October 6, 2010
By LIZ ALDERMAN
DUBAI — On a sultry June evening in 2007, more than 100 people camped out at the offices of Emaar, a prestigious Dubai property developer, to ensure that they would land a coveted spot in a gleaming new skyscraper scheduled to open this year near the Burj Khalifa, the world’s tallest building.
Today, the property, designed by the New York architect Frank Williams (who died in February), is like a number of others around Dubai — little more than a rotting foundation. Its value has plunged by more than 40 percent since 2008, after the collapse of Dubai’s real estate boom.
“It’s really a disaster, the situation in Dubai,” said Silvia Turrin, a real estate agent who bought into the property, 29 Boulevard, and has been unable to get her money out. “It’s not like in Western countries. It’s very difficult to exit here if there’s a problem. And we’ll never get our money back, but now we’re stuck dealing with this hole.”
Dubai lured people to a gold rush in properties at the height of its real estate boom — including business and political leaders from Afghanistan who invested the deposits from Kabul Bank, one of the country’s largest. The near-collapse of the bank in September was largely a result.
At the time, few asked if there was a legal framework for resolving potential disputes. Now, with the glitter gone, interviews with investors, legal specialists and real estate analysts here show that many who bought in are finding it hard to get out.
Despite the construction delay, Emaar is still holding the down payments of as much as 80 percent that were required to secure an apartment, Ms. Turrin and other property holders said. And Dubai’s opaque property laws have made it virtually impossible for those who bought in to walk away, even as interest accumulates on their construction loans.
In a statement, Emaar acknowledged that 29 Boulevard was still “under construction” but said that it upheld transparency standards and had “taken several proactive measures to address the concerns of investors on developments that are in the pipeline.”
It said those measures included the option of buying other completed properties. Investors, however, say the properties being offered are in some cases smaller, less attractive and more expensive than those they had agreed to buy.
Emaar is not the only developer with such problems. Scores of other buildings around Dubai are well past their delivery dates, or have yet to be started.
Apartment buyers who made down payments for property construction cannot find what is happening with their money, these people said. Bank loans held on undelivered property often cannot be forfeited, and borrowers have had to pay higher interest rates even as banks have not let them walk away from the mortgages.
“The rules of the game are definitely opaque here,” said an investor who has bought several properties in Dubai and who insisted on anonymity because of delicate talks with developers and regulators. “In the United States, I would know my legal position much more clearly and could take actions if necessary.“
Most developers have also thwarted the formation of owners’ associations that could take control of building finances and ensure the transparent management of condo fees, which many owners say developers use to take in more money.
Dubai has compressed decades’ worth of real estate development into the last 15 years. But the legal framework for resolving property disputes, and the nature of the contracts themselves, are still as incomplete as many of the buildings, analysts said.
“Dubai has evolved rapidly in just a short time,” said Graham Coutts, who is in charge of Middle East management services at Jones Lang LaSalle, a global real estate services firm. “The legal system is evolving with it.”
Still, concerns about resolving disputes here are mounting, even as developers struggle to find foreign and domestic investors for what has become one of the largest property surpluses in the world.
Commercial real estate vacancies in particular are still rising.
Although about 70 percent of empty lots from three years ago have been filled, real estate construction since then has far exceeded the purchases, more than doubling the amount of vacant space available, said Timothy Trask, the director of corporate ratings at Standard & Poor’s in Dubai.
Dubai is not the first place where soaring ambitions outpaced reality. Shanghai, Singapore and Hong Kong all were overbuilt in relatively short time frames. But these cities were able to trim their real estate surpluses by greatly reducing construction until demand picked up.
Building is continuing in Dubai, however, even though potential corporate tenants are showing little interest in developments like the Dubai Silicon Oasis or the Jumeirah Lake Towers, a complex of more than 85 buildings that looks like a Las Vegas version of Lower Manhattan planted on the fringes of the desert. Jones Lang LaSalle recently proposed that some buildings should simply be sealed for the next five years, until buyers return.
Even if investors eventually respond to slumping prices, they would still have to be wary of contracts and vigilant about how legal disputes in Dubai are resolved, said Ludmila Yamalova, a managing partner at the law firm HPL Plewka & Coll, who handles lawsuits for individual and commercial property investors.
She recently sued Damac Properties, one of Dubai’s biggest builders, on behalf of a German investor who claimed that from 2006 on, he invested nearly $10 million in five properties that were not delivered on time. The investor, Lothar Hardt, also contends that the developer mismanaged escrow accounts related to the properties and that he lost money by signing contracts with retailers who planned to set up shop in the buildings.
