Sunland 'misled the ASX' in Dubai case

Source: Sydney Morning Herald 11 Feb 2010 (and thanks to "Anonymous" for the heads up.)
Photo: the Waterfront website
============================
The company at the centre of a failed purchase in a huge development has contradicted its own claims to the stock exchange.  Sunland, a Gold Coast developer behind the fraud prosecution of two Australians in Dubai, has misled the ASX three times by claiming that it and its senior executive have never been investigated in the case.
When Matt Joyce and Marcus Lee were arrested and jailed in January last year, Dubai authorities confiscated the passport of another Australian, the Sunland Group's chief operating officer in the Middle East, David Brown.
Now Sunland's own barrister has contradicted the company's repeated claims to the stock exchange, by telling the Federal Court that Sunland and Mr Brown were in fact investigated in connection with their purchase of a plot on Dubai Waterfront, a colossal development project where Mr Joyce was the managing director and Mr Lee the head of commercial operations.
Mr Brown has since become a critical witness for the prosecution against Mr Joyce and Mr Lee in Dubai. But court documents from early last year, when Mr Brown was arranging bail and fighting for the return of his passport, refer to him as "the defendant" and "the accused", and as being "under investigation".
Sunland, nevertheless, released three statements to the stock exchange - in February, March and July. The first said "there is no investigation into Sunland"; the second said no allegations had been made against the company or its executives, and that Mr Brown, while a witness, "is not the subject of investigations"; the third said Mr Brown was "never subject of the investigations nor detained".
In the Dubai fraud case - and in a separate civil action against Mr Joyce and others in Australia - Sunland alleges it was duped into paying a "consulting fee" of more than $14 million to buy the plot on Dubai Waterfront, a subsidiary of the government-owned master developer Nakheel.
Sunland paid that fee to another Australian company, Prudentia, which claimed it had established a right to purchase the plot. Dubai authorities allege Prudentia had no such right, and Mr Brown's lawyers in Dubai noted that his status was changed from "defendant" to "victim".
Mr Joyce and Mr Lee, who insist they are innocent, are trapped in Dubai with their families, having spent nine months behind bars before they were released on bail to fight the fraud allegations. Their lawyers say they have been caught up in Dubai's spectacular property market collapse, in which Sunland, like many others, lost millions.
James Packer quit the Sunland board last August and sold his $28 million stake in the group in September without explanation, although at the time he was divesting a wide range of assets.
In the Federal Court in Brisbane in December, Pat O'Shea, SC, for Sunland, said "when these matters were first investigated, Sunland was also the subject of investigation, and, indeed, Mr Brown in particular was the subject of investigation". Mr Brown's emails were seized, Mr O'Shea said. He said this background "adds force" to Sunland's attempt to vindicate its reputation.
Sunland's statements to the stock exchange raise the prospect of investors suing if they believe they bought and sold shares when the market was not properly informed.
The Herald sent detailed questions to Sunland, which responded with a two-sentence statement: "Sunland stands by its previous ASX announcements that David Brown is a witness for the prosecution and has never been implicated in any wrongdoing. Sunland has and will continue to accurately inform the ASX and its investors as is required by law."
In a follow-up letter yesterday, Sunland's lawyers, DLA Phillips Fox, repeated that neither Sunland nor any of its employees were under suspicion of any wrongdoing "at the time of the initial statement to the ASX" on February 20 last year. They were "assisting the authorities, no more".
However, a Public Prosecution document in Dubai dated February 16 last year - four days before Sunland's first statement to the ASX - says Mr Brown was informed that it was "questioning him in his capacity as Defendant in the case". On March 16, another Public Prosecution document refers to his attempt to retrieve his passport, and still Mr Brown is described as the accused.
If a misleading statement to the stock exchange is deemed to be an attempt to manipulate share prices, a prosecution can lead to a maximum penalty of a $22,000 fine and/or five years' jail for an individual and a $110,000 fine for a corporation. Lesser breaches might lead to only civil remedies, and legal sources say it would be technically possible for some false statements not to be deemed as misleading or deceptive conduct - and escape any sanction.
The Australian Securities and Investments Commission said it did not confirm or deny whether investigations were under way.
Matthew Gibbs, the corporate relations manager for the ASX, said: "Allegations about a company issuing misleading or deceptive statements are potential breaches of the law rather than ASX listing rules, and are matters for the attention of ASIC. Under ASX rules, companies are obligated to keep the market properly informed of all material events. Companies are aware of the serious consequences of failing to do so. ASX treats the market announcements made by companies in good faith, but would consider investigating their veracity if additional information was provided that suggested a breach of ASX rules."
In the Federal Court, Sunland is suing Mr Joyce, who lodged his defence last Friday, Prudentia and its director Angus Reed, who has been declared a fugitive in the Dubai fraud case. Mr Reed, back in Melbourne, and Prudentia say they acted with integrity.
Sunland is not suing Marcus Lee, the second Australian accused in Dubai. Mr Lee's lawyer, John Sneddon, has stressed that it has never been alleged that he gained, or even stood to gain, from the land deal. Mr Joyce's Australian lawyer, Martin Amad, has said his client "never received a cent" of Sunland's money.
In Dubai, meanwhile, the case drags on. The court reconvened on Sunday but was put off yet again because the first prosecution witness, a financial auditor, failed to turn up for the fourth time.

Aussie businessmen granted bail after 9 months in Dubai jail

Source: Sydney Morning Herald 21 Oct 09 
==============================
Two Australian businessmen have been granted bail after languishing in a Dubai jail for nine months on suspicion of fraud.
Melbourne man Matt Joyce, 43, and his colleague Marcus Lee, 40, of Sydney, were arrested in January after working for three years for the Nakheel company's multi-billion dollar Dubai Waterfront development.
Their arrests came as the global financial crisis hit the local property market hard.
The pair were held in jail for six months before charges of misappropriation were laid.
Last month an independent judge finally assessed their applications and granted an application to hear their case.
Joyce's Australian lawyer Martin Amad said his client was due to be released from prison in the next few days while Lee is also due for release shortly.
The co-accused will be required to hand in their passports once released ahead of the first witness appearance on November 17.
Legal processes in Dubai are primarily controlled by the prosecution, Mr Amad said.
"There's no time limit as to which a prosecutor needs to provide a file," he told AAP.
Joyce will spend time with his wife and three children before concentrating on preparing his defence with his local legal representative.
"We've got confidence he'll be found innocent.
"His wife is over the moon and can't wait to have him back in the home."

Emaar & Nakheel do a u-turn on Cityscape.

Another one for the "Dubai, Capital of The U-turn" file.  After announcing at the end of last week that they wouldn't be taking part in the Cityscape exhibitions, Nakheel and Emaar have had a joint change of minds and have now announced that they will.  Limitless have announced that they will not take part this year, probably because there's nobody left.
Source: ArabianBusiness.com
==================================
State-owned master developer Nakheel on Saturday said it would participate in Cityscape Dubai after all, a decision taken following tals with the event organisers.
The company, the developer of iconic projects, like the Palm Jumeirah and The World, said in a statement sent to Arabian Business that the decision was made "following discussions with various industry stakeholders, including partners and the leading event’s organisers".
Its announcement was followed by a similar change of mind from Emaar Properties which said its decision "follows discussions with the various agencies involved in organising the event", it was reported by Zawya Dow Jones newswire.
Both Nakheel and Emaar had said on Thursday that they would not be taking part in Dubai's premier property show.
But Nakheel's statement on Saturday added that it would focus on "exhibiting communal properties on several of its developments that are close to completion".
Nakheel said it had recently completed the handover of 33 islands on The World and is scheduled to complete property handovers on a number of other developments in its portfolio.
The company is also gearing up for the inaugural Dubai World Championship golf tournament at Jumeirah Golf Estates in November.
A Nakheel spokesperson added the company was expecting "a very active last quarter 2009" and was focusing on delivering units and services to existing investors and residents, without giving further details.

