year-to-date.

Dh350 billion Jumeira Gardens project

Meraas Development, a new real estate developer, has burst on to Dubai's property stage with the announcement of its first-ever project worth a staggering Dh350 billion and involving one of the world's tallest buildings - with varied microclimates and a mini-Manhattan.

Jumeirah Gardens will be a fully integrated, mixed-use development project located in the old Satwa area west of Shaikh Zayed Road and flanked by Al Diyafa Street and Safa Park.
The project aims to cater to a population of 50,000 to 60,000 residents.

The announcement comes amid a global market crash that has shattered investor confidence worldwide, but goes on to show that Dubai is determined to continue with the vision of His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.

Meraas Development, a new real estate developer, has burst on to Dubai's property stage with the announcement of its first-ever project worth a staggering Dh350 billion and involving one of the world's tallest buildings - with varied microclimates and a mini-Manhattan.

Jumeirah Gardens will be a fully integrated, mixed-use development project located in the old Satwa area west of Shaikh Zayed Road and flanked by Al Diyafa Street and Safa Park.
The project aims to cater to a population of 50,000 to 60,000 residents.

The announcement comes amid a global market crash that has shattered investor confidence worldwide, but goes on to show that Dubai is determined to continue with the vision of His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.