Another Mysterious Inside Track

Well well, it never rains, it pours!

This week we see a story about another Inside Track. This time in the Middle East. Developers Al Barakah responsible for the "tallest tower in Ajman" Police are looking for the CEO Imran Khan after allegedly defaulting on $3.8 million USD worth of cheques.

The story goes according to the Dubai 7 Stars blog and The National Newspaper that the company was offering 50% profits in 6 months. Nothing illegal about that of course, the likelihood of it however takes a bit of believing to say the least!

Buyers however still bought in their droves, some buying entire floors of buildings in the traditional greedy sheep mentality that gripped the Dubai market place.

Now buyers with their bouncing cheques are flocking to the police after not being able to find Kahn. Strangely his house is empty! To rub salt, or maybe sand into the wounds, Al Barakah is registered in Ras al Khaimah (RAK) a tax free offshore zone, as an offshore company, the marketing company, aptly named "Inside Track Real Estate Brokers LLC" is a limited liability company in Dubai, quite likely as an offshore company too.

Perhaps Mr Kahn has an offshore company in Panama too like our other inside track chums?

Apparently staff at the sales agency has received death threats and not been paid, no projects are registered at the Ajman land department and no-one has anywhere too turn. The official real estate body in the region RERA is reported to be coming up with some cunning plan or another to deal with all of this, but considering it has only thought of 12 laws and decrees since 1997 on its website, it could be a little while.

As they say in Arabia, Enchala! (God Willing)

Spanish Developer Colonial, The Next Martinsa Fadesa?

This week we see yet more doom and gloom emanating from sunny Spain in two hefty stories.

The first is regarding the ongoing process of sorting out developer Martinsa Fadesa. In a post on Saidiavacations.com by David Hewitt, Fadesa have failed to file it's half year accounts on time with the CNMV (The Spanish equivalent of the Financial Services Authority) with respect to it's finances. The reason for the delay apparently is two-fold, firstly Fadesa want the approval of the liquidators, and secondly "The chairman of the company, Fernando Martin, declared personal bankruptcy shortly after the company went into liquidation in an effort to separate his personal assets from those of the company." It is claimed that the filings will be made in "A few days more"

A few points of what this likely means to the everyday person out there once you read through the mumbo jumbo and take into account the "Spanish" take on things,

Fadesa wants approval of the liquidators - Likely to mean there is some shuffling to be done with respect to what is where on the finance front, and we have a lot of shredding to do.

Chairman of the company declared personal bankruptcy - Well as much as we don't enjoy kicking someone when they are down, but this could well mean that he knew it was coming, I mean how many billions in debt do you really need to be before the penny drops? Protection of personal assets is likely to be what that is about.

A few days more - Anyone who has lived in Spain has come across the word manana. Contrary to popular belief, it does not mean tomorrow, it means not today. It doesn't state when, just not today. If this is the literal translation of what has been said, then it will be a lot more than a few days before the CNMV get their papers!

Do note though, whilst all this is going on, Fadesa Maroc is still OK as far as we are aware, see our last post about the Morroccan arm of the company.

The second company with major interest is Colonial, they are off for a meeting with shareholders and creditors according to Reuters to have a chat about the possibility of a debt restructuring deal worth 8.9 Billion Euro, a right old tea party by the sounds of it with several major players involved, including RBS (Royal Bank of Scotland) who's shares closed down 3.51% on Friday.

There are others involved in the talks, the likes of Goldman Sachs, as well as Banco Popular and La Caixa, which earned the equity after swapping some debt earlier this year. Some earning that was eh guys!

These two developers will not be the last, Colonial is making the best efforts possible to avoid liquidation, but this isn't likely to disappear over night unfortunately, after the developer bankruptcies, the agents will follow. Some are already in that particular cauldron steeping as we speak, Viva Estates, Ocean Estates, and Red Hot Homes for example. From what we hear, it is sadly unlikely that any will recover.

Having said all that, perhaps it is what the industry needs, a healthy cull within a much hyped business, where almost any Tom, Dick or Harry can set up shop and develop away, or flog houses to unsuspecting people, playing on the "left my brain at the airport" syndrome.

We are researching in depth into the number of developers and agents in main areas of Spain at present that have gone out of business in the past 6 months, and the results are staggering so far, rest assured we will post the report when we are done, and what you can do if you have been affected.

Panama - Just a short ride in a Canoe?

The biggest rave in the industry in recent times during the demise of the European market has been Panama. Made famous more recently by the "Reggie Perrin" incident by a husband and wife team Anne and John Darwin who thought it might be a good idea to have a picture taken even though one of them was "dead" (Good call!) Then Anne deciding she would go back to the UK, somehow under the illusion that no wrong had been done. (Ask her that in 6 years)

In the real estate world though we saw a surge in developers arrive in Europe with all their dog and pony shows at the trade exhibitions, many with their amusingly miss-spelled brochures and charming good looks, especially at the 2007 SIMA exhibition in Madrid.

2008 though was a different story. Less Panamanians had made the trip, more western agencies were there though with the same product, literally! Whilst at the exhibition I stumbled across no less than 4 stands selling the exact same product from the very same developer, and then found the developer themselves also there, offering exclusivity to anyone wandering by! In 2007 the developer stands did appear to be busy, but 2008 saw less stands, most were not developers but agents, and there appeared to be less traffic all round.