Emaar, Nakheel both no shows at 2009 Cityscape

Neither Emaar nor Nakheel will be attending Cityscape this year.  A spokesperson for Emaar said the companies wish to "concentrate on the completion and handover of projects."  However, back in the real world there's speculation that both companies wish to avoid the prospect of crowds of irate investors arriving to question company reps.  Without Emaar or Nakheel why bother even having Cityscape at all?  Last year's Cityscape in Abu Dhabi which was held after the redundancies had begun in Dubai, was poorly attended except by company salespeople talking to each other.
Source: ArabianBusiness 17 September 09
Photo of one of the Cityscape models Dubai 2008
=======================
Dubai real estate giants Emaar and Nakheel revealed on Thursday they would not be taking part in Cityscape this year.
The developers said they would forego the massive business-to-business real estate investment event, which attracts thousands of visitors every year, to concentrate on the completion and handover of projects amid a sharp downturn.
“Emaar's focus continues to be on completion of the projects in Dubai and internationally. With the opening of The Dubai Mall and The Dubai Fountain and Burj Dubai scheduled to open this year, Emaar's concentrated efforts are towards making the Downtown Burj Dubai community one of the best developments,” a spokesman for Emaar said in a statement sent to Arabian Business.
“As such we have taken a strategic decision not to participate in Cityscape 2009, but will evaluate our participation in Cityscape 2010 based on our objectives, strategy and announcements next year,” the company added.
A spokesman for Nakheel, the state controlled private developer, said: "After careful consideration, Nakheel has decided it will not participate in Cityscape Dubai 2009. The developer of iconic projects, like the Palm Jumeirah and The World in Dubai, determined it was more prudent to focus on property handovers on several of its developments that are close to completion."
Cityscape in Dubai attracts the biggest developers in the region and is seen is a key event in which to launch and sell projects and close multi-million dollar deals.
Last month Arabian Business reported that visitor and exhibitor numbers would be 30 per cent down on last year, when the event drew record crowds.

Aussies refused bail in Dubai Court hearing

The 'Gulf News' uses initials for defendants' names in their reports.
Source: Gulf News 15 Sept 09
==============
Waterfront's former executive director and ex-operations manager were refused bail by a court yesterday after they denied the charge of unlawfully gaining Dh44.1 million.
With his arms folded, the 43-year-old Australian former executive director, M.J., repeatedly said: "No!" four straight times when he pleaded not guilty before the Dubai Court of First Instance.
His 40-year-old compatriot ex-operations manager, M.R., said: "No!" four times in the same manner when he denied his charges at courtroom nine in front of Presiding Judge Al Saeed Mohammad Barghout.
Lawyers Salem Al Sha'ali and Ali Abdullah Al Shamsi, who are defending M.J. and M.R., respectively, told the judge that there are no more reasons to keep their clients in provisional detention.
The advocates said their clients' passports have been confiscated and asked the judge to bail the defendants.
The Public Prosecution charged M.J., M.R. and Waterfront's former legal adviser, 44-year-old Australian A.J. (who is at large), with abusing their jobs as public servants and intentionally damaging the interest of Nakheel's Waterfront project by unlawfully earning Dh44.1 million, out of which Dh22.1 million went to M.J.
According to the bill of impeachment, a fourth Australian escapee, identified as A.R., collaborated with the former Waterfront executives.
Prosecutors charged M.J., M.R. and A.J. with abusing their jobs when they managed and promoted Dubai Waterfront lands for sale and gained an illegitimate profit.
Public Prosecution records claim the Australians swindled and misappropriated Dh44.1 million from a Dubai-based property developer.
The defendants allegedly claimed to the developer's Australian manager, D.B., that one of the lands at the Waterfront project belonged to an Australia-based company, which is owned by A.R. The defendants claimed that the land had been reserved for A.R.'s company. Prosecutors claimed that the defendants deceived D.B. and lured him into paying Dh44.1 million and obtain a waiver over the ownership of the land to be able to buy it.
During yesterday's hearing, advocate Eisa Bin Haidar represented the property developer and D.B., who is claiming Dh20,000 in temporary compensation.
Al Sha'ali argued in court: "Since this case surfaced nine months ago, we submitted a document that confirms that the defendants reserved the land for the Australia-based company. Prosecutors failed to face prosecution witnesses with that document because eventually it corroborates that the suspects didn't have any criminal intention&"
Presiding Judge Barghout rejected the bail requests and adjourned the case until October 22.

Dubai wealth fund under stress

Source:Al Jazeera and agencies
=====================
Istithmar World, the sovereign wealth fund of Dubai, is reported to be considering a halt to investments as it undertakes an overhaul of its operations.
Istithmar is one of the flagship companies of state-owned Dubai World, whose real-estate unit Nakheel is seeking to refinance $3.52bn Islamic bonds maturing in December.
The overhaul could lead to the sale of the fund or its assets, the news agency Bloomberg said.
Istithmar, run by David Jackson, said recently that John Amato and Felix Herlihy, its co-chief investment officers, were leaving the firm to explore other opportunities.
Jackson's job is also under review, the Bloomberg news agency said quoting people.
However, Dubai World said on Friday that Jackson would continue to lead the company.
"Reports that ... David Jackson had left the company were incorrect," a company spokesperson said in an e-mailed statement.
Reversal of fortune
A restructuring by Istithmar and its parent Dubai World may mark the most public reversal of fortune for a state-controlled investment firm since global credit markets seized up in 2007.
Dubai World has $59bn of liabilities, a large proportion of the Gulf emirate's total debt.
The company, which owns Barneys New York, hired an advisory firm in August to help it explore options to shore up the US luxury chain's financial position.
Dubai World is also trying to persuade bank creditors to restructure up to $12bn of its loans, an indication that the emirate is starting to grapple with the challenge posed by its $80bn-plus debt pile.
Bankers close to the talks say Dubai World is gauging interest from about 10 banks for a restructuring of outstanding syndicated debt and bilateral loans for the holding company as well as Nakheel and Istithmar.
Recovery signs
Hit hard by the credit crisis, Dubai, one of the UAE's seven emirates, is showing signs of recovery on the back of global economic optimism.
However, restructuring Dubai's government-linked debts remains a top priority as the government seeks to assure a rebound for its trade, tourism and services-focused economy and recover from the precipitous property crash.
Speaking to Al Jazeera on Sunday, Robin Amlot, managing editor of CPI Financial, based in the emirate, said: "Dubai is not oil-rich. It's a service economy. And as all service economies it has suffered in the global retrenchment that we have seen in the last two years.
"And what has happened with Istithmar World is an extension of that.
"They invested in banks, yacht marinas, Las Vegas property, Barneys high-end fashion in New York - all of which have been vulnerable areas.
"We are not staring into the abyss anymore. Business is still carrying on, companies are starting to hire again. The thought that we were going to fall into a black hole is falling away."

