Real estate still a good investment

source Gulf News

Dubai: The real estate sector is still a good option for investment, despite the current global economic slump, a top UAE businessman says.

"It is believed that [in] the long term business investors could have more than 20 per cent profit if they invest in real estate," Eqbal Al Yousuf, president of Al Yousuf Group, told Gulf News in an exclusive interview.

"There is no other alternative market for investors and Dubai is still the Middle East's business hub and an attractive destination for investors since its doors were opened to foreign entrepreneurs.

"There are still opportunities for good investments and real estate has the best potential to develop new business in the UAE market amid the economic crisis."

---

---

Eqbal Al Yousuf holds two degrees, one in computer sciences and another in economics from the University of Minnesota, in the United States. He joined the family business, Al Yousuf Group, one of the largest business houses in Dubai, 26 years ago immediately after graduation in 1983.

In an exclusive interview, Eqbal elaborated on his views on the country's economy. Excerpts:

Gulf News: Like most countries globally, economic crisis hampered many businesses in the UAE, can you tell us how much your business has been affected?

Eqbal Al Yousuf: The economic crisis is a global one and the Dubai market has been affected but not as [badly] as it appeared [from media coverage]. The impact of the economic downturn in the UAE compared with Europe and the US is similar to the contrast between heaven and hell. The baseless unrealistic coverage about the impact of the economic crisis on the UAE has severely affected our morale. However, the effect of the downturn on Al Yousuf business is not really big ... [In] the real estate sector, which represents 50 per cent of the [company's activities], the drop is 5 per cent.

Considering Al Yousuf is one of the leading companies in the UAE, how did you manage the situation?

To save our business we played the role of observer during the global economic crisis. We finalised the ongoing projects but we [put a] hold on all the investment plans since December 2008. However, now it is the time to start up new business plans.

On the other side, we reduced the company cost by terminating the contracts of a number of Al Yousuf employees.

Do you believe that Dubai has started recovering from the crisis?

Dubai's market didn't collapse or suffer as badly as it appeared in the international media. What happened in the market is more a morale than a materialistic issue. People are holding their money trying to protect their businesses. Also banks became very strict and didn't facilitate loans and cash flow procedures. In business you should not be optimistic or pessimistic ... you should be realistic and rely on facts only.

Yes, the UAE market has been affected by the economic downturn but we should not forget that this is a global crisis.

People who have [been] badly affected by the economic downturn are those who went beyond their financial capacity and set up businesses. Those are small entrepreneurs and are few.

Dubai market needs this correction as what happened in 2008 was illogical as prices soared, leading to a great chaos ... I feel that the UAE market now is more stable and embedded [with good opportunities for investors].

Do you think you might move away from real estate into other sectors that you had never thought of before?

No, definitely not. There will not be any change in Al Yousuf policy.

We will keep investing in the real estate sector and I am thinking of buying property immediately if banks allow ... cash facilities. I believe that there will not be a drop in the real estate sector any more. However, the prices of properties and rent are excellent and reasonable.

Al Yousuf Motors is one of your main businesses, what is your plan to improve this sector and increase sales?

Al Yousuf Motors represent 15 per cent of the group business. It encompasses the company's operations in motor vehicles, motorcycles, marine engines, and generators, golf carts, water vehicles, boats, spare parts, car leasing and taxi services.

Actually we are facing a 50 per cent drop in motor sales. At the moment and during the downturn we can do nothing towards improving motor sales. We are in a transitional period [and] should watch the market carefully before ... developing any plan.

However, the reason behind the drop of motor sales is banks. [There is always demand] but banks don't facilitate loan procedures.

What about future investment plans for Al Yousuf? Do you have plans to invest abroad?

The company [put a hold on] all the investment plans since December 2008, but now it is time to go on with our new projects. We are looking to invest in the family entertainment sectors.

What we have [in terms of an] entertainment sector in Dubai is not enough. Dubai lacks indoor sport centres ... However, it has good potential for new, different sorts of investments. We want to bring something new to the amusement sector in the UAE. Currently we are planning to have a go-cart project. Entertainment sectors still need indoor sport centres for tennis and football.

In terms of investing outside the UAE, we do have investments in Europe and the US and this is a critical mistake that Al Yousuf committed [in its] history. Al Yousulf was a Dubai-based company from when it was established in 1953 until 2007 when we decided to expand our business in Europe and the US and especially in the motor sector.