Ms. Yamalova is now trying to bring suit in a court run by the Dubai International Financial Center, a government body set up to attract investors, which operates largely on British-based law and is independent of the opaque Dubai court system, where cases are conducted in Arabic and plaintiffs must go through local Emirati representatives.
Dubai’s real estate regulators have issued a flurry of rules since 2008 to clarify the situation in Dubai and to comfort potential investors. But new rules sometimes contradict others issued just months earlier, often in ways that leave developers with the advantage and property buyers in a legal limbo, making many wary of ever investing in Dubai again, Ms. Yamalova said.
Mr. Coutts, the Jones Lang LaSalle executive, said that because Dubai had grown so fast, the government was learning on the job. In more mature markets, “you had 200 years to develop a legal framework,” he said. “It’s now becoming clearer what kind of a legal framework is needed to regulate development here.”
07/10 Wall Street Tentative Ahead of Jobless Data
October 7, 2010
By THE ASSOCIATED PRESS
Indexes on Wall Street seesawed Thursday as traders balance slightly better news on jobs against mixed results from PepsiCo.
The Dow Jones industrial average came within two points of 11,000 before turning lower.
Indexes were up in the first minutes of trading after the Labor Department reported that first-time filings for jobless aid dropped by 11,000 last week to a seasonally adjusted 445,000. That was the lowest level since the week ending July 10. Wall Street analysts had expected a small increase. The four-week average of new claims, a less volatile measure, dropped to 455,750, the sixth consecutive weekly decline.
But within the first half-hour, those gains were shed. Trading was held in check as investors awaited the government’s crucial monthly employment report Friday and PepsiCo kicked off earnings season with mixed results.
In late morning trading, the Dow Jones industrial average was down 19.26 points, or 0.18 percent. The Standard & Poor’s 500-stock index and the Nasdaq composite were also off by 0.2 percent.
The beverage and snack maker PepsiCo reported a 12 percent rise in third-quarter profit, on strong overseas sales. But the company lowered the top end of its guidance, and it said changes in currency exchange rates are expected to weigh on future profit. PepsiCo shares fell 3.4 percent in early trading.
High unemployment remains a big obstacle to stronger growth. Worries about jobs had been keeping a lid on spending in recent months, though retailers reported Thursday that sales improved modestly in September. Macy’s, Abercrombie & Fitch and Limited Brands, which owns Victoria’s Secret and Bath and Body Works, all reported better-than-expected monthly sales.
In European equity markets, the FTSE 100 in London was down 0.34 percent, while the DAX in Frankfurt and the CAC 40 in Paris gained 0.1 percent.
Two key central banks in Europe held their benchmark rates steady on Thursday. The European Central Bank also signaled Thursday that it would stick to its policy of gradually removing extraordinary economic stimulus measures — even as other monetary authorities appeared to be moving in the opposite direction.
Trading had been fairly subdued in Asia earlier, with South Korea’s Kospi closing down 0.2 percent to 1,900.85 while Japan’s Nikkei 225 stock averaged dropped 0.1 percent, to 9,684.81. Hong Kong’s Hang Seng index ended flat at 22,884.32.
In the currency markets, the euro and the yen continued to strengthen. The euro briefly topped $1.40 for the first time since early February and the dollar dropped below the level that forced the Bank of Japan to intervene in the markets to stem the export-sapping appreciation of the yen.
The gains in the euro came amid warnings from the chief of the International Monetary Fund about the risk of a global currency war. In a bid to bolster their flagging economies , many countries are abandoning the solidarity shown during the financial crisis and adopting beggar-thy-neighbor policies.
The yen strengthened despite the Bank of Japan’s intervention and its move earlier this week to buy more assets, trading at 82.36 yen to the dollar. And the British pound rose slightly, to $1.60, also for the first time since February. Commodity prices, including oil, rose as the dollar weakened.
Members of the Federal Reserve have indicated that they are willing to offer more relief for the struggling American economy. Buying government debt from banks would lower interest rates in the economy, weakening the appeal of dollar assets.
Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said he “takes very seriously the threat of a currency war, even a nascent one.”
In an interview with the French newspaper Le Monde published Thursday, Mr. Strauss-Kahn said China’s currency was “at the root of tensions in the world economy that are becoming a threat,” and that China must speed up its currency appreciation “if we want to avoid creating the conditions for a new crisis.”
