Construction & Real Estate

Bahrain: Segmented recovery

Whilst the Bahraini real estate sector may not have suffered the dramatic reversal of form experienced by many property markets across the Gulf, it has seen a fall off in activity, with the volume of sales and new leases down and many expecting a return to the heated conditions of before 2008 to be some time off. Some estimates put the fall in rental prices for high-end residential units at around 10 per cent during 2009, far better than some of its near neighbors, where returns from rental properties have fallen by as much as 50 per cent. Sales prices for some developments in the Gulf such as those in Dubai have plunged at a similar rate. Bahrain has not seen the extensive corrections in general asset prices that occurred in Dubai or elsewhere around the globe but Tim Glover, the Bahrain CEO of real estate specialist Cluttons, said a chance of instability remained. “There is still the potential for an imbalance between supply and demand across many of the real estate sectors and supply in particular will have to be carefully regulated in order to allow for some growth in market transactions,” he said in a report issued February 22. Significantly for the Bahrain property market, the Cluttons report foresaw growth in the industrial segment, thanks to continued state support and new developments coming on-line. If correct, this trend could result in spillover to the residential and possibly office or retail segments, driven by the need to house employees and provide workspaces and sales sites. (Source: OBG)

UAE’s Deyaar postpones US$136m distressed fund

Dubai developer Deyaar has postponed a 500 million dirham (US$136.1m) distressed property fund after international investors withdrew AED200 million previously committed, a local daily reported. The Gulf emirate's second-largest developer by market value launched the fund last summer to buy distressed properties from its own portfolio as well as other properties, as it looked to boost returns for shareholders. "It is the wrong time for Deyaar to go out and try to raise the funds from the international community," the firm's Chief Executive Markus Giebel told The National paper. "We will wait until the dust settles ... and restart in two or three months, as we believe the market will come back."

Dubai's Istithmar puts Inchcape on sale for US$700m

Dubai World's investment arm Istithmar has put port and shipping agent Inchcape Shipping Services up for sale for US$600-700 million and has attracted interest from private equity groups, the Financial Times reported in early February. The report said Advent International, Cinven, Charterhouse Capital Partners, Montagu Private Equity, TPG Capital and Kohlberg Kravis Roberts & Co were all working on bids potential bids for London-based Inchcape, which is one of the world's biggest marine management firms with some 200 offices globally. Dubai World is seeking to offload assets as part of a restructuring plan after the state-owned conglomerate rocked global markets last November when it said it would request a delay on paying US$26 billion in debt linked to its main property units. Istithmar bought Inchcape for US$285 million in 2006 from London-based private equity fund Electra Investment Trust.

Construction sector spending in Egypt to soar to US$7.3 billion by 2015

Spending in Egypt’s construction sector is expected to increase to US$7.3 billion by 2015, according to Collaboration, Management and Control Solutions (CMCS), a leading provider of Project Portfolio Management solutions in the region. The continuous influx of foreign investments into the country combined with the many government-initiated development programs that have focused on developing healthcare facilities and infrastructure are also expected to further bolster Egypt’s economic development. Aiming to capitalize on this expected surge in growth, CMCS has announced the recent opening of offices in Cairo and Alexandria, a strategic move that will give the country’s project-based companies increased access to project management services and solutions. The country’s residential construction segment will increase to US$606 million in 2015. The increase is due to many key factors such as higher disposable incomes, development of new residential areas, and the implementation of new government policies to help create a stronger housing finance system for the country. Meanwhile, the country’s non-residential construction segment is also expected to increase to US$6.7 billion in 2015. The introduction of investment-friendly government policies and the move for more infrastructure development is expected to encourage more spending in this segment. Egypt, which had a GDP growth of 4.5 per cent in 2009, received a stimulus package of US$2.7 billion from the government in 2009, favoring infrastructure projects and export subsidies, and is also likely to get an additional stimulus spending this year to mitigate the slowdown in economic growth.

French plans to finance infrastructure projects in Iraq

The French ambassador in Iraq, Boris Boillon, has revealed his country’s willingness to finance projects in the sectors of energy, water, agriculture and transportation. During a Baghdad-based press conference, the ambassador said that the Agence Française de Développement (AFD) singed in November 2009 an agreement that establishes an official presence in Iraq as of September 2010. The agency will finance projects in the fields of energy, water, agriculture, and transportation in an attempt to help rebuild the infrastructure in the country, Boillon explained.

