Easy come, easy go: Abdullahs sell tower to pay back Damas debt

Source: The National 20 January 2010
Photo: Khan Tours website
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The Abdullah family has sold one of its twin high-rise towers on Sheikh Zayed Road in Dubai to raise money to pay back part of the US$165 million (Dh606m) it owes shareholders of the jewellery giant Damas International for "unauthorised" investments.
The sale of the tower, to a private investor, marks the first efforts by family members to meet their debt payment schedule, which requires them to pay Dh200m by April this year. The unauthorised investments were made with company money.
The two 49-storey buildings were known as Angsana Hotel and Suites until late last year, when Damas Hotels cancelled its contract with Banyan Tree Hotel and Resorts. Banyan Tree said in a statement at the time that the building would be "converted to residential use" and sold.
Yesterday, a temporary sign hung outside one of the buildings, proclaiming the new name "Emirates Grand Hotel".
Staff in the building said the tower had been sold to an Emirati investor for an undisclosed sum in October last year and would reopen next month with Iberotel, a German hotel company, as the operator.
The second tower is still for sale.
"We just signed a contract last week," said Alaa Hanna, a sales director at the Iberotel Miramar Al Aqah Beach Resort in Fujairah. "It previously belonged to Damas International but it was sold because of all these problems."
Construction on the two towers started in 2004. The tower that became the suites section of the hotel was opened last year, while the second building, with 364 hotel rooms, did not open despite being scheduled for completion late last year.  A spokesman declined to comment yesterday but a source close to the company said this week that the family had begun liquidating assets to meet its obligations. The brothers have recently been promoting the sale of their largest yacht to raise more cash.
Prices of residential property in Dubai have fallen by more than 50 per cent since their peak in 2008, which could be an obstacle to liquidating the investments the family made with the proceeds from the Damas International
public share offering in 2008. Almost 70 per cent of the transactions were investments in the property sector, with about 90 per cent of those in the UAE.
Blair Hagkull, the head of the regional office for the property consultancy Jones Lang LaSalle, said yesterday the sale was among the only major transactions in Dubai in recent months.
"We are seeing a situation where cash-rich organisations are finding attractive deals in this market," Mr Hagkull said. "The market has been quiet, but there are many purchasers and potential investors that are waiting in the wings for the prices to get to the right levels."
The Abdullahs face the risk of losing control of their 103-year-old family jewellery business. The brothers signed an agreement on November 4 to pay back the amount of the unauthorised transactions within 18 months.
They have also pledged to return 350 million of their 515 million shares if they fail to pay Dh200m within six months, Dh400m within 12 months and the full amount within 18 months.  If they were to default on these payments back to Damas International  and the shares were taken back by the company, their holding in the firm would fall to 16 per cent, from 51 per cent.

First bank repossession on Palm Jumeirah

Source: ArabianBusiness.com
Photo: Fotosearch Stock Photography
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The Palm Jumeirah has witnessed its first property repossession, resulting in a bank selling an apartment for just AED745 per square foot – nearly 35 percent below the current market rate.
Arabian Business understands that a three bedroom apartment in Al Shala, on the prestigious development, was “taken back” by the owner’s bank last week after he failed to resolve Dhs1.7 million of outstanding debt.
“He left the country and gave power of attorney to someone else. The bank moved in quickly and asked for Dhs1.7 million, which they got within a few hours,” said a source close to agent involved in selling it.
The property was advertised by Networth Real Estate on the website of UAE daily Gulf News, at an asking price of AED1.7 million for a 2,280 square foot three bedroom apartment. When contacted, the agent said it had “gone immediately for cash".
It is thought to be the first time any bank has taken back a property on the Palm.
Just last week, according to Bloomberg, Barclays, Britain's second largest bank, has won the first foreclosure orders in Dubai, clearing the way for lenders holding about $16bn of Dubai home loans to take action when borrowers don’t pay.
Barclays said in an e-mailed reply to questions from newswire Bloomberg that it won the foreclosure orders, without providing details of the cases.
Similar properties on the Palm are currently being advertised close to AED1140 per square foot, nearly 35 percent higher than the bank’s selling price.
Provisions for bad loans in the UAE surged 68 percent by to 32 billion dirhams ($8.7 billion) as of November, compared with a year earlier, according to Bloomberg.
It said that Islamic lender Tamweel, the emirate’s biggest mortgage bank, has several of its own foreclosure claims pending and estimates about 3 percent of its mortgages are in default.
“Banks will be more aggressive in pursuing legal action if they see the process is efficient,” said Antoine Yacoub, a banking analyst at Moody’s Investors Service.
“They were trying to avoid the courts and restructure most of their loans, but once they see a precedent has been set, they will be encouraged to push more cases through.”

