ABU DHABI // Blue City, the largest property development project in Oman, is being hit hard by the financial crisis and may need to make changes to survive, analysts say.
The developer behind the first phase of the US$20 billion (Dh73.46bn) project has missed sales targets since last summer, leading Fitch Ratings and Moody's Investors Service to downgrade its credit rating this week to reflect the project's vulnerability to the downturn.
Blue City issued bonds worth a total of $925 million in 2006 when markets were booming, but sales of $53.9m are far short of the $639m it expected to have by August.
"Given the current environment they are really going to struggle to be able to try and address that shortfall," said Khalid Howladar, a vice president and senior credit officer for structured and Islamic finance at Moody's.
"Blue City was being built in Oman in anticipation of the growth they thought would happen. Unfortunately, the timing of this wasn't really working in their favour."
With oil revenues declining, Oman has begun a campaign to capitalise on its cooler and mountainous terrain by becoming a high-end tourist destination.
At the forefront of these efforts was Blue City, a 2.2 square kilometre piece of land that would bring five-star hotels to the coast near Muscat and create housing suitable for the growing Omani population and expatriates looking for holiday homes.
The project was to include hospitals, schools and entertainment facilities for 200,000 residents by the end of its 20-year construction process.
Even before the economic crisis began having an impact on its sales, the project was facing challenges because of an ownership dispute between the two stakeholders, Bahrain's AAJ Holding and Oman's Cyclone. Then, just as the project's sales push began, the global credit crisis weakened interest in Middle East property. Speculative buyers, in particular, left the market.
Blue City, also known as Al Madina A'zarqa, has tried to sell larger groups of units to investors to boost sales but it still has not been able to meet its obligations.
Moody's said it was lowering the credit rating on about $399m of senior notes from the company to "Ba1" from "Baa3" because of "worse-than-expected transaction performance and a less favourable macroeconomic environment".
Fitch Ratings downgraded four other classes of notes, worth $526m, to "CCC" and "C" from "B plus" and "B minus", citing the deterioration of Oman's property market.
"Demand for retail villa and apartment at integrated tourism resorts in Oman appears to have reduced significantly over the last 18 months and has collapsed entirely on the project itself, with no sign of recovery in the short or medium term," Fitch said in a statement.
"Fitch understands that only a handful of units have been sold at the Blue City development since the start of the year."
Executives at Blue City declined to comment. In an interview last September, Richard Russell, the chief executive of a company in charge of the first phase of the development, said he would finish the initial phase "on time" by Dec 2012.
Fitch said sales were so slow that there was not enough money to pay the construction contractor, AECO, and that if "revenues do not significantly increase in the short term, money remaining from the advance payment will likely allow the contractor to be paid for approximately three more months".
This could lead to construction stalling and would mean the company may have to restructure some of the debt.
@Email:bhope@thenational.ae
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Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
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T20 World Cup Qualifier
Final: Netherlands beat PNG by seven wickets
Qualified teams
1. Netherlands
2. PNG
3. Ireland
4. Namibia
5. Scotland
6. Oman
T20 World Cup 2020, Australia
Group A: Sri Lanka, PNG, Ireland, Oman
Group B: Bangladesh, Netherlands, Namibia, Scotland
The five pillars of Islam
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The Orwell Prize for Political Writing
Twelve books were longlisted for The Orwell Prize for Political Writing. The non-fiction works cover various themes from education, gender bias, and the environment to surveillance and political power. Some of the books that made it to the non-fiction longlist include:
- Appeasing Hitler: Chamberlain, Churchill and the Road to War by Tim Bouverie
- Some Kids I Taught and What They Taught Me by Kate Clanchy
- Invisible Women: Exposing Data Bias in a World Designed for Men by Caroline Criado Perez
- Follow Me, Akhi: The Online World of British Muslims by Hussein Kesvani
- Guest House for Young Widows: Among the Women of ISIS by Azadeh Moaveni
The Great Derangement: Climate Change and the Unthinkable
Amitav Ghosh, University of Chicago Press
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
Ipaf in numbers
Established: 2008
Prize money: $50,000 (Dh183,650) for winners and $10,000 for those on the shortlist.
Winning novels: 13
Shortlisted novels: 66
Longlisted novels: 111
Total number of novels submitted: 1,780
Novels translated internationally: 66
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Dubai works towards better air quality by 2021
Dubai is on a mission to record good air quality for 90 per cent of the year – up from 86 per cent annually today – by 2021.
The municipality plans to have seven mobile air-monitoring stations by 2020 to capture more accurate data in hourly and daily trends of pollution.
These will be on the Palm Jumeirah, Al Qusais, Muhaisnah, Rashidiyah, Al Wasl, Al Quoz and Dubai Investment Park.
“It will allow real-time responding for emergency cases,” said Khaldoon Al Daraji, first environment safety officer at the municipality.
“We’re in a good position except for the cases that are out of our hands, such as sandstorms.
“Sandstorms are our main concern because the UAE is just a receiver.
“The hotspots are Iran, Saudi Arabia and southern Iraq, but we’re working hard with the region to reduce the cycle of sandstorm generation.”
Mr Al Daraji said monitoring as it stood covered 47 per cent of Dubai.
There are 12 fixed stations in the emirate, but Dubai also receives information from monitors belonging to other entities.
“There are 25 stations in total,” Mr Al Daraji said.
“We added new technology and equipment used for the first time for the detection of heavy metals.
“A hundred parameters can be detected but we want to expand it to make sure that the data captured can allow a baseline study in some areas to ensure they are well positioned.”
The specs
Engine: 3-litre twin-turbo V6
Power: 400hp
Torque: 475Nm
Transmission: 9-speed automatic
Price: From Dh215,900
On sale: Now
Meydan race card
6.30pm: Baniyas (PA) Group 2 Dh125,000 (Dirt) 1,400m
7.05pm: Maiden (TB) Dh165,000 (D) 1,200m
7.40pm: Maiden (TB) Dh165,000 (D) 1,400m
8.15pm: Handicap (TB) Dh170,000 (D) 1,900m
8.50pm: Rated Conditions (TB) Dh240,000 (D) 1,600m
9.25pm: Handicap (TB) Dh175,000 (D)1,200m
10pm: Handicap (TB) Dh165,000 (D) 1,400m
Mohammed bin Zayed Majlis
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A State of Passion
Directors: Carol Mansour and Muna Khalidi
Stars: Dr Ghassan Abu-Sittah
Rating: 4/5