Our business loss could be estimated at up to 60 per cent. So no more investment outside the UAE and I don't recommend businesses abroad.

Will there be new opportunities for good investments and what is your prediction for business in the UAE market?

There is no other alternative market for investors and Dubai is still the Middle East's business hub and an attractive destination for investors since its doors were opened to foreign entrepreneurs.

There are still opportunities for good investments and real estate has the best potential to develop new business in the UAE market amid the economic crisis.

Meantime, the profit of real estate business is over 20 per cent, but in the long term. However, real estate investors who think that they can achieve this profit in two months as happened in 2008, are wrong. Dubai's market is living a new era of prosperity.

It is just a matter of the market regaining its confidence again.

Background: Al Yousuf group

Al Yousuf Group is a major business group in the Middle East. It was founded by Yousuf Habib Al Yousuf in 1953 to play a major role in the emergence of the UAE and Dubai in particular as the economic model for the region.

Al Yousuf has developed partnerships with many of the world's leading brand names.

Al Yousuf is a family-owned commercial group with a diverse portfolio of motors, technology and real estate.

- Z.B.

Funds fuel property recovery

source The National

ABU DHABI // Investment funds focusing on distressed property are forming in the UAE, helping to solve some of the problems caused by disputes between developers and investors that have hit tower builders’ cash flows.

Their emergence has coincided with a recovery in prices in some parts of Dubai and Abu Dhabi, raising hopes that the property market may have turned the corner after a sharp downturn.

“The arrival of these funds marks the beginning of the upturn in the market,” said Hamish Walton, a partner in the financial services practice at the law firm Clyde & Co in Dubai. “I think the market in many ways has already hit the bottom. These transactions will be the first signs of recovery.”

Distressed asset funds could help get cash flowing for some projects and protect investments at a time when the market has slowed to a near standstill, Mr Walton said.

Many buyers, especially of off-plan properties, are reluctant or unable to keep up with instalments because of the downturn in the economy. Developers cannot build their towers without cash, leaving the two sides in disputes that are playing out in the courts and in the offices of bodies such as the Real Estate Regulatory Agency in Dubai.

Tariq Hameed, a director at Access Consulting, said his company, along with an as yet unnamed global partner, was planning to launch a distressed property fund in about two weeks.

The fund, called Special Opportunities Scheme for Dubai Real Estate – or SOS Dubai Real Estate – would aim to raise US$250m (Dh918.1m) in several tranches.

“The market is in a very, very difficult situation today,” Mr Hameed said. “People are stuck in the real estate market and they have no way out. This fund would help some of these situations.”

The fund would target property that was well on its way to completion, and investors who had paid at least 50 per cent of the purchase price.

Instead of buying the property outright, the fund would take over the payment plan and ownership from the original buyers and offer them a certificate of investment equivalent to the value they had paid so far for their unit, Mr Hameed said.

Then it would use money put into the fund by retail investors to pay the remaining instalments on the property. The fund’s investors would get a fixed return on their investment, as with a bond, with the option to convert their stake into equity. After a period of years, the apartment would be sold off, giving the original buyer back their stake money plus, it is hoped, some interest on top, and the fund’s investors their return.

“The basic assumption is that prices will rise in five to six years to a point where home owners get their principal amount plus interest,” Mr Hameed said. “It also opens investment to individuals who have an appetite to play the real estate game, but do not have an equity stake in properties.”

Andrew Charlesworth, the head of corporate finance advisory at Jones Lang LaSalle in Dubai, agreed that the arrival of distressed asset funds could be a signal that the market is in the final part of its decline.

“When you get pricing that is dropping by 30, 40 or 50 per cent, there is an investment group that takes that quite seriously,” he said. “The expectation is that pricing will reset back to historic norms at some point. Sophisticated investors recognise that you never know when you are at the bottom, so a lot of people buy when the trend is still slightly downwards.”

Mr Charlesworth said his company was in discussions with foreign institutional investors and regional sovereign wealth funds about opportunities to make distressed asset investments.

In some cases, these could be bridge or mezzanine loans issued directly to developers who could not get bank financing to finish the final stages of a project, Mr Charlesworth said. Projects that are still raw land, have not started construction or are in the very early stages are attracting little interest, he said. However, the arrival of investors in distressed assets was adding certainty to the market, which was in turn improving sentiment and pushing the market “in the right sort of direction”.