Everyone’s talking nonsense

My head's spinning. Every day it seems, some "expert" gives their opinion on the state of the UAE property market and you couldn't get a broader range of opinions if you were discussing the All Black front row, or to use another analogy as there are local readers of this blog, whether Al Shabab should use the 4-4-2 formation. (Hey, don't blame me, I had to look it up on a website, I know zero...sorry nil...about soccer.)

These expert property opinions range from "the recession is over and prices are rising" through to "we're all doomed, abandon ship" with every shade of opinion in between. Its totally baffling. I thought about saving some of the conflicting headlines to write a piece on the confusion for the public who aren't experts and who need to make property related decisions but Anil Bhoyrul of Arabian Business 13 June 09 has done the job already:

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If you’re planning on buying a new home, I guess you only need to know one thing: have property prices bottomed out?

Depending who you believe, prices are now stabilising. Or they are actually rising again. Or they are falling just a tiny bit more. Or they are in freefall. Or you better get in now. Or don’t touch property with a barge pole.

Before you blog comments accusing me of being negative again, these are not my words but those of the experts. HSBC said in May that real estate prices in the UAE were stabilising after agreed prices in the two largest cities rose 4 percent in April and 5 percent in May from the previous month.

And earlier this week, Standard Chartered said that the market was stabilising after being in “freefall” for several months.

Yet today, from Deutsche Bank: “We expect UAE property prices to decline another 15 to 20 percent from current levels and only expect a bottom by year end.”

Hang on a minute. Two days ago, the respected National newspaper stated the following: “In Dubai, the price of homes in The Springs, Jumeirah Village, The Greens, The Green Community and Jumeirah Islands have risen from their lows in January by between five and 30 percent, according to Cluttons, an estate agency.”

Oh, and let me add that on Sunday, Arabian Business will publish an interview with ex-World Bank boss James Wolfensohn, in which he predicts that for global economies, “the worst” is yet to come.

So what is really happening? In the absence of any genuine and reliable data, I have come to only one conclusion: everyone who is trying to sell their property is lying.

They are lying about the price they will take, they are lying about how long it has been on the market, they are lying about how desperate they are.

Let’s take the quote from Cluttons, which says that in some parts of Dubai prices are up 30 percent since January. I hate to be blunt, but this is absolute, utter, complete and total nonsense. Codswallop. Tosh. I’m not accusing the very respectable Cluttons of lying. They are a great bunch of guys who have been around since 1765. (So please don’t call my CEO to complain late on a Thursday night, as some of your contemporaries like to do).

But they rely on statistics from their clients, and whatever they are getting are clearly flawed. A 30 percent rise since January would represent the biggest property boom taking place anywhere in the world during the last ten years.

Is this really going on in The Springs? And it’s not difficult to see why everyone is lying. Many speculators stuck with countless properties are facing ruin. Their multi-million dollar property portfolios are just a few thousand dollars away from collapse.

They have to claim that prices are rising, in the hope that if everyone says it enough, everyone will start believing it. This will, eventually, lead to a herd effect. We will all pile in asap, and therefore actually force prices up.

The only way to measure what is really happening in the market is through actual transactions made (not advertised or hoped for). But with virtually no transactions being made, everyone is giving it their best guess – hence so many different reports from highly respected organisations.Where do I sit in the middle of all this?

I am still of the view that things will get worse before they get better – as suggested by Deutsche Bank and James Wolfensohn.

But I might be lying...