Dubai bribery case: Shaping up to be a bitter public brawl

This is shaping up to be an enthralling, and very public, brawl. As a commenter on an earlier posting pointed out, this matter will be open to public gaze once it starts to process through the Australian Courts. If the Court case captures the public imagination, as it no doubt will, it will take on a life of its own. No matter what the eventual outcome, Dubai's reputation, in Australia at least, will be severely damaged, mud will be slung and some of its going to stick.
Source: Sydney Morning Herald 27 July 09
======================
FOR more than 150 years, Geelong Grammar has provided its privileged graduates with the keys to success in an Anglo-dominated Australia. But for the Old Grammarian classmates and property industry figures Angus Reed and Matt Joyce, some training in doing business in more exotic places like the United Arab Emirates might have been more useful.
The Herald can reveal that Mr Reed, a Melbourne-based developer, has emerged as the mystery man at the heart of a Dubai property deal gone bad; a transaction that has left Mr Joyce and and another Australian executive, Marcus Lee, languishing in prison for six months and facing trial for fraud.
Mr Reed and an Australian lawyer, Anthony Brearley, are believed to have left Dubai before a police investigation, thus avoiding jail. Well-placed sources last night confirmed that Mr Reed and Mr Brearley have been declared "fugitives" in Dubai and will be tried in their absence.
The Herald also understands that the James Packer-backed developer Sunland Corporation has Mr Reed and Mr Joyce in its sights as it prepares civil action to recoup millions it says it lost on the deal.
Like thousands of their colleagues, Mr Reed and Mr Joyce ventured to Dubai a few years ago in search of riches. The dream turned sour last year for Mr Joyce in particular, when the emirate's "miracle" property boom proved to be a very fragile bubble.
Until his arrest in January, Mr Joyce had been managing director and Mr Lee a senior executive of Dubai Waterfront, a subsidiary of the state-owned Nakheel Corporation. It is the world's biggest waterfront development.
Important to the charges against Mr Joyce and Mr Reed are payments allegedly made by Mr Reed's Australian company, Prudentia Investments, to a bank account in Jersey held by Mr Joyce. Both men are expected to insist that any such payments were unconnected with the Dubai property deal in question.
A source close to Mr Reed says he is deeply upset by his mate's predicament but has not returned to Dubai for fear of being arrested.
At the core of the row is the sale in 2007 of a parcel of development land by Dubai Waterfront to Sunland. Prudentia is believed to have partnered Sunland in the purchase of the waterfront site. But Prudentia sold its share of the project to Sunland as the boom continued through 2007. Now Sunland has put development of the site on hold and says it is the victim of fraud.
It has made a formal complaint to Queensland police and the Australian Competition and Consumer Commission. The Herald understands the company names Mr Reed, Mr Joyce and Mr Lee.
One source close to one of the families said the saga had led to tension between the two old school friends, a suggestion rejected by a spokesman for Mr Joyce.
Mr Joyce and Mr Lee insist they are innocent. Australian business sources have complained that the two became scapegoats amid the property collapse in Dubai, where "commissions" or kickbacks have been commonplace.
The Dubai prosecutors and Sunland, which has billions at stake in Dubai, see things differently. Sunland has stated publicly that it will seek "civil remedies in respect of the alleged fraud".
It has repeatedly stated that it is co-operating fully with the Dubai authorities in its investigation of Mr Joyce and Mr Lee but has denied being behind the police action against them.
Any civil action will be taken in Australia, not Dubai. But in what is shaping up as a bitter stoush, with big-name lawyers such as Robert Richter (QC, William Crockett Chambers in Melbourne and barrister for underworld gunman Mick Gatto) likely to be throwing the punches, the case is set to open a rare window into the opaque world of business and government in a country dominated by its ruler, Sheikh Mohammed bin Rashid al-Maktoum.
Mr Reed is well-known in property circles, including as an adviser to the Nauru Government in the 1990s, when it lost a fortune on the Melbourne property market.
Those who know the two men say Mr Joyce is quiet and cautious while Mr Reed is more entrepreneurial and daring. It is counter-intuitive, they say, that Mr Reed is now a free man at home in Toorak while Mr Joyce sweats it out in a Dubai jail.
After a thorough vetting by Mr Reed's lawyers, Prudentia issued a brief written statement. The lawyers would not allow Mr Reed to be quoted. Instead, a company "spokesman" said: "Some years ago, the Prudentia group, through its Singapore-based subsidiary, was involved in a transaction which we understand is the subject of the investigation by the Dubai authorities.
"The Prudentia group has at all times acted properly and with integrity and is concerned and surprised that there would be any allegations of wrongdoing against representatives of any of the parties involved in the transaction."
Mr Joyce's Melbourne lawyer, Martin Amad, restated his client's innocence and questioned Sunland's motives. He said the land sale was a "legitimate business transaction that occurred prior to the global economic downturn. Sunland has subsequently incurred a huge loss on the project and has written down the value of the land substantially."
He added: "Shareholders of Sunland would hope that Sunland exercised due diligence prior to purchasing the land. After all, they would have their shareholders believe they are an experienced and sophisticated property developer."
He said that, contrary to previous reports, there had never been an allegation of Sunland paying consultancy fees to Dubai Waterfront.
Mr Joyce's wife and three children and Mr Lee's wife are still in Dubai, awaiting the outcome of the fraud trial.
Sunland did not wish to add to a written statement made to the Stock Exchange last week.
In a separate matter in Sydney last week, Prudentia refused to comment about its plans for the Waratah Park Earth Sanctuary, where Skippy the Bush Kangaroo was filmed in the 1960s, after the RSPCA put down two emaciated kangaroos at the closed park. State authorities say Prudentia has failed to obtain a licence to care for more than 100 native animals in the park since it took over the site in Duffys Forest, on the northern beaches, in 2006. Residents fear the company has let the site run down because it wants to build houses there.

Packer-backed developer to sue Dubai pair

THE James Packer-backed Gold Coast developer Sunland Group has complained to police and the corporate watchdog about two Australians accused of fraud in Dubai, and is expected to take civil action against the men to recover losses from their alleged crime.
Sunland, in which Mr Packer is a key shareholder and non-executive director, has laid the complaints against Matthew Joyce and Marcus Lee, executives from the colossal Dubai Waterfront project. The two have been charged with fraud after being jailed for six months on suspicion of bribery.
The pair insist they are innocent and Australian business sources have complained they became scapegoats amid the bursting of the property bubble in Dubai, where "commissions" or kickbacks are commonplace.
But now Sunland, which has billions at stake in Dubai, has made a formal complaint about Joyce and Lee to Queensland Police and the Australian Competition and Consumer Commission.
In a media release yesterday, the day after the fraud charges were revealed, the company said: "Sunland understands that the charges relate, at least in part, to the purchase by one of its subsidiaries of a site from the Dubai Government-owned master developer Nakheel (Dubai Waterfront LLC), at Dubai Waterfront in October 2007."
It is understood that Sunland paid commissions to Dubai Waterfront, where Joyce was managing director and steering the world's biggest waterfront development.
Sunland's managing director Sahba Abedian said the company had been assisting Dubai authorities with their investigations since December 2008 and would continue to provide help when required. The company said it did not instigate the investigation into the executives.
Mr Abedian said: "Sunland has also taken steps to report the actions of certain individuals to the Australian authorities and we are investigating civil remedies in respect of the alleged fraud."
The statement did not name Joyce or Lee, but the company has confirmed that its complaint and action were against the executives, not Dubai Waterfront or Nakheel.
It is believed that any civil action will be launched in Australia, not Dubai.
Mr Abedian confirmed that Dubai authorities had returned the passport of David Brown, the Sunland's chief operating officer in the Emirates, now that the they had completed their investigation. He said Mr Brown was a witness and not a subject of investigation.
Joyce's lawyer, Matin Amad, said he was shocked by Sunland's action.
"No complaint about Joyce or Lee has been brought to my attention," he said yesterday afternoon. "I can't imagine any circumstances under which a complaint could be justified. The alleged offence occurred in Dubai, not in Australia. It sounds like they have an ulterior motive in doing this."
Mr Amad said the case against Joyce and Lee is weak. Joyce's wife and three children and Lee's wife are in Dubai, awaiting the outcome of their fraud trial.
Sunland said it only released the information now as it had not wanted to interfere with the Dubai investigation.
====================
Source: The Age, Melbourne 22 July 2009

Aussies face bribe charges in Dubai

From the Sydney Morning Herald 20 July 09
=========================
Two Australian businessmen have been formally charged with fraud, almost six months since they were thrown into a Dubai prison.
Marcus Lee, from Sydney, and Matt Joyce, from Melbourne, were arrested in January on suspicion of bribery while working on a development project for the United Arab Emirates government-owned Nakheel property group.
Mr Joyce's lawyer Martin Amad today told ABC Radio formal charges had been laid, although the exact details of the allegations were still not known.
"We've just received the charges yesterday and we haven't had a chance to have it translated," he said.
The charges are related to fraud.
The men were each held in solitary confinement for seven weeks, had been moved between three prisons and were struggling to deal with their detainments, Mr Amad said.
Although he had yet to read the prosecutor's brief, he suspected the case against the pair was weak.
"A particular set of circumstances may lead to charges in Dubai, but may not be sufficient in Australia and I think that's probably the case here."
The federal government has confirmed 91 Australians have been arrested in the UAE - most in Dubai - since January 2008.
Mr Amad said the figure was unlikely to recede, given foreigners were increasingly being made scapegoats for soured business deals.
"More and more people are now starting to understand the risks in doing business overseas," he said.
"With the impact of the global financial crisis, I think more and more people will be charged on similar allegations and I think Australians and the Australian Government need to be aware that this is a distinct possibility."
Mr Amad said in a statement later that the wives of Mr Joyce and Mr Lee, and Mr Joyce's three children, were all in Dubai awaiting the outcome of the legal proceedings.
"The experience, and concern about the eventual outcome of the case, has taken its toll on the two men and their families," he said.
The pair were now being held in Al Awar Central prison, where they were allowed non-contact visits once a week, Mr Amad said.
The defence was looking forward to presenting its evidence and believed the case against the pair should be dismissed, he said.