On Wednesday, Treasury Secretary Timothy F. Geithner also stepped up pressure on Beijing to make more progress to let its currency fluctuate.
In a speech at the Brookings Institution, Mr. Geithner said the United States would make currencies a major topic at international finance meetings this weekend in Washington. He also called on the International Monetary Fund to play a bigger role in monitoring how countries manage their currencies.
By THE ASSOCIATED PRESS
Indexes on Wall Street seesawed Thursday as traders balance slightly better news on jobs against mixed results from PepsiCo.
The Dow Jones industrial average came within two points of 11,000 before turning lower.
Indexes were up in the first minutes of trading after the Labor Department reported that first-time filings for jobless aid dropped by 11,000 last week to a seasonally adjusted 445,000. That was the lowest level since the week ending July 10. Wall Street analysts had expected a small increase. The four-week average of new claims, a less volatile measure, dropped to 455,750, the sixth consecutive weekly decline.
But within the first half-hour, those gains were shed. Trading was held in check as investors awaited the government’s crucial monthly employment report Friday and PepsiCo kicked off earnings season with mixed results.
In late morning trading, the Dow Jones industrial average was down 19.26 points, or 0.18 percent. The Standard & Poor’s 500-stock index and the Nasdaq composite were also off by 0.2 percent.
The beverage and snack maker PepsiCo reported a 12 percent rise in third-quarter profit, on strong overseas sales. But the company lowered the top end of its guidance, and it said changes in currency exchange rates are expected to weigh on future profit. PepsiCo shares fell 3.4 percent in early trading.
High unemployment remains a big obstacle to stronger growth. Worries about jobs had been keeping a lid on spending in recent months, though retailers reported Thursday that sales improved modestly in September. Macy’s, Abercrombie & Fitch and Limited Brands, which owns Victoria’s Secret and Bath and Body Works, all reported better-than-expected monthly sales.
In European equity markets, the FTSE 100 in London was down 0.34 percent, while the DAX in Frankfurt and the CAC 40 in Paris gained 0.1 percent.
Two key central banks in Europe held their benchmark rates steady on Thursday. The European Central Bank also signaled Thursday that it would stick to its policy of gradually removing extraordinary economic stimulus measures — even as other monetary authorities appeared to be moving in the opposite direction.
Trading had been fairly subdued in Asia earlier, with South Korea’s Kospi closing down 0.2 percent to 1,900.85 while Japan’s Nikkei 225 stock averaged dropped 0.1 percent, to 9,684.81. Hong Kong’s Hang Seng index ended flat at 22,884.32.
In the currency markets, the euro and the yen continued to strengthen. The euro briefly topped $1.40 for the first time since early February and the dollar dropped below the level that forced the Bank of Japan to intervene in the markets to stem the export-sapping appreciation of the yen.
The gains in the euro came amid warnings from the chief of the International Monetary Fund about the risk of a global currency war. In a bid to bolster their flagging economies , many countries are abandoning the solidarity shown during the financial crisis and adopting beggar-thy-neighbor policies.
The yen strengthened despite the Bank of Japan’s intervention and its move earlier this week to buy more assets, trading at 82.36 yen to the dollar. And the British pound rose slightly, to $1.60, also for the first time since February. Commodity prices, including oil, rose as the dollar weakened.
Members of the Federal Reserve have indicated that they are willing to offer more relief for the struggling American economy. Buying government debt from banks would lower interest rates in the economy, weakening the appeal of dollar assets.
Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said he “takes very seriously the threat of a currency war, even a nascent one.”
In an interview with the French newspaper Le Monde published Thursday, Mr. Strauss-Kahn said China’s currency was “at the root of tensions in the world economy that are becoming a threat,” and that China must speed up its currency appreciation “if we want to avoid creating the conditions for a new crisis.”
On Wednesday, Treasury Secretary Timothy F. Geithner also stepped up pressure on Beijing to make more progress to let its currency fluctuate.
In a speech at the Brookings Institution, Mr. Geithner said the United States would make currencies a major topic at international finance meetings this weekend in Washington. He also called on the International Monetary Fund to play a bigger role in monitoring how countries manage their currencies.
07/10 European Central Banks Hold Rates Steady
October 7, 2010
By MATTHEW SALTMARSH and JULIA WERDIGIER
The European Central Bank signaled Thursday that it would stick to its policy of gradually removing extraordinary economic stimulus measures — even as other monetary authorities appeared to be moving in the opposite direction.
