Abu Dhabi slowdown

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united arab emirates

As the global economy imploded — taking Dubai along with it — Abu Dhabi stood almost alone as a place on Earth that was still financially healthy. The financial system, that lubricant of international business, just about nearly ground to a halt but Abu Dhabi was spending cash building whole new cities: a cultural district and new financial center, an island dedicated solely to tourism and amusement.

But since then we’ve seen signs that perhaps the emirate got a little ahead of itself, forgetting the painful lessons taught to Dubai just up the road. Some of the retrenchment and reprioritization is good. In my view, there seemed to be too much focus on high-end housing (despite a chronic need for decent middle-class housing in the emirate) and luxury everything, regardless if that was where the demand would come from. My latest story, this time for Architectural Record, looks at how the latest cutbacks are affecting the design and construction businesses which had regarded Abu Dhabi as a bright spot in troubled economic times.

I don’t agree with the headline — clearly, Abu Dhabi is in no danger of running out of cash any time soon — but the comments to the story offer additional insight into what it’s like working there.

 

 

 

By Angela Shah

Eighteen months ago, Ross Ensor at Leo A Daly described the business climate in Abu Dhabi as “a bit like the California Gold Rush.” Backed by oil prices at relatively high levels, the capital of the United Arab Emirates had embarked on an ambitious program of new developments, a rare bright spot as the rest of the world dealt with a crushing recession.

Today, however, with the global economy still weak and political unrest sweeping the Arab world, the mood here is subdued. “What a difference a year makes,” says Ensor, a vice president with the Nebraska-based design firm, which has an office in the Persian Gulf emirate. “Things have certainly slowed down.”

(Marcus Lam, Architectural Record)

Most significantly, Abu Dhabi announced in October that the marquee projects in its $27 billion Saadiyat Island development, slated to be the emirate’s cultural hub, were stalled. Three flagship museums—branches of the Louvre (by Jean Nouvel) and Guggenheim (by Frank Gehry), along with the Zayed National Museum (by Foster + Partners)—would no longer open between 2013 and 2014, and could be delayed up to five years. Gehry told a Bloomberg reporter in October that construction had come to a halt. “The Abu Dhabi building we’ve been working on in the last five to six years has been stopped, and that’s painful,” he stated.

An award! No foolin’

Technically, I got the news yesterday that the Austin American-Statesman won 2nd place for Project Reporting at the Associated Press Sports Editors National Sports Journalism Awards. So it’s not an April Fool’s trick!

The editors included my contribution to the package of Formula 1 coverage, namely my story on Abu Dhabi’s Yas Marina circuit which first opened in 2009. Austin is set to get the next F1 track scheduled to deafen all within earshot in May 2012. It’s the first – and probably, the last – time my byline has shown up in a sports journalism contest. The win is a really nice surprise.

Check out the Statesman’s F1 coverage online and follow them at @StatesmanF1 on Twitter for more.

Real estate crunch in Abu Dhabi

Dubai’s debt woes are well-known, especially once the declaration of Dubai World wanting a standstill on tens of billions in debt in late 2009 sent global stock markets to the floor. In the last 14 months or so, the government-affiliated developer has worked out a repayment plan with its banks

During this time, Abu Dhabi has accelerated its planned city-building. Nearly a dozen hotels have opened in the past two years and about a dozen more are scheduled to come online in the next year. Abu Dhabi, which does have a severe shortage of affordable, quality housing, sponsored the development of whole new neighborhoods on the mainland and on islands just off the main Abu Dhabi isle. I noticed, though, that most of these developments were pricey, very pricey. Everything was “luxury” just like you saw in Dubai. And I wondered at what point would Abu Dhabi be crossing the line into the excesses that now straps the Dubai economy.

Abu Dhabi's skyline (Getty/TIME)

So, it was interesting to see last month that Aldar, the U.A.E.’s largest developer and the firm behind many of Abu Dhabi’s signature developments, had to seek government assistance to repay its loans. Project delays and perhaps a mismatch of market demand had resulted in some cash flow problems for both Aldar and another major Abu Dhabi developer, Al Jaber Group.

While the family-owned Al Jaber seeks its own agreement with its creditors, the government did step in earlier this month and gave Aldar about $5.2 billion to tide it over. It has now bought back the Yas Marina F1 racecourse and Ferrari World as well as some infrastructure on Yas Island – all of which Aldar built for Abu Dhabi.