Generally the SIMA exhibitions are a pretty good indicator for what is likely to be a popular seller for the coming year, not necessarily because it's good value, or a great investment, but simply because if the developers sign enough agents, they know the agents will advertise, the press will pick up on it and will make it popular for them. As a result, public being what they are and the sheep mentality that exists, the product will sell one way or another.

Panama now though as a seller? Not a lot seems to be happening there, I speak to agents on a regular basis that sell there, either in Panama itself, or remotely and it doesn't sound like it's moving all that fast.

The big question here has to be why? You would think Panama being a tax haven, low extradition laws, and limited space that prices would be off to the moon, and it would be the greatest thing since sliced bread!

The reasons are few and simple. Donald Trump, Resale Market (Or lack of it) and the inexperience of agents and Realtors there.
Just because Donald Trump buys or develops a building somewhere, it doesn't make it a good investment!

Donald Trump is a Bazillionaire, has an outrageous syrup, and most well known for saying "Your Fired". These are not reasons to base the largest investment you are likely to make in your life upon. Why not? He has the money and the name to manipulate the market, and he has the "sheep factor" behind him. If he buys somewhere and then tells everyone, you will buy too, push up the price, he will then let some company sell it to you at an exorbitant mark up, and then run away giggling. Just like Warren Buffet does with silver, and George Soros does with the UK stock market.

The Resale Market? There hasn't been one! Ask your friends, go to the pub, go on the Internet and see if you can find someone who bought a house before the arrival of all the developers. We saw a similar thing happen in Cape Verde. When the market started there any re-sale price or procedure was purely guess work, now though 5 or 6 years on, there is a steadily growing market, and ex pat agents are thriving.

Inexperienced Agents/Realtors? With no re-sale market to begin with there wouldn't be, so any agents there are ones that have fled Spain before the crash, or are some of the few Americans with a passport and/or a tax problem. I tried on many occasion to list and display Panamanian re-sale property on European websites, several companies touting to be Panamas largest, oldest and so on. Not one could come up with anything!

What now? If you have bought, sit tight. Personally I think the market is there, just not in the "get rich quick boom" that everyone was told, the weak dollar is still making it a value play for those with Sterling in their pocket. As to whether quite all of the developments will get built or not is another matter. The transition from what Panama was (Basically a tax haven) to a tourist destination for all to enjoy is a large one to say the least, and is certainly not a 5 minute job.

Dubai - Tax Free Sand Castles in the Sun?

The hype for Dubai and the surrounding Emirates has been going on for some time now, but little seems to be known by the public as to what really goes on, and quite how it all works. With a completely different culture to the west, and a country that made its living very quickly from "Black Gold"

The problems that arise from this though is a large amount of belligerence from the developers themselves, with huge belief that people will just throw money and whatever they build, and all is good!

There are only a few main "authorized" developers (I guess the ones with the largest pockets, or those that know a prince) the top 3 are Damac, Profile and Emaar.

There are what would appear to be 100's of companies developing and selling there, but these are the big guys, the ones that pretty much control everything.

Emaar. Once revered as the highest quality, has decided to enter the timeshare market, "Emaar Hospitality Group plans to enter timeshare market" as much as timeshare has had a bad name over the years, it is trying to clean up its act, but as we all know, where there is timeshare, there are timeshare salesmen. I dont know about you, but something I cant stand. Emaar, as fancy as your developments are, you just cheaped out buy a vast amount, pulling down the quality in a country where you pride yourselves on delivering the best. I don't care what anyone says, timeshare is not an investment. It might save you money long term, but there is a vast difference between saving and investing.

Profile. Responsible for "The World" and most noteably the "Island of Ireland" built entirely on reclaimed "land" (I'm sorry but a heap of sludge you dredged out of the sea and sprayed about the place with a few rocks around it doesn't constitute land in the real world) One has to wonder how long this will last, I mean it's all very nice, and aimed at the uber riche and so on, but we have all seen the discovery channel documentry about the race against the storms and trying to fix it as the build and hoping it won't sink. On top of all that, who in their right mind wants to drink Guiness in 50 degree heat surrounded by a bunch of Irish timeshare salesmen? I'd rather lick the path.

Damac. Now this is an interesting one, Damac have started to sell a great many projects, and been doing so many u-turns on them they appear to be spinning like a fairground ride, with unbelievable things going on as a result. Their latest ploy was their annoucement to build a multi billion dollar project in the Kurdish region of Iraq. Now I'm no historian by any stretch of the imagination, but was there not a war going on in Iraq? didn't some bloke called George W Bush decide he wanted a new sand pit? I am all for investing early, but do you really think this is going to happen? show us your "entrance strategy" never mind the exit!

What few people realise is that Damac actually started as a catering company http://www.zawya.com/cm/profile.cfm?companyid=1003214 and runs many restaurants. With the number of clients out there that have bought there properties, only having been told that the odd project here and there is being cancelled, one should ask should they have made the transition? With numerous projects delayed or cancelled, many investors have "flipped" their properties. For those that manged it and got their money, all is good, but those that bought at the flip end are left holding fresh air!

The Emirates in general?

Well, going direct to the developer is one thing, but you have no idea what wonderful new scheme they could bring in before they finish, in some cases even if they finish at all. Buy through an agent and you end up with even more confusion and higher prices. In a land as unstable as it is, both physically and politically one really should be wary. VAT will be introduced soon which removes a large chunk of profit, the developers aren't advertising that! The other thing to consider is the desperation factor, the Emirates have gone about as far as they can on their oil, do you really think they can sustain the same financial status on tourism?