The comments, and the seeming lack of alarm from the European Central Bank president, Jean-Claude Trichet, about the euro’s recent appreciation, briefly pushed the currency above $1.40, the highest level against the dollar since late January.
The E.C.B. also left its benchmark interest rate unchanged at 1 percent. Earlier Thursday in London, the Bank of England kept its main rate at 0.5 percent and decided not to expand its debt-purchasing program for now.
The E.C.B. has been saying that it will gradually remove measures intended to provide added liquidity for struggling banks, but has not given a schedule. Speaking in Frankfurt, Mr. Trichet said there was still a “consensus” on the bank’s council that it should retain support for lenders having difficulty raising funds in interbank markets.
“There is absolutely no change in our own attitude,” he said. He noted that outstanding amounts of its refinancing operations had declined recently, reflecting a “progressive normalization” of money-market conditions.
The bank’s difficulty now is that troubled lenders primarily in small economies — like Ireland, Greece and Spain — are so fragile that they still require extraordinary financing from the central bank, while most lenders in the core economies of Germany and France are stronger. Mr. Trichet said that in countries that have major problems with bank financing — as in Ireland, where the government is debating whether to require bond holders to share the burden of the bailout of Anglo Irish Bank — it is up to the “appropriate decision makers” in those countries to resolve them, rather than the E.C.B.
Nick Kounis, an economist at ABN Amro in Amsterdam, said, “This suggests that the E.C.B. does not want to keep on extending its full allotment policy for a relatively small part of the euro-zone banking sector that needed it.”
As the E.C.B. moves in one direction, other central banks are going in another. The Bank of Japan opted for a further round of stimulus Tuesday, and some economists said that the Bank of England might follow this year. The are also strong signals that the U.S. Federal Reserve will resume buying huge amounts of government debt to help the economy.
Mr. Trichet did not echo recent comments from finance officials elsewhere that the world may be on the verge of a currency war — as the authorities in East Asia and other emerging countries continue to intervene to dampen the value of their currencies. “I think that exchange rates should reflect economic fundamentals, that excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability,” he said.
Analysts said the comments suggested that the E.C.B. was not overly concerned about the rebound in the euro, for now.
The E.C.B., which sets monetary policy for the 16 countries in the euro zone, has kept its benchmark interest rate at 1 percent since May 2009. Most analysts do not expect the E.C.B. to raise rates until well into 2011.
There have been signs in the past week that more banks have been able to borrow the money they need on open markets, rather than relying on the E.C.B. But at the same time, the E.C.B. last week stepped up its purchases of European government bonds, a sign that the sovereign debt crisis is still simmering.
Mr. Trichet continued to present a balanced view on growth prospects. “Recent economic data are consistent with our expectation that the recovery should proceed at a moderate pace in the second half of this year, with the underlying momentum remaining positive,” he said, adding that “private sector domestic demand should gradually strengthen further.”
In Britain, there have been signs that some policy makers would consider a new round of debt purchases to revive an economic recovery that has lost steam.
Support for expanding the debt purchasing program, also called quantitative easing, indicates a change of tone at the central bank from previously worrying more about relatively high inflation than economic growth.
During a speech last month, the Bank of England policy maker Adam Posen made a case for considering more quantitative easing, a sign that fears the economy could deteriorate again gained pace. Such debt purchases are intended to revive the credit markets and add liquidity to the economy,
Many economists expected that support for expanding the program to buy mainly government debt, which was halted at £200 billion, or $317 billion, almost a year ago, would gain momentum from the committee meeting at the bank this week.
The Bank of England made no statement after its meeting Thursday. It is to publish the minutes of the meeting later this month.
After gaining some momentum earlier this year, Britain’s economic recovery started to slow again in the past quarter and consumer confidence ebbed amid concern about upcoming government spending cuts. Consumer confidence fell more than economists expected in September, and claims for jobless assistance increased more than expected in August, the first rise in seven months.
The British chancellor of the Exchequer, George Osborne, said at a party conference Monday that postponing spending cuts and tax increases was not an option.
He warned that any delay in cutting Britain’s record deficit would lead to higher costs to service the country’s debt and ultimately higher interest rates. The government is due to detail its plans to cut the budget deficit in two weeks.
Matthew Saltmarsh reported from Paris and Julia Werdigier from London. Jack Ewing contributed reporting from Frankfurt.
By MATTHEW SALTMARSH and JULIA WERDIGIER
The European Central Bank signaled Thursday that it would stick to its policy of gradually removing extraordinary economic stimulus measures — even as other monetary authorities appeared to be moving in the opposite direction.