Deyaar Development, a major builder of towers in Dubai, is planning to launch its own distressed asset fund in the next few weeks, although the fund would focus solely on defaulted property among its own properties. After a buyer defaults and loses part or all of their investment, Deyaar would sell the unit at a discount to the fund. The fund, which would range in size between Dh500m and Dh1 billion, would hold on to the unit until the market improves and then resell it for a profit, the company said last week.

Dubai property may get state aid-crisis panel mbr

original source Reuters

Dubai-based real estate and construction companies could get more help from the state, a member of a Dubai committee formed to tackle the fallout of the global financial crisis said on Monday.
Article Controls



'Everyone is facing challenging times,' Omar bin Sulaiman, who is also deputy chairman of the United Arab Emirates Central Bank, told Reuters on the sidelines of a legal conference.

'You have already seen some help and I am sure you will see some more,' he said, when asked if there was any consideration being given to offering financial support for Dubai's real estate sector.

Bin Sulaiman, governor of the Dubai International Financial Centre Authority, declined to be more specific.

Dubai's real estate sector is facing a sharp price correction and hundreds of billions of dollars of construction projects have been cancelled in the United Arab Emirates as a result of the economic slowdown.

The UAE finance ministry and central bank have together launched 120 billion dirhams ($32.67 billion) of funding facilities to help banks cope with the crisis.
Comment On This Story

The government, meanwhile, is looking at ways to help troubled Dubai mortgage financers Amlak Finance and Tamweel, including a possible merger.

But concerns are mounting about whether Dubai will be able to refinance debts it accumulated to finance expansion projects during a six-year economic boom spurred by high oil prices.

Abu Dhabi's move this month to inject 16 billion dirhams into five of its banks has also raised questions about whether Dubai could take similar steps to help its banks face growing loan defaults and investment writedowns.

MEETING DEBT OBLIGATIONS

The cost of insuring Dubai's debt with credit default swaps has gotten more expensive in past months as investors worry the emirate could default on its debts.

Bin Sulaiman said Dubai has managed to meet its debt obligations in the past. 'Of course, of course,' he said, when asked if Dubai would be able to pay back its debts.

Dubai's mostly government-linked issuers will have to refinance about $15 billion before year-end, compared with $5 billion in the rest of the UAE and $15-20 billion in the rest of the Gulf, Moody's (nyse: MCO - news - people ) Investors Service said last week.

The UAE government, meanwhile, said on Sunday it was planning a federal law to regulate and manage the Gulf state's debt.

Dubai-linked companies have been restructuring their businesses, consolidating operations and announcing thousands of job cuts to help them contend with an economic slowdown.

Dubai real estate developers seek out African investors

source Daily Monitor

A Dubai-based real estate company has set its sights on attracting Kenyans to invest in property in the city as part of its diversification plan.
Memon Investments LLC aims to attract high value investors from the country as part of its growth strategy, which mainly involves exploring new markets especially in Africa. Memon is on the road in Nairobi and Mombasa showcasing a portfolio of over 10 complexes under development worth $365 million (KSh27.3 billion).

“We hope to leverage on this road show as an effective platform to build awareness on our projects among high net worth investors in Africa,” said Memon’s sales manager, Mr Arif Majeed.
Speaking to potential real estate agents Mr Majeed was quick to ease fears on the impact the global financial crisis has had on the real estate market in Dubai.

“We are offering payment plans on our properties, which are currently in development stages,” he said.
The properties will cost Dirhams 1,450 (KSh29,000) per square foot, with prices for a studio apartment costing from Dh700,000 (KSh14 million) upwards depending on the complex while a three bedroom is going for over two million dirhams (Sh40 million). For those interested in investing in the business centre, a square foot will retail at Dh1,500 (KSh30,000).

Memon will be offering a special payment plan of 10 per cent down payment and five per cent every three months on the remaining 70 per cent on hand over.

The other option includes a seven-year payment plan of 10 per cent down payment and five per cent after three months with the balance being staggered over 84 monthly installments with a 5.9 percent charge. Memon Investments is part of the Memon Group of Companies, a conglomerate with interests in real estate development, trading, manufacturing and IT.

Value of property has been reported to be on the decline with most potential clients holding back on investing due to the recession. This has raised the questions of supply surpassing demand thus eroding the worth of investments.

However Mr Majeed was quick to reassure the agents that demand was still high in the city especially as Dubai turns itself into a sporting destination the demand is expected to increase.