Nakheel cuts 400 more jobs

From The National 8 July 09
===============
Nakheel, a property developer owned by Dubai World, has made about 400 more staff redundant as the company continues an overhaul brought on by the downturn in the property sector.
The redundancies were staggered over the past two weeks and are on top of the 500 jobs that were cut last December, a source close to the company said.
"We were given a redundancy package of six months' pay" one former staff member who was laid off last week said.
The economic downturn has battered nearly every Dubai developer, with property prices and sales falling sharply. Developers, who were mostly reliant on off-plan sales to finance the construction of their projects, have struggled to collect payments, leading to rising defaults, while payments to suppliers have been delayed.
Nakheel yesterday confirmed the redundancies as the company continues to readjust its current business objectives to match supply and demand in the most effective way, but declined to say how many jobs have been cut.
Nakheel recently merged a number of its business units, which are now undergoing resource restructuring to ensure efficiency and optimisation of skill and talent, the company said.
The source said the bulk of the cutbacks affected the company’s asset management and design (NAMAD) division, a unit that was formed only in February after the the design group and universe master planning divisions were merged. The source said Imdaad, a facilities management (FM) firm also owned by Dubai World, would now manage most of the infrastructure and facilities across Nakheel's projects.
But Nakheel denied this, saying: NAMAD's facilities management team is functioning as usual. Imdaad has been providing FM services to Nakheel as a service provider in various communities following the usual practices of engaging a service provider.
The redundancies come after at least five years of expansion, during which Nakheel took on staff for large salaries in order to resource its ambitious projects, which include the Palm island trilogy, The World and Waterfront.
It was a time when all Dubai developers scrambled to attract staff, with poaching being the norm and salaries being high.
A junior level staff member, for example, could earn about Dh80,000 (US$21,780) a month with a company such as Nakheel, according to Simon Hobart, the managing director of the recruitment firm Millennium Solutions.
Everyone was earning big money in the first six to eight months of last year, with the problems associated with that now being enormous, Mr Hobart said. Nakheel was paying people too much, it all went a bit mad. Some of these guys were only 24 or 25 years old. Today, they’d get a third of what they were on.
While there is no official figure on how many jobs have been lost in the property sector since the downturn hit, estimates suggest thousands have been made redundant across associated sectors, including construction.
Thousands of redundancies have also been made in the financial sector. The job cuts could have a longer-term impact on the property market because of a dwindling local population. However, developers owned by the Dubai Government are working to streamline operations and, through integration and mergers, reduce further risks.
Dubai World said last month the property activities of its subsidiaries, Leisurecorp, Dubai Maritime City and Dubai Multi Commodities Centre, would now be managed by Nakheel, also owned by Dubai World. Emaar Properties is also in advanced merger talks with Dubai Properties, Sama Dubai and Tatweer, companies owned by Dubai Holding.

Investors form action group against Dubai developer

From ArabianBusiness.com 25 June 09

A group of investors are locked in a dispute with Dubai developer ACW Holdings after significant delays to its projects. Investors, some of whom have paid up to 80 percent of installment payments on units, have written to Dubai property watchdog RERA (the Real Estate Regulatory Authority) demanding a refund and cancellation of ACW’s projects over fears they may not be completed.
Around 85 property buyers have formed an action group called ACW Investors.
Some have refused to sign contracts, which they consider to be unfairly drafted in favour of the developer.
One such investor is UK-based Chandra Kumar, who bought at ACW’s Hanover Square project in November 2007 and has paid 70 percent of installments. He said: “To date I have paid nearly 70 percent of the purchase price with nothing to show in return. The project is little more than a hole in the ground.” "The contract is unreasonable. They are holding money and demanding money. I’ll see no return on my investment for three years- I want my money back,” he added.
Although the developer has insisted its payment plans have been changed and are now linked to construction progress, some investors complain they are still being instructed to pay date-based installments.
Only excavation work and no formal construction has started at five of ACW’s projects in the Arjan and Jumeirah Village districts in Dubai. (A photo taken earlier this month of the site is shown.)
A sixth project called Platinum Two is severely delayed due to a proposed road through the site by the Roads and Transport Authority (RTA).
“In the present economic climate it is easy for investors to feel nervous about their investment in Dubai. We as a company made the decision to focus all of our resources on construction,” the company said in an emailed statement to Arabian Business.
”We are in the business of building, and that is precisely what we are doing,” the statement added.
The developer blamed the late handover of plots from master developer Nakheel for the delay on its Jumeirah Village projects, which include residential schemes Kensington Manor and Knightsbridge Court together with Hanover Square, a serviced apartment project.
Scott Richards, director of client services at ACW said that apart from Platinum Two, the bulk of the company’s projects will come online by the middle of 2010, although the developer’s website states most schemes will be completed in the first quarter of 2010.
Hanover Square was originally scheduled for delivery in May 2009, according a Sales and Purchase Agreement seen by Arabian Business. But clause 2.4 of the contract states: “The Handover Date may be extended by the Seller for any Period or periods up to a maximum of one year.” In an email to one ACW investor in May, Essa Saeed Al Mansoori, head of the trust accounts section at RERA, said ACW’s projects were undergoing a "technical audit".
A spokesman for RERA said: “ACW is a registered developer and has five projects in Dubai and escrow accounts set up for each one and through which funding for all these projects is financed.
”ACW was established in 2004 and has two UK offices in London and Leeds as well as its Dubai operations in Emaar Business Park and Jebel Ali.
The company has launched seven freehold developments since 2006 with an asset value of AED5bn, according to its website.

Dream jobs dwindle for Australians in Dubai

Emirates Towers on Sheikh Zayed Rd in Dubai

Article from The Australian 28 May '09. The "fear and loathing" referred to in the article is working both ways. You don't have to read too many UAE web forums to see a growing number of anti-expat postings (in English) as the "If you don't like it go back to where you came from" brigade is overtaken by an increasingly virilent sentiment reflected in a recent posting. Its one of the tamer anti-expat posts "....the western way of life inherently is devoid of any real deep meaning. A westerner doesnt have that deep capacity anymore. He/she [only] has a capacity for power, money, whores..." Pfft, I wish! Though, I'd be magnanimous with the first, demonstrate good stewardship of the second and the other is not my territory.

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Dubai's dream jobs have evaporated and hopes of making quick riches have been replaced by an air of fear and loathing following the arrest of several Australians this year.

Five months after taking on a job in a large Dubai property group, a Sydney property specialist has returned to Sydney as promises made during the interview disappeared the day he arrived in Dubai.

"The project for which I was hired to develop was cancelled due to the credit crunch," said the executive, who declined to be named.

"The base salary was $US500,000 ($640,000) a year plus generous bonuses. Potentially, it was a $US1.4 million package - tax free." The icing on the cake was to be six weeks of annual leave.

But two months after taking on the job last October, he said: "The Australian executives in my company were arrested on allegations of corruption. There was a real sense of unease in that place."

Expatriates have been arrested along with local employees on charges of alleged corruption and espionage.

"It is quite unbelievable. It is like stuff you see in a James Bond movie," said another Australian executive.

Officially, the charges remain unclear. Those who spoke to The Australian said the bursting of Dubai's property bubble had sent companies and authorities searching for someone to blame.

The irony was that nothing happened in Dubai without the signature of the chairman of the company, said one Australian executive who resigned because the company changed his job description on arrival.

"An individual had his computer removed from his desk when he went on holidays. On his return, the company's security guards escorted him out of the building," the executive said.
"He believed sensitive information in his computer regarding an offshore investment that has gone sour overseas could be the reason."

Stories and circumstances of how expatriates have lost their jobs have painted a grim picture of Dubai. Some of those still employed talk of paranoia and fear of persecution.