The comments, and the seeming lack of alarm from the European Central Bank president, Jean-Claude Trichet, about the euro’s recent appreciation, briefly pushed the currency above $1.40, the highest level against the dollar since late January.
The E.C.B. also left its benchmark interest rate unchanged at 1 percent. Earlier Thursday in London, the Bank of England kept its main rate at 0.5 percent and decided not to expand its debt-purchasing program for now.
The E.C.B. has been saying that it will gradually remove measures intended to provide added liquidity for struggling banks, but has not given a schedule. Speaking in Frankfurt, Mr. Trichet said there was still a “consensus” on the bank’s council that it should retain support for lenders having difficulty raising funds in interbank markets.
“There is absolutely no change in our own attitude,” he said. He noted that outstanding amounts of its refinancing operations had declined recently, reflecting a “progressive normalization” of money-market conditions.
The bank’s difficulty now is that troubled lenders primarily in small economies — like Ireland, Greece and Spain — are so fragile that they still require extraordinary financing from the central bank, while most lenders in the core economies of Germany and France are stronger. Mr. Trichet said that in countries that have major problems with bank financing — as in Ireland, where the government is debating whether to require bond holders to share the burden of the bailout of Anglo Irish Bank — it is up to the “appropriate decision makers” in those countries to resolve them, rather than the E.C.B.
Nick Kounis, an economist at ABN Amro in Amsterdam, said, “This suggests that the E.C.B. does not want to keep on extending its full allotment policy for a relatively small part of the euro-zone banking sector that needed it.”
As the E.C.B. moves in one direction, other central banks are going in another. The Bank of Japan opted for a further round of stimulus Tuesday, and some economists said that the Bank of England might follow this year. The are also strong signals that the U.S. Federal Reserve will resume buying huge amounts of government debt to help the economy.
Mr. Trichet did not echo recent comments from finance officials elsewhere that the world may be on the verge of a currency war — as the authorities in East Asia and other emerging countries continue to intervene to dampen the value of their currencies. “I think that exchange rates should reflect economic fundamentals, that excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability,” he said.
Analysts said the comments suggested that the E.C.B. was not overly concerned about the rebound in the euro, for now.
The E.C.B., which sets monetary policy for the 16 countries in the euro zone, has kept its benchmark interest rate at 1 percent since May 2009. Most analysts do not expect the E.C.B. to raise rates until well into 2011.
There have been signs in the past week that more banks have been able to borrow the money they need on open markets, rather than relying on the E.C.B. But at the same time, the E.C.B. last week stepped up its purchases of European government bonds, a sign that the sovereign debt crisis is still simmering.
Mr. Trichet continued to present a balanced view on growth prospects. “Recent economic data are consistent with our expectation that the recovery should proceed at a moderate pace in the second half of this year, with the underlying momentum remaining positive,” he said, adding that “private sector domestic demand should gradually strengthen further.”
In Britain, there have been signs that some policy makers would consider a new round of debt purchases to revive an economic recovery that has lost steam.
Support for expanding the debt purchasing program, also called quantitative easing, indicates a change of tone at the central bank from previously worrying more about relatively high inflation than economic growth.
During a speech last month, the Bank of England policy maker Adam Posen made a case for considering more quantitative easing, a sign that fears the economy could deteriorate again gained pace. Such debt purchases are intended to revive the credit markets and add liquidity to the economy,
Many economists expected that support for expanding the program to buy mainly government debt, which was halted at £200 billion, or $317 billion, almost a year ago, would gain momentum from the committee meeting at the bank this week.
The Bank of England made no statement after its meeting Thursday. It is to publish the minutes of the meeting later this month.
After gaining some momentum earlier this year, Britain’s economic recovery started to slow again in the past quarter and consumer confidence ebbed amid concern about upcoming government spending cuts. Consumer confidence fell more than economists expected in September, and claims for jobless assistance increased more than expected in August, the first rise in seven months.
The British chancellor of the Exchequer, George Osborne, said at a party conference Monday that postponing spending cuts and tax increases was not an option.
He warned that any delay in cutting Britain’s record deficit would lead to higher costs to service the country’s debt and ultimately higher interest rates. The government is due to detail its plans to cut the budget deficit in two weeks.
Matthew Saltmarsh reported from Paris and Julia Werdigier from London. Jack Ewing contributed reporting from Frankfurt.
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