If you think it’s hot now, you’re in for a rude awakeningMay 25, 2015 9:00
Insolvency leaves property investors reeling
Kipp recently suggested that the property industry was better off than we thought. We were wrong. The first official bankruptcy of a UAE property firm since the downturn has investors reeling.
November 24, 2010 12:27 by Samuel Potter
Kipp has learned a valuable lesson about speaking too soon. Earlier this week, we pointed out that real estate companies in the UAE may not be quite as badly off as every thinks. Emirates 24-7 had reported that of the third quarter reports of 101 companies listed on the Abu Dhabi and Dubai bourses, 20 of the top 25 companies who are most profitable belong to the banking or real estate industries. In fact, Emaar and Arabtec topped the pile.
But of course, these numbers are only part of the story. A handful of companies may be trotting along quite nicely, but many, many others are still battling everyday to survive. And some may fail.
Al Murjan Real Estate is one which has failed. The Financial Times reports that it has filed for bankruptcy in Sharjah, and two liquidators have been appointed. The paper points out that it is the UAE’s first court-mandated bankruptcy of a distressed property project since the downturn hit.
The news will send a cold chill down the spines of the thousands of investors who are waiting on stalled developments in the country. Insolvency will mean a long and potentially fruitless battle to recover money invested via what the FT rightly describes as an “opaque” court process.
And this developer was no fly-by-night operation, either. Al Murjab were behind the White Bay project, a $3 billion development in Umm al-Quwain that was set to boast 8,000 homes. According to the FT, the project was to span a waterfront strip and two man-made islands and its infrastructure was reportedly in place, but main construction was yet to begin. The failure seems to have been down to a combination of lack of payments from some investors, and problems with government planning.
Speaking to the paper, a lawyer representing several investors who want to maintain payments and see the company’s major project completed called the move “unprecedented.”
“It could become a common tactic for developers to forestall investors’ ability to enforce their interests as proceedings could take years,” said Ludmila Yamalova from HPL Yamalova & Plewka JLT.
Investors elsewhere in the country need to hope and pray that doesn’t happen. In the event of an insolvency they will likely have to compete with each other as the insolvency practitioners get to work, and also with other company creditors – who could be numerous and have much bigger claims.
The White-Bay website was, at the time of writing, blocked by Du. Ironically, the blocking message says, “Site not trusted.” You’ve got that right.