The reason? The arrest of fellow Australians, mostly in the property sector, without charges.
A spokesman for the Department of Foreign Affairs and Trade said 17 Australians were currently detained in Dubai.

He said five were in prison or detained. Of these five, three had been charged. They faced a variety of charges on a variety of matters.

The situation of the remaining 12 was unclear as no charges had been laid, but their passports had been seized to prevent them from leaving the country, sources said.

An official source said the number of Australians getting into trouble with the law in the UAE had risen from 23 cases in 2005-06 to 55 in 2007-08 and still rising.

"There is no doubt the number of cases is growing, but then the number of Australians working and living in the UAE is also rising," said the source.

He said charges could range from drunkenness, not paying a bar bill to more serious charges such as embezzlement.

The most high-profile arrests are those of two former employees of Dubai-based Nakheel, Australians Matt Joyce and Marcus Lee, detained without charges since January. They are alleged to be involved in bribery over the sale of the Waterfront site, now controlled by the Queensland-based Sunland.

While these cases are pending, a small number in senior management is concerned about phone tapping and monitoring of their emails, according to industry sources.

Several persons who lost their jobs recently spoke to The Australian on an anonymous basis, citing concerns of inadvertently implicating former colleagues still in Dubai.

One expatriate said that in at least one instance, the employer held a person "hostage" by refusing to return his passport. The passport was finally returned after the intervention of his embassy.

"Holding on to passports is apparently a common tactic in disputes over severance payments," said one executive.

"I was not paid out when I left, but I was not about to argue with them. I just wanted my passport back to jump on the first plane out."

There are now about 20,000 Australians working in Dubai, lured by wonderful job descriptions and huge salary packages.

As jobs dry up, the Gulf's largest investment bank EGF Hermes says Dubai's population will shrink by 17 per cent this year.

During the boom years, Dubai's population grew by about 20 per cent a year, said Keith Parker, an expatriate living in Dubai.

The number of employees in the worst-affected sectors of construction, real estate and financial services will drop by 30 per cent this year, according to EGF Hermes.

Reports said 54,684 residency visas were cancelled in January alone. Most of those affected, however, are workers from South Asia.

Those who spoke to The Australian said when a person terminated his contract, he or she would be banned from taking a position with another company in Dubai.

These people also face financial hardships such as locked-in rental payments and relocation costs.

A source said accommodation costs are much higher in Dubai than major capital cities such as London or Sydney.

S&P puts Dubai-based government-related entities on CreditWatch

From Standard & Poor's website, 30th April '09
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Standard & Poor's Ratings Services today said it had placed the ratings on the following Dubai-based government-related entities (GREs) on CreditWatch with negative implications:

1. DIFC Investments LLC,

2. DP World Ltd.,

3. Jebel Ali Free Zone (FZE),

4. Dubai Multi Commodities Centre Authority (DMCC),

5. Dubai Holding Commercial Operations Group LLC (DHCOG), and

6. Emaar Properties PJSC (collectively, "the Rated GREs").

In addition, we have placed the notes issued by Thor Asset Purchase (Cayman) Ltd. (Thor), which are securitized by cash flows from a revolving pool of existing and future receivables originated by Dubai Electricity and Water Authority (DEWA; not rated), as well as the notes issued by JAFZ Sukuk Ltd. (collectively, "The Notes"), on CreditWatch with negative implications.

"The CreditWatch placements reflect our opinion of the likelihood of downgrades of the Rated GREs and The Notes if the potential for extraordinary government support to the Rated GREs and The Notes is not affirmed by the government of Dubai," Standard & Poor's credit analyst Farouk Soussa said. "The need for Dubai government support is potentially increasing in the face of deteriorating fundamentals for some of the Rated GREs."

"The action results from our learning that a review of debt strategy at Nakheel (not rated), a material subsidiary of government-owned Dubai World (also not rated) and a key Dubai-based GRE, may include the possibility of a debt exchange. Recent media reports indicate that Nakheel is opening a dialogue with existing holders of its $3.5 billion sukuk coming due in December 2009, with a view to restructuring the debt."

Standard & Poor's has discussed these reports with Dubai World and has been told that "all options" in dealing with outstanding liabilities are being considered as part of an ongoing review, including a restructuring.

Standard & Poor's has also invited comment from the government of Dubai, which has declined to either refute the possibility of a debt restructuring at any of its Rated GREs or to provide clear assurances that all debt obligations of the Rated GREs will be met in a full and timely manner as per their original terms.

The primary reason the mere possibility of a debt restructuring in an unrated Dubai-based GRE has been sufficient to trigger a review of all our Rated GREs and The Notes is due to the fact that such a possibility stands at odds with our prior expectation that the government of Dubai is committed to providing extraordinary support to its key GREs, including the Rated GREs, in order to allow them to service their respective obligations in a full and timely manner. This expectation is based in part on repeated representations to Standard & Poor's and to the public by senior government officials and other highly placed individuals, that the government of Dubai is committed to providing such extraordinary support.

"In accordance with our published criteria, a GRE is rated between the inclusive bounds formed by the GRE's stand-alone credit profile and the government rating, with the placement along this rating spectrum a function of our assessment of the potential for extraordinary government support (see "Rating Government-Related Entities: A Primer," published on June 14, 2006, on RatingsDirect). All of the Rated GREs reflect government creditworthiness more than stand-alone credit profiles, though this may shift should the government's support commitment ebbs. In our view, the consideration of a debt restructuring in any key GRE, particularly if it were deemed to be "distressed", increases the uncertainty as to Dubai's intention to provide adequate support in times of stress. "

"At this stage, we have not had confirmation as to Nakheel or the government's intentions with respect to Nakheel's outstanding sukuk. The CreditWatch placement will hold for the duration of our review, which will focus on confirming these intentions, and then assessing the impact this may or may not have on our view of the likelihood of extraordinary government support with respect to The Notes, and each Rated GRE and its respective obligations," Mr. Soussa said. "We will resolve the CreditWatch placement once the analysis is complete. There is a significant likelihood that the review may result in the downgrade of one or more Rated GREs or The Notes by one or more notches, depending on our assessment of the likelihood of support on a case-by-case basis, and on the stand-alone creditworthiness of each Rated GRE and its respective obligations."

The basic rules for working in the UAE

From the Australian publication "Business Spectator" 14 April '09
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The arrest and imprisonment without charge of several Australian businessmen working in Dubai should be the catalyst for shaking Australians out of their ignorance of Arab business culture.

It should help put an end to the stereotypical view that a job in the United Arab Emirates (UAE) as a ticket to a cushy, highly paid, tax-free position in a business environment not that different to home.

This distorted view of the UAE is perpetuated by recruitment consultants and by the custom of expatriates in senior positions hiring mates from the old boy's club.

Foreign Minister Stephen Smith highlighted the Australian ignorance of Arab culture in a recent interview on the ABC's Lateline. Smith was interviewed following his direct intervention in the cases of two Australians employed by the Dubai government-owned property company Nakheel. Matthew Joyce and Marcus Lee have been in jail since January.

The Minister said he is trying to upgrade the diplomatic relations between Australia and the UAE to reflect the increased commercial links and also see what can be done to inform Australians about the very different legal and judicial systems that apply in Muslim countries.

The travel advisory for UAE issued by the Department of Foreign Affairs and Trade has been recently updated to highlight that an individual can be arrested and held indefinitely without charge while an investigation proceeds.

Without commenting on the circumstances surrounding the cases involving Joyce and Lee, it is obvious from discussions with sources in the Gulf region that many expatriates have little or no sensitivity toward Arab culture or the requirements for working in the UAE.

A couple of anecdotes sum it up.

There was a swaggering American executive who was employed by a property company in the UAE, but after less than three months didn't like it and decided to change jobs. He was surprised to find that he should have asked permission of his employer before doing so. He walked out on his employer as a protest and was then banned from working in that country for 12 months.
Then there was the arrogant Englishman who parked illegally outside his place of employment in Dubai. When asked to move by an Arab man, the Englishman verbally abused him. The Arab man was very well-connected and the Englishman was out of the country within two days.
In the UAE the contractual relationship between the expatriate employee and a government-owned employer is very different to the contract of employment in Australia.

