On the Edge Financial Daily UEM Land-Damac deal off
- UEM Land-Damac deal off
Written by Fong Min Hun
Wednesday, 17 June 2009 18:46
KUALA LUMPUR: Damac Properties (M) Sdn Bhd, which is part of Dubai’s Damac Group, has pulled out of a deal with UEM Land Holdings Bhd to acquire a piece of land for RM396.44 million in Nusajaya, Iskandar Malaysia.
UEM Land said on June 17 it received notification on Tuesday that Damac would not be interested in further extending the sales and purchase agreement (SPA), which was signed on June 12 last year.
It told Bursa Malaysia that under the terms of the SPA, the period to fulfil the condition would expire 12 months from the date of the SPA unless extended by mutual agreement by both parties.
“The parties had been in discussions on certain issues relating to the conditions precedent and a possible extension of the extended approval period. However, on Tuesday, UEM Land received notification stating that they are not agreeable to further extension of the extended approval period,” it said.
UEM Land said the SPA relating to the proposed disposal had lapsed and was of no further effect.
The proposed acquisition, if it had gone through, would have resulted in the development of an integrated waterfront development consisting of residential, commercial, retail, dining and leisure facilities.
Damac’s pullout marked the first time that a potential investor in Iskandar Malaysia has pulled out of a deal from the designated economic zone.
The announcement confirmed market talk over the past few months that Damac was no longer interested in the Iskandar development. This was despite statements by UEM Land that Damac was still keen in the project.
To recap, UEM World Bhd had signed the SPA with Damac in June 2008 to dispose of a 17.42-hectare parcel of land in Puteri Harbour, Iskandar Malaysia. The deal was entered into before UEM’s corporate restructuring, which saw UEM Land take over UEM World’s listing status.
The plan then was to accelerate development in Nusajaya and in particular, in Puteri Harbour. One of UEM Land’s strategies was to partner with reputable property developers, such as Damac Group, to develop selected strategic land parcels within Nusajaya.
The proposed disposal would allow UEM Land to bring not just an investor with extensive financial resources, but one of leading international developers of luxury waterfront projects with proven track record and strong market following, to develop a signature world-class waterfront development.
Damac, at the time, was bullish on taking up and developing a parcel of land at Puteri Harbour. This was before the Dubai property bubble burst. Damac was one of the developers caught in the maelstorm, and was forced to dispose of its international ventures elsewhere.
During the heydays, Damac Group had grown into one of the most successful residential, leisure and commercial developers in Dubai and the Middle East, and is expanding rapidly into North Africa, Jordan, Lebanon, Qatar, Saudi Arabia and the Far East.
Its current project portfolio as at June last year included development properties of over 450 million sq ft worth in excess of US$30 billion (RM105.9 billion). Damac Group was then the name behind some of the most distinguished residential and commercial projects in Dubai.
This the Bernama version: UEM Land Deal With Damac Properties Off and this is the Star Biz version UEM Land, Damac sale agreement lapses
This news is actually not too shocking. Last Saturday, on the 13th June 2009, on the Star Biz, Spotlight on IDR draws interest in UEM Land
- ......... An initial optimism for the IDR was when UEM Land successfully attracted international developers such as Limitless LLC and Damac Holdings to participate as strategic partners in Nusajaya.
Limitless and Damac are two of the bigger investors in Nusajaya, with agreements to develop residential and commercial property at Puteri Harbour, the 688-acre crown jewel of the development.
Both have international reputation and solid financial backing.
Herein lies the catalyst.
For the uninitiated, Dubai-based Damac Holdings, is one of the world’s leading luxury waterfront developers.
It plans to build commercial and residential properties and a private marina with a projected gross development value (GDV) of about RM3.8bil in Puteri Harbour, Nusajaya.
Spanning 44 acres, Damac has commited to invest an initial RM397mil for this project to be undertaken over eight to 10 years.
It will be handled by Damac Properties (M) Sdn Bhd, a subsidiary of Damac Properties LLC, the real estate development unit of Damac.
Meanwhile, UEM Land’s joint venture with Limitless is through its development vehicle Haute Properties Sdn Bhd, where it owns a 40% stake.
It was reported that earlier this year, Limitless has already submitted the layout for the 100-acre residential project in Puteri Harbour .
Haute Properties will develop the 111 acres of the precinct with an initial investment of RM241.8mil.
The development was expected to commence in 2008 and will be completed by 2013 with an estimated GDV in excess of RM1.5bil.
While so far there has been indications of both companies retreating on their agreements, observers close to the company says that no fresh funds have poured in for its Nusajaya development in Iskandar Malaysia.
Afterall, both companies have been grappling with their own problems back home, as the global financial crisis burst the bubble of the Middle Eastern property market.
There have been reports of Damac laying off staff at its headquarters in Tecom, Dubai.
According to Khaleej Times, a Dubai-based newspaper, Damac laid off between 45 and 50 employees in February.
The company axed 200 workers in October last year as the global credit crisis has slowly begun to leave its impact on the property sector.
Earlier in the year, there were reports of employees fired by Damac, that were not paid their full settlement.
According t o an analyst, construction work on Damac’s site has yet to begin.
Damac Properties has some US$30bil worth of projects in the Middle East and North Africa region.
On the other hand, Limitless has nine global projects with a total GDV of US$100bil across UAE, Saudi Arabia, Jordan, Vietnam, Malaysia, Russia and India.
“I heard that Damac may want to scale back on its development in Nusajaya, as they have bigger problems in their other developments elsewhere,” says one analyst who used to track UEM World Bhd
Back in April 2009, RHB Research actually did a report on UEM Land.
- There has been an uptrend in land sale prices during 2005-2008, culminating in the highest recorded price of RM209 psf to Damac, Dubai’s largest private property developer as well as the Middle East’s largest catering company. However, we note this last transaction with caution given the cash-flush Middle East investor has now also been affected by the significant drop in crude oil prices.
So the highest recorded price of rm209 psf is now off.
How?
What kind of impact you reckon this will have on UEM Land?
And if you look at the stock, don't you think it's squeaky bum time given its recent massive run up?
Look at the volume.. hasn't it kinda disappeared? Just where did it all go?? Without the volume, how long can the uptrend last?
There was this once saying I remember... 'You want to cut profit or you want to cut loss'? :p2
ps: The housing problem in Dubai is not exactly 'new' news, yes? See past postings Dubai's House Prices Drop 41% In Q1!! and LCL and Its Dubai Woes
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