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Worldwide CRE Still Feels Recession's Reverberations
Worldwide CRE Still Feels Recession's Reverberations
Jun 30, 2009
By: Dees Stribling, Contributing Editor
Commercial Property News
Sometimes lost in the din of bad economic news in the United States is the worldwide impact of the current recession on commercial real estate. Markets everywhere have been affected to some degree, some worse than others, and players in those markets are only now beginning to sort things out, as they are here at home.
Dubai, for instance, has seen a notoriously steep downturn in its fortunes. Flying high in the mid-2000s--literally, since the world's tallest building began development there only a few years ago--the country is now licking its wounds. Early this week, Dubai-based Emaar Properties, the very same developer that is building the near-complete world's-tallest Burj Dubai, said that it was merging with three real estate units of Dubai Holding. The ruler of the Dubai, Sheikh Mohamed bin Rashid Al Maktoum, who is also the vice president of the United Arab Emirates, owns that holding company.
In their heyday, Emaar had assets exeeding $65 billion, annual profits nearing $2 billion and global land bank of more than 5 billion square feet. The other three entities--Dubai Properties L.L.C., Sama Dubai L.L.C. and Tatweer L.L.C. had deals aplenty--but with property valuations down as much as 40 percent in Dubai and markets throughout the world sour, their activities have been drastically diminished. The new entity will have estimated assets of $52.8 billion, but also debt of $13.4 billion.
Consolidation, then, is likely to be a key survival strategy for Middle Eastern developers going forward. The Emaar deal is a test case for the market and could prompt a series of mergers between second- and third-tier developers, Bobby Sarkar, a real estate analyst for Dubai-based investment bank Al Mal Capital, told The Wall Street Journal recently.
Worldwide dislocation is also creating opportunities for U.S. investors. That's the position of Chicago-based U.S. Equities, which has long had interests in Latin America, and which has increased its interests in that part of the world recently. In the first half of 2009, the firm successfully secured or completed ten new assignments in Argentina, Chile and Mexico.
"Right now, market dynamics are such that we're seeing more international investors who want to enter these emerging markets, given the potential for higher investment returns," Tony DiBiase, U.S. Equities' chief operating officer and director of firm operations in Latin America, told CPN.
Recession or not, Latin America represents a set of emerging markets in the long run--markets with growing middle classes who will not, as the decades pass, be denied new houses, or places to work, play or shop. "As a a group of emerging markets, Latin America is a very dynamic and open marketplace that continues to evolve and create new opportunities," he said.
DiBiase added that the company is also seeing a fair amount of Latin American investors looking to invest in the U.S., now that valuations are down to pre-bubble levels, or even lower.
Copyright Commercial Property News 2009. Used with permission.
Jun 30, 2009
By: Dees Stribling, Contributing Editor
Commercial Property News
Sometimes lost in the din of bad economic news in the United States is the worldwide impact of the current recession on commercial real estate. Markets everywhere have been affected to some degree, some worse than others, and players in those markets are only now beginning to sort things out, as they are here at home.
Dubai, for instance, has seen a notoriously steep downturn in its fortunes. Flying high in the mid-2000s--literally, since the world's tallest building began development there only a few years ago--the country is now licking its wounds. Early this week, Dubai-based Emaar Properties, the very same developer that is building the near-complete world's-tallest Burj Dubai, said that it was merging with three real estate units of Dubai Holding. The ruler of the Dubai, Sheikh Mohamed bin Rashid Al Maktoum, who is also the vice president of the United Arab Emirates, owns that holding company.
In their heyday, Emaar had assets exeeding $65 billion, annual profits nearing $2 billion and global land bank of more than 5 billion square feet. The other three entities--Dubai Properties L.L.C., Sama Dubai L.L.C. and Tatweer L.L.C. had deals aplenty--but with property valuations down as much as 40 percent in Dubai and markets throughout the world sour, their activities have been drastically diminished. The new entity will have estimated assets of $52.8 billion, but also debt of $13.4 billion.
Consolidation, then, is likely to be a key survival strategy for Middle Eastern developers going forward. The Emaar deal is a test case for the market and could prompt a series of mergers between second- and third-tier developers, Bobby Sarkar, a real estate analyst for Dubai-based investment bank Al Mal Capital, told The Wall Street Journal recently.
Worldwide dislocation is also creating opportunities for U.S. investors. That's the position of Chicago-based U.S. Equities, which has long had interests in Latin America, and which has increased its interests in that part of the world recently. In the first half of 2009, the firm successfully secured or completed ten new assignments in Argentina, Chile and Mexico.
"Right now, market dynamics are such that we're seeing more international investors who want to enter these emerging markets, given the potential for higher investment returns," Tony DiBiase, U.S. Equities' chief operating officer and director of firm operations in Latin America, told CPN.
Recession or not, Latin America represents a set of emerging markets in the long run--markets with growing middle classes who will not, as the decades pass, be denied new houses, or places to work, play or shop. "As a a group of emerging markets, Latin America is a very dynamic and open marketplace that continues to evolve and create new opportunities," he said.
DiBiase added that the company is also seeing a fair amount of Latin American investors looking to invest in the U.S., now that valuations are down to pre-bubble levels, or even lower.
Copyright Commercial Property News 2009. Used with permission.
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