The employer is effectively the employee's sponsor. The employer's name appears on the employee's work visa. The employer takes responsibility for the actions of the employee and is liable for everything from personal debts to social behaviour.

Until an employee gets a visa they can't do anything. Without a visa an expatriate cannot open a bank account sign a lease, obtain a driver's licence, get a mobile phone or rent a car.
An employee cannot change employment without the certification of the current employer.
The fundamental principle that underpins all relationships for an expatriate in the UAE is employment. Residency is tied to employment.

In fact, an employee who is terminated has a legal obligation to immediately notify the bank. This is to give the bank the opportunity to freeze the employee's accounts and ensure that all debts are paid before departing the country.

Separate to the strict rules of employment and residency are the ways of doing business, which can be hard for an expatriate to get their mind around.

The Australian way of running property development projects with verbal decisions at board meetings backed up by legally recognised board minutes and letters of intent do not apply in emirates such as Dubai.

In Dubai, all contracts have to be agreed and signed before proceeding. Variations orders must be signed and received by the client before proceeding. However, it is believed this approach was overlooked during the boom times when 'speed' was the core value of the government owned development companies.

Government-owned companies in the UAE have very powerful internal audit functions that focus on written and signed contractual terms. These internal auditors are being called upon to ensure all existing contracts are properly approved.

The concept of an implied contract does not apply in the UAE. This is particularly the case at a time when those higher up the chain are searching for people to blame for cost overruns, project problems or looking for excuses to stop work.

As Stephen Smith told Lateline, the best advice for Australians planning to work in the UAE is prevention rather than cure – to be aware of the different cultures and the different systems, “and the need for Australians to respect the judicial and legal processes of another country.”

Nakheel confirms cancellation of $1bn construction contract

From Arabian Business 6 April '09
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Nakheel has cancelled a $1bn contract with Samsung C&T to build shopping malls, apartments and commercial buildings in Dubai.

Dubai state-owned developer Nakheel confirmed on Monday it had cancelled a construction contract with South Korea’s Samsung C&T that had included the building of shopping malls. In a statement, the developer said it had taken the decision to reschedule or cancel a number of supplier contracts as a result of a delay to its $3bn mall expansion programme.

At the end of last month it announced it was putting the design work and site preparation for the programme on hold for 12 months because of the global financial downturn.

Samsung said on Friday its $1bn order from Nakheel to build apartments, shopping malls and other commercial structures in Dubai had been cancelled.

"The cancellation of the deal came via unilateral notification by the contractor," Samsung C&T said in a regulatory filing without elaborating on the reason.No one was available to comment from Samsung’s Dubai office on Monday.A Nakheel spokesman said: “Nakheel Retail remains committed to its expansion plans over the medium and long terms and will make announcements about new target completion dates for projects in due course.”

In April last year, the company’s retail division unveiled an ambitious shopping mall development programme across the UAE.It said it would build five new projects including one on the Palm Jumeirah, its palm-shaped island.Nakheel, which is also behind the ambitious The World project, is owned by state-backed investment group Dubai World.

Dubai developer withdraws from Barangaroo project in Sydney

From the Sydney Morning Herald 2nd April '09

IT IS 15 months since the Australian boss of Dubai's biggest developer, the royal family-backed Nakheel, said it would expand its "international mandate" by buying a big stake in the leading Australian property group Mirvac.

Now Nakheel is winding back that mandate and has withdrawn from a consortium bidding to develop Barangaroo, the NSW Government's $2.6 billion project on east Darling Harbour.
Mirvac and another of Nakheel's co-bidders for Barangaroo, Leighton, are sharing its pain amid the global credit squeeze and a collapse in Dubai property prices. Leighton was to build the Donald Trump Tower in Dubai until Nakheel and the American tycoon halted the project this year.

The Herald revealed on Monday that Barangaroo - to combine Australia's biggest financial hub and a foreshore park - faced a financial hurdle as bidding consortiums warned the Government they could provide only limited funding. Nakheel's withdrawal raises further questions. Its departure was announced when the three bids for Barangaroo were submitted on Tuesday.

Mirvac Projects, Leighton Projects and Macquarie Property Development and Finance insisted yesterday that Nakheel's departure from their tender did not jeopardise the bid. A spokeswoman said it was locally driven and "we have the financial capacity, the experience and the resources to deliver the project". She could not say what percentage of funding Nakheel was to contribute.

Another bidder, Lend Lease, said it and Westpac, its main financier and bid partner, remained committed. The Herald understands Westpac's funding will be limited but David Hutton, chief executive of Lend Lease Retail and Communities, said his firm's own capital was significant. "We remain confident, despite the current financial conditions, that we can fund the bid."

The third bidder is Brookfield Multiplex. Its major projects director, Mick O'Brien, asked if there were concerns about finance, said: "We're not talking about that when we're in the process. We feel we have a good bid and we will want to discuss those issues internally, with the Government."

When Nakheel took a stake in Mirvac worth about $400 million in December 2007, the Australian chief executive of the company, Chris O'Donnell, said: "As Nakheel looks to move forward its international mandate, it makes perfect sense to look at the possibility of joint developments with a like-minded company."

Two of Mr O'Donnell's former Australian colleagues at Nakheel, Matt Joyce and Marcus Lee, have been held without charge in Dubai, on suspicion of fraud, since January 25. They are among 20 Australians now held in Dubai. The latest two are a NSW man, 57, and another man, facing separate allegations of fraud. Both approached the Australian Consulate-General on March 25.

After the gold rush: Getting paid in Dubai

This article from the UK construction industry magazine "Building" dated 27 March '09 is the first to talk openly about the failure of Dubai developers to pay their bills resulting in staggering amounts being owed to the large constructions companies.
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It is claimed that the average contractor is owed £50m, while some consultants’ fees are being slashed in half.

Dubai is looking more and more like a place with a great future behind it. You can see that most clearly on the billboards erected beside empty sites and motionless tower cranes. “Ordinary is for other people” says the one where the Trump Tower was to have gone. Well, nemesis follows hubris: at least half of the emirate’s construction projects are “on hold” according to research firm Proleads, and nobody knows when, or if, they will start again.

New signs of the desperate state of Dubai’s developers are emerging every day. To look at the top three of them is telling: Union Properties has admitted it would welcome a merger after shelving its flagship £320m Formula One theme park in Dubailand. Emaar recently announced yet more cancelled projects: Asmaran (a 70 million ft2 , £17bn mixed-community scheme billed as “a jewel in the desert”), Maysan (three residential towers, also covering 70 million ft2) and Warsan (500 villas covering 3.4 million ft2). Meanwhile, Nakheel is facing a fraud investigation and has put its £2bn mall expansion plan on hold. It has also been hit by the halving of property prices on its celebrated Palm Jumeira project. Four-bedroom garden homes on a frond are going for £1.2m compared with £2.6m in July.

Where does all this leave the British consultants and contractors who count these developers among their top clients?

The short answer is, cash-strapped. Some are seeing their fees slashed – a Building survey of more than 150 people working in the UAE found that two-thirds of them have been asked to drop their prices recently. Others have been waiting for payments for six months and many are considering legal action.

What went wrong?
The first problem was that many developers were reliant on bank credit rather than oil revenue, as is often thought. Abu Dhabi, the capital of the UAE, has about 10% of the world’s oil, but Dubai has almost none. Banks were happy to keep lending to its developers as long as property prices were going up, and could act as collateral for more lending and more construction. But when property prices started tumbling, this virtuous circle turned vicious and clients ran out of money to pay consultants and contractors.

Abu Dhabi’s $10bn (£7bn) loan to Dubai announced in February appeared to offer a glimmer of hope, especially when the Dubai government said this money would mainly go to state-linked developers. But questions are being raised about how far it will go. For one thing, Dubai has declared that it owes at least $80bn (£56bn), of which almost a quarter falls due for repayment this year. The boss of a UK consultant with a large presence in Dubai says: “The $10bn won’t even cover developers’ interest payments.” He adds that compounding this is the fact that Dubai has so few ways to make money. Last year, 65% of its GDP was from real estate. He adds: “And there is no oil, no exports, no tax and 80% of the population are expats, many of whom are leaving.” Now the fee cuts are spreading to Abu Dhabi, where developer Aldar has written to consultants to ask them to cut fees – on live projects by up to 20%.