Abu Dhabi: Entering a new phase

As Abu Dhabi’s developers ready themselves to hand over new units, the residential real estate sector in the capital is entering a challenging yet likely beneficial phase of its development. “The real estate market in Abu Dhabi has changed a lot since the financial crisis,” Ali Saeed bin Sulayem, chief executive of Hydra Properties, told OBG. Prior to the global financial crisis affecting the UAE’s economy, the emirate’s nascent real estate sector was buoyant, as a perennial shortage of units pushed up property and rental prices. In 2006, four years after the property boom in neighboring Dubai, Abu Dhabi opened up its market to foreign investors, launching a slew of new development projects, such as Al Reem Island and Al Raha Beach development. Although the majority of investors have yet to receive the keys to their homes, the result of opening up the market was a vertiginous rise in the value of some properties. Many observers, both local and foreign, dismissed talk of the fractured global financial system affecting the capital. In late 2008, however, it became all too apparent that the emirate’s housing market would not go unscathed. Residential values and rent fell throughout 2009 but the rate of decrease slowed in the second half of the year. According to CB Richard Ellis, rent in the final quarter of 2009 was still declining but at a more stable rate than at any point during the previous year. With a standard unit attracting US$24,500-$35,392 per year, one-bedroom apartments were the least impacted, registering just a 4 per cent drop compared to the third quarter. Other segments, however, fell harder. (Source: OBG)

Egypt: Stimulus pressure

With the advent of the global financial crisis, most countries saw their construction activities grind to a halt as banks tightened lending. In this respect, Egypt is proving resilient; indeed, its cement producers are trying to keep pace with an energetic construction industry. As an anti-crisis measure, the government has aimed stimulus money at large infrastructure development projects, including water treatment plants, railways, highways and housing. Around LE23 billion (€3.1bn) has been issued since October 2008 to stimulate the economy, and the People’s Assembly is currently pushing through another LE10 billion (€1.35bn) in stimulus cash, which will be financed by the sale of land plots. This construction surge should help push the GDP growth rate above 5 per cent in the 2009/10 fiscal year, after registering 4.7 per cent in 2008/09. The sustained demand means Egypt’s limited construction supplies are trying to keep up. “Despite the slowdown in Egypt’s GDP following the global financial crisis, it has not translated into a slowdown in construction, with cement demand maintaining high growth levels throughout 2009,” Jaime Muguiro Dominguez, president of Cemex, a local cement company, told OBG. According to the national Industrial Development Authority, cement demand increased 26 per cent over the course of the year. As a global trend, most input costs for construction decreased during the crisis due to lack of demand. However, Egypt saw a steady rise in the number of construction projects, so prices for rebar have stayed steady in most parts of the country, while increasing slightly in Alexandria and Matrouh, for example. In contrast, cement shot up to LE680 (€90) per ton in April 2009, and the government swiftly responded by banning exports of the product for four months. Without the possibility of producers sending their product abroad, prices stabilized at around LE500 (€67). (Source: OBG)

Saudi developer issues sukuk

Saudi real estate developer Dar Al Arkan has issued a US$450 million sukuk, priced at 11 per cent, a banking source said, making it the first issue from the region this year. "The magic number is US$450 million," the source said. The developer had been expected by bankers to raise around US$500-700 million. The source said the issue had attracted an order book "well north of US$500 million" but the pricing had been more important to the issuer than the amount it could attract at 11per cent. Unicorn Investment Bank, Deutsche Bank and Goldman Sachs were arrangers for the issue. The bond from the kingdom's largest developer by market value is the first international issue from the Gulf Arab region this year - and also a first since conglomerate Dubai World rocked global markets on November 25 with plans to request a delay on repaying US$26 billion in debt.

Kuwait contributes US$300m to Lebanon reconstruction

Kuwait has now contributed a total of US$300 million to reconstruction efforts in Lebanon following the Israeli war on the country in the summer of 2006. This was announced by Kuwait Fund for Arab Economic Development (KFAED) Country Representative Mohamed Sadeqi. The Kuwaiti fund established an office in Lebanon in January 2007 to set out a strategy of action for contributing to reconstruction efforts in the country, he added. Kuwait is at the forefront of those countries which provide aid and assistance to Lebanon thanks to distinguished relations between Kuwait and Lebanon, Sadeqi pointed out. The fund has used its aid in serving various development sectors in Lebanon, including the building of new schools, hospitals and emergency centers, he said. The KFAED has pledged to rebuild 24 villages and restoring over 11,000 housing units in south Lebanon, he added.