Mr David Machua, a director with Lloyd Masika who has previously travelled to Dubai looking for opportunities, noted that before the crisis the city was very viable but now people have to be cautious because of the reports of prices going down.

The Institute of Surveyors of Kenya (ISK) welcomed the opportunity for agents to broaden their portfolio thus minimising their risk exposure but noted the company would have to give certain guarantees.

“There is the legal framework in Dubai that has to be understood and by partnering with registered agents who are understand the product Kenyans can be protected,” he noted.

For him its an opportunity for the investment company to also look at investing in Kenya where there is a need for more low and middle income housing. An opportunity that Mr Majeed said they were looking at when in the country and would most likely partner with a Kenyan company.

Dubai has in the past ten years risen to be a major investment ground especially in real estate where it now spots an ultra modern skyline. According to the country’s policies an investor in residential property get a resident visa to access the country.

UP gearing up to launch $7bn of projects

original source Reuters

Dubai-listed Union Properties plans to launch 25 billion dirhams ($6.81 billion) of new projects soon, after boosting its land bank in partnership with the Dubai government, its chief financial officer said.

Zaid Ghoul told Al-Khaleej newspaper that Dubai's second largest developer by market value was planning to develop 15 million feet in a joint venture with the Dubai government.

The firm was also expecting to add another 35 million feet to its land portfolio, he said.
Story continues below ↓
advertisement

Union Properties told newswire Reuters last week it planned to borrow $1 billion by the end of the year to help finance projects and was seeking to raise its foreign ownership limit to 30 percent.

The firm's second-quarter net profit surged 106 percent to 317.7 million dirhams, beating analysts' forecasts.

Ghoul told Reuters in June that the company was hoping to add 40-60 million square feet to its land bank.

Shares of Union Properties, down almost 15 percent this month to Sunday's close, were up 0.66 percent at 0635 GMT. (Reuters)

Dubai buys slice of Cirque du Soleil

source Channel News Asia


MONTREAL: Cirque du Soleil sold a 20-per-cent stake in its entertainment dynasty Wednesday to two Dubai firms to fuel its worldwide explosion, starting with a new permanent show in the Middle East.

Istithmar World, the investment arm of Dubai World, and real estate developer Nakheel paid an undisclosed sum for a 10 per cent share each in the circus company, they announced.

Under the terms of the agreement, former street performer Guy Laliberte, 48, will retain control of the circus troupe he founded in 1984 and hold onto its creative reigns.

"Cirque is not sold, and I'm still the captain of the boat," he told a press conference, dispelling rumours he had jumped ship.

Nakheel and Cirque du Soleil will jointly design and build a 1,800-seat theatre on Dubai's Palm Jumeirah island to stage the first Cirque resident show outside of the United States and the Far East.

"Cirque du Soleil marks Istithmar World's first foray into the live entertainment space, which is a key to our media focus," Istithmar chief executive David Jackson said in a statement.

"Besides being a global tourist hub, Dubai is home to one of the fastest growing entertainment and media markets in the world, presenting a huge opportunity for such world-class cultural and entertainment facilities to add to the emirate's rich tourism and leisure offerings."

Cirque's touring show "Quidam" performed in Dubai last year and was said to be "one of the most successful single entertainment projects ever to be staged in the region" with more than 100,000 people attending its month-long run at Nakheel's Ibn Battuta Mall.

A new touring show "Alegria" is scheduled next year as a prelude to the permanent show which is due to open on Palm Jumeirah island in mid-2011.

Meanwhile, Cirque said it will open a show production office, a ticketing company and a set design rental company in Dubai in the coming weeks.

"We have found the right partners in our long-term growth in the form of Dubai World and this marks a watershed moment in our evolution," said Laliberte.

"This partnership is the best of both worlds for me and my management team; we can keep control of our creative challenges and operations while accelerating our growth doing projects all over the world."

Eminent for blending traditional circus acts with dance, music, mime and vivid theatricality, Cirque du Soleil is currently producing 18 shows around the world for 2008, including permanent shows in Macau, Tokyo and Las Vegas.

Its performances attract nearly 10 million spectators each year and rake in ticket and merchandise sales in excess of US$700 million.

The company is estimated to be worth US$2 billion to US$3 billion, said Laliberte.

Istithmar World has assets under management of US$6 billion, and Nakheel's projects are estimated at a value of US$80 billion, according to reports.

Both are controlled by the United Arab Emirates's sovereign wealth fund, which has investments in ports, real estate, financial services and other sectors.

- AFP