Late payments and fee cuts
So how bad has it got for UK firms? Certainly there is no sign that the government cash is filtering through. A senior source at a UK contractor in Dubai is fuming. He says: “The average contractor here is owed about £50m.”

A source at a UK project manager says some payments from Dubai developers are up to six months late; Mace and EC Harris are saying openly that it is taking at least three months to get paid. WSP is estimated to have set aside £4m to cover bad debts and project management consultancy Blair Anderson now employs someone full-time solely to chase payments in Dubai.
Meanwhile, the head of a British specialist working on a major project that stopped in October says his firm was paid 20% of what it was owed in January. He said he has no idea when he will get the rest, although he believes it will come through eventually, as his client is linked to the Dubai government.

Then there are the fee cuts, which are affecting most firms. Evan Anderson, group director of Blair Anderson, says the firm’s fees are between 20% and 30% lower than six months ago. But he is still better off than many architects, whose fees Anderson is renegotiating on behalf of clients. He says: “We are doing a lot of reverse briefing of designers. We’re asking them to cut their fees by up to half and to change the materials they’re specifying to bring down costs by about 30%.”

Contractors across Dubai are having to renegotiate tenders, typically resulting in 15-20% being lopped off their money. The senior contractor says: “Contractors here had been enjoying margins of seven, eight or nine per cent. Now clients are trying to get us to take margins as low as three or even one per cent. They also want to lengthen programmes so that cash flow is less onerous. It’s chaos.”

More pain for consultants is arriving in the form of deferred payment plans. Mark Prior, head of the Middle East for EC Harris, says: “We are discussing deals that would mean we will be paid in six months’ time – or half of what we’re owed in three months and the rest in six.”

Other companies are understood to have been forced to accept payment in the forms of stakes in a development. George Grant, operations director for infrastructure at M&E specialist Drake & Scull, says: “We have no experience of taking equity instead of cash but we would consider it. Our view is we want to work with the clients if it means that work goes ahead.”

Others are more wary. Anderson has refused payment in shares: “They offer you 1% of a development that you have had no involvement on and no idea how it works. If you invest in something you want to do detailed research on it.”

Meanwhile, the old model of developers paying contractors with money from sales of units in buildings before it has been completed is a thing of the past. Projects launched on this model are being refinanced. Under the new deals institutional investors are brought in and contractors are forced to accept deferred payments.

Anderson says: “The previous model based on off-plan sales is no longer viable, so total financing is being done by investment, and selling is happening when the building is under construction.”
As a result, development is less gung-ho, he adds, which in turn means people are earning lower fees over a longer period. Developments are being built in phases. “Before, a developer would build three high-rises at once; now they are building them one by one. They build a tower, sell it, then use the proceeds to build the next one.”

Such is the state of the market that those who are actually getting paid do not want to admit it. Speaking on condition of anonymity, the head of a British architect’s Dubai office said: “I would rather you didn’t put my name in your article because if other people working for my client find out that I’ve been paid, they’ll be demanding that the client pays them too, and then I’ll have to answer to the client.”

He says at the moment you have the best chance of being paid if you are needed to help with the process of putting a project on hold. “If you are not essential – that is, if you are not putting remedial works in place so the client can put work on hold – you will not get paid.”

Will developers ever pay?
The gravest concern of all is caused by rumours that some developers are about to go bust. Despite their government links, there is no guarantee the state will step in to save these firms. A source at a project manager in Dubai says: “It’s impossible to say whether the government will pay developers’ debts or not. State sponsorship is relatively loose here. Nobody knows whether certain developers are going to be mothballed, merged or go bust.”

Drake & Scull’s Grant, a Middle East veteran, says: “There’s no doubt some clients have run out of money and will disappear. Not the big names though, they need to renegotiate their finance deals but they will carry on.”

He may be right, but the question of when they will pay is still causing UK firms to fret. Emaar, to take one developer, has just had its debt downgraded by Standard & Poor, the ratings agency, from –A to BBB+. It made a loss of 1.6bn dirhams (£304m) in the last quarter of 2008. Meanwhile, the government has warned that the economy may shrink in the second half of 2009.

Most developers are declining to comment on the payment issue, including Nakheel. A spokesperson from developer Limitless did speak to us and insisted that all creditors would be paid. She said: “We’re renegotiating some payment plans, but not all, as part of our overall response to the global situation.”

An Emaar spokesperson also sent the following statement: “Payments for contractors and consultants are based on a credit cycle and set deliverables agreed with them. All payments that meet the criteria have been honoured and will continue to be cleared, in line with our agreements.”

But for those still waiting to be paid and suffering, what recourse is there? Another source says: “Historically, if you’re not getting paid here, you don’t rock the boat; the last thing you do is resort to litigation. But now people are getting highly emotional. If you’re working on a huge project and you recruited a huge team to do it, and you’re owed millions, well maybe it is time to sue.”

He adds that he expects to see “some big disputes in the next three months”, which is perhaps ironic considering that Dubai is aiming to become a regional dispute resolution centre. Prior is among those who admit that “litigation is an option we have our eye on”. It’s a statement that would have been unthinkable in Dubai a year ago.

As the legal cases loom (see box below,it’s clear that relations between clients and project teams are strained to the limit. The head of another UK consultancy, who asked not be named, revealed a conversation he had with a senior emirati working for a big developer. “I said to him, if I don’t get my money, I will sue. He said, you will never work in Dubai again. I said, why would I want to?”

Disputes in Dubai
Dubai’s legal system is facing a sudden rush of disputes, and there are doubts about how well it is going to handle them. The first problem is the absence of adjudication. Paul Taylor, a partner at lawyer HBJ Gateley Wareing, says: “Unlike in the UK, there is no quick fix in Dubai. Here, arbitration and litigation, are the only ways to get your money.” Even worse, arbitration in Dubai takes up to two years – even longer than in the UK.

Another problem is certification. Of course, getting an engineer’s certificate proving you have done the work and are therefore entitled to be paid is an important piece of ammunition in the fight for your fee. However, in Dubai, Taylor says many contracts include a clause saying that an engineer cannot approve a piece of work without the client’s sign off. “These clauses are being disputed, but it’s still tough.”

People are looking at alternative methods of resolving disputes. Next month a “mediation centre” is being set up that will fast-track dispute resolution through an independent party. Taylor says it is a mid step between amicable settlement and arbitration and could resolve a dispute in two or three weeks. The problem, though, is that it will only work if both parties voluntarily accept the verdict.

Most projects are on the FIDIC contract. The 1999 version contains a clause that allows the use of a dispute resolution board, which can take six to 12 weeks. Earlier versions of the contract do not tend to offer this option.

Even if you do resolve a dispute to your satisfaction, then you have the problem of enforcing the decision. Taylor recommends a “more commercial” way of tackling a dispute. “Knock on the client’s door and try to explain your difficulties face to face. And get your local sponsor to act as an intermediary.” As a last resort, you can threaten to terminate the work you’re doing for the client – an approach that will only work if the project is continuing.

Bargain prices on the Palm

From BI-ME and Dow Jones Newswires, 12 March '09

Once the best-known symbol of Dubai’s explosive growth, Palm Jumeirah now looks to be one of the biggest victims of the Emirate’s property slump.

Dubai’s Palm Jumeirah, the self-proclaimed ‘eighth wonder of the world’, has become a symbol of the Emirate’s economic vulnerability as plummeting real estate prices unravel its boom town image.

Leading brokers say that prices on the development have slumped 50% since September, while local newspaper classifieds list hundreds of luxury villas and apartments on its 16 fronds as owners try to off-load unwanted homes. A four-bedroom garden home now lists for AED 6.5 million (U$1.8 million), down from AED 14.0 million last July.

“Palm Jumeirah was one of the catalysts of the Dubai real estate boom,” said Edward Carnegy, a surveyor for CB Richard Ellis Middle East. “But the gap in the prices investors were willing to pay, say in mid-2008, compared to the finished article was huge and needless to say, unsustainable.”

Once the best-known symbol of Dubai’s recent, explosive growth, Palm Jumeirah now looks to be one of the biggest victims of the emirate’s property slump.

Dredged from the seabed of the Arabian Gulf at a cost that rose to more than US$12 billion, the vast Palm Island project helped catapult Dubai into the ranks of the world’s most desirable locations. That status is now under threat as real estate prices plummet and the government struggles to cope with US$80 billion of debt.

Last week, some brokers said prices on Palm Jumeirah dipped below AED 1,000 per square foot for the first time since prices began to fall last year.

At the height of the boom, some of island’s signature villas sold for US$12 million, while a penthouse in the planned Trump International Hotel & Tower reportedly sold for a Dubai record of more than US$30 million in June.

Since then, the US$1.1 billon hotel and apartment tower, being built in partnership with US real estate magnate Donald Trump, has been put on hold, leaving a gaping construction hole at the centre of the Palm’s trunk.

And as the value of properties on the Palm sink, so to do the fortunes of its developer, government-owned Nakheel. The company, part of the business empire of the Ruler of Dubai Sheikh Mohamed bin Rashid al-Makhtoum, is being forced to take drastic action to keep its business afloat.

Recent steps to cut costs include cutting 10% of its workforce and delaying construction work at two other offshore developments, the Palm Jebel Ali and the Palm Deira. The company denies that Palm Jumeirah is suffering any downturn from the global economic crisis.

“Palm Jumeirah is one of Dubai’s most recognisable icons. Its success as a residential community and tourist destination will continue to grow,” says Johann Schumacher, Palm Jumeirah’s Managing Director.

True enough, the development has attracted some of the biggest names in entertainment with sporting celebrities such as British soccer players David Beckham and Michael Owen, and former Grand Prix racing driver Michael Schumacher said to be amongst the list of celebrity owners of its luxury villas.

“Palm Jumeirah was extremely well promoted at its launch with celebrities buying property there and a lot of glamour surrounding the project. Prices there rose very fast as a result and are now seeing a correction along with the rest of the Dubai market,” said David Camp director of Economic Research Associates, an international real estate consulting firm.

To be sure, many investors still view the Palm as the Beverly Hills of the Gulf region.

Simon Murphy, a 42-year old Briton and former hedge fund advisor, was lured into buying property on the palm by its celebrity kudos. He was part of an initial wave of investors to snap up property on the huge man-made, palm-shaped island.

“There’s a certain snob value to living on the Palm and people here are justifiably proud to have a pretty cool postcode,” he said. (Dubai has postcodes? Since when?)

He bought his ground floor shoreline apartment over the telephone for AED 870,000 without seeing a floor plan or any other information about the property. At the height of Dubai’s property boom in July 2008, Murphy received offers of up to AED 6 million for the apartment, but refused to sell.

Despite the uncertainty surrounding the future of the Palm Jumeirah, Murphy says he’s not too concerned. He points to the near 600% increase in average prices on the Palm between 2002 and the Summer of 2008, before the current downturn set in.

Also feeling the squeeze, is the US$1.5 billion Atlantis Palm Hotel, a joint venture between Kerzner International Holdings and Nakheel, which sits at the crest of the mammoth development.

Just months after a US$20 million lavish opening party, which saw a 2,000-person, star-studded guest list and the world’s largest fireworks display, the hotel where rooms start at US$800 a night and go up to US$25,000, is struggling to attract guests.

Sunland executive "not arrested" says company owner

Employee of development company Sunland Group is there as bribery witness, says owner
Article from: AAP, 2nd March '09
A development company part-owned by James Packer denies one of its employees has been arrested in Dubai over a bribery scandal, saying he's simply acting as a witness in the investigation.

Fairfax reported three property industry heavyweights were among a number Australians arrested in Dubai over property-related allegations.

One of the men named in the report, David Brown, is the Middle East head of the Sunland Group, a development company part-owned by Mr Packer, while the others, Marcus Lee and Matthew Joyce, worked for the state-owned Nakheel development company.

According to Fairfax, the allegations involve millions of dollars in consultancy payments by Sunland to Nakheel and another party over the purchase of a waterfront property.

But Sunland on Monday denied Mr Brown had been arrested, saying no allegations had been made against the company or its executives in relation to the scandal.

"Sunland advises its chief operating officer - Middle East, Mr David Brown, is a witness to the authority's investigation," a statement from the company said.

"He is not the subject of investigations, nor has he been arrested or detained as is stated in the press articles."

Sunland managing director Sahba Abedian said the firm supported the Dubai investigation.

"Sunland fully supports the Dubai government's commitment to ensure the region's property market is transparent," Mr Abedian said in the statement.

"We will continue to provide assistance where required.

"Maintaining the highest ethical standards in all our dealings has long been a core value of Sunland."

A lawyer for two of the men arrested said both had denied any wrongdoing.

Australian lawyer Martin Amad said his two clients, whom he would not name but were believed to be Mr Lee and Mr Joyce, had been held in solitary confinement without charge since their arrests on January 25.

"I put in a phone call to DFAT (the Department of Foreign Affairs and Trade) last week and I'm awaiting a return call from them," he told ABC Radio today.

"Hopefully we can meet with them to see what, if anything at all, the Australian government can do about two of its citizens in a foreign jail where they are being kept for investigation without charge."

DFAT on Monday said a report that 13 Australians had been detained in connection with the property scandal was wrong.

"It is not correct to say that the large majority of the Australians are being detained due to the building industry collapse," a DFAT spokeswoman said.

"Australians in UAE under detention/arrest are charged with a range of offences, from relatively minor to relatively serious.

"Some of the cases remain under investigation by local authorities and date back to February 2007."

DFAT said the number of Australians detained or arrested by local authorities in the UAE can fluctuate on a daily basis.

Now 13 Aussies arrested in Dubai collapse

From the front page of the Sydney Morning Herald
March 2, 2009

THREE property industry high-flyers, including the senior agent of a company part-owned by James Packer, are among 13 Australians under arrest in Dubai as its supposed property miracle has succumbed to the global financial crisis.

Legal sources in Dubai have confirmed that among those in jail or in effect under house arrest over property-related bribery allegations are:

■ David Brown, architect and the middle eastern head of the Sunland Group, a Queensland development company which is part-owned by Mr Packer. Mr Brown has been interrogated at least eight times and has had his passport confiscated in relation to a bribery investigation.

■ Marcus Lee, until recently a senior executive with the Dubai Government-controlled Nakheel development company. He is a former executive with the local property companies Jones Lang LaSalle and Investa. Mr Lee is in jail, without charge, and is facing investigation over alleged bribery.

■ Mr Lee's Nakheel colleague Matthew Joyce, former managing director of the Dubai Waterfront project, is also in jail without charge over alleged bribery.

Until now, only the arrests of Mr Joyce and an unnamed colleague had been made public.

The three executives are of particular concern to lawyers and the Australian embassy because of the seriousness of the allegations and the uncertainty of their future. United Arab Emirates law allows suspects to be held indefinitely without charge.

It is understood the bribery allegations involve millions of dollars in consultancy payments by Sunland to Nakheel and a third party over a waterfront property purchase. Nakheel is one of four development companies linked to the Dubai Government and its ruler, Sheik Mohammed bin Rashid al-Maktoum.

Mr Lee and Mr Joyce have been held in solitary confinement since January 25. They have been allowed only limited access to lawyers and family.

Mr Joyce's and Mr Lee's Melbourne lawyer, Martin Amad, refused to identify Mr Lee by name or discuss details of the cases. But he said he was anxious for both men as they enter their second month in custody without charge.

"We're concerned for the welfare of the accused in custody where they've been kept in solitary confinement," he said. "Their physical and mental health has deteriorated. We are becoming increasingly frustrated at the time it seems to be taking for the prosecution authorities to investigate the matter."

Commenting on the 13 Australians under arrest in Dubai, a Department of Foreign Affairs and Trade spokesman said: "The United Arab Emirates legal system is different to the Australian legal system. People who are under investigation can be held in detention for long periods of time without bail."

Some fear people are being made scapegoats. "There is a lot of face-saving to be done," said one Melbourne property player well versed in business in Dubai. "The sheik can never be responsible, so somebody else has to be."

Sunland's managing director in Australia, Sahba Abedian, confirmed Mr Brown had been interviewed by police but insisted his company was not "implicated in the investigation".