So is Abu Dhabi on the path of Dubai? Not exactly, said analysts I spoke to for the story.

 

 

 

Tuesday, Jan. 25, 2011

Behind the Latest Gulf Real Estate Crisis

By Angela Shah / Abu Dhabi

With banks reluctant to lend and a pervasively weak property market, a major real estate developer in the United Arab Emirates said it needed a cash lifeline to keep operations going. Oh no, is Dubai in more trouble?

Not exactly. The developer is not in Dubai, the emirate that has attracted as much attention for its debt woes in recent years as for the iconic real estate projects it no longer can afford. The emirate in question is neighboring Abu Dhabi and the developer feeling the squeeze is Aldar, the biggest real estate development company in the U.A.E. And Abu Dhabi is why the Aldar crisis, while massive, isn’t really catastrophic.

Abu Dhabi agreed last week to purchase about $5.2 billion in assets to help Aldar repay its debt. Aldar is behind many of Abu Dhabi’s signature projects, including the Yas Marina F1 circuit and the Ferrari World theme park, both of which it has now sold back to Abu Dhabi. As the global credit crunch drove down values of the emirate’s real estate by about a third, the developer found it couldn’t pay the bills. (See how rents are coming down in Dubai.)

While most of the world paid attention to the boom and bust of Dubai, its sister-city state in the UAE, Abu Dhabi, embarked on its own string of ambitious projects. “In Abu Dhabi there was the same kind of crowd that wanted the big, grandiose status-symbol projects,” says Christopher Davidson, a professor on Middle East politics at Durham University in England, who has written books on Dubai and Abu Dhabi. “They did get carried away, just not on the same scale.” (See pictures of the Burj Khalifa, the tallest building in the world.)

In addition to commissioning nearly two dozen new hotels — including the 844-room Millennium Al Wadha hotel, the largest — Abu Dhabi began carving out new residential and commercial areas of empty sandscape, Dubai-style. The emirate has also developed two former barren islands in the emirate: Yas, the home of Abu Dhabi’s F1 track and the Ferrari World theme park, and Saadiyat, which is slated to become its cultural district with local branches of the Guggenheim and Louvre museums.

While Yas Island opened to global fanfare, developer Aldar has posted four straight quarterly losses and has nearly $4 billion of debt due this year. “Some of the other [developers] are in exactly the same financial and developing cycle,” says Chet Riley, a research analyst with Nomura Investment Bank in Dubai. “2011 is really the pinch point for all of these companies.” Another prominent Abu Dhabi developer, Al Jaber Group, is seeking to delay payment of about $1.6 billion in debts. The family-owned conglomerate has projects worth about $4 billion in the pipeline and has hired KPMG to help reorganize its debt.

But Riley and other analysts agree that there is a key difference between Abu Dhabi and Dubai: cash.

“Dubai dreamed big without the means,” says Jean-Francois Seznec, a former commercial banker who worked in the Gulf and now teaches at Georgetown University in Washington, D.C. “Abu Dhabi is dreaming big, and they have made some mistakes, but they have the money.”

The final word on the F1

One of the things I’ve always loved about being a reporter is the opportunity to dive into new worlds, go back stage and witness events that you couldn’t do otherwise. The F1 was one of those experiences. I went into the stories with no knowledge about the sport – OK, I know it involves really fast cars.

the track from the pit

In any case, over the four-day weekend, I prowled around the pit and paddock, one of a swarm of journalists from all over the world in Abu Dhabi to cover the races. The folks at Scuderia Ferrari gave me a tour of their pit facilities. By the end of the weekend I had a sense of the team names and who the most competitive drivers are.

One place I couldn’t get a sight of was the grandstand. It seems my press pass didn’t allow me to actually venture out and about. Maybe this stems from the idea that most reporters cover the GP just want access to the pit, the crew and the drivers. But my story was a business story and a story to illustrate what the GP might like for Austin. I don’t know if I should’ve asked for this access or whether FIA just wouldn’t allow it.

Race day

Even if you’re not sympathetic to a reporter’s woes, it does raise an interesting point. John Sinders, a Texas investment banker who now lives in Dubai, said even his VIP Paddock Club passes wouldn’t allow him to access the grandstand.

This so annoyed him, he didn’t bother to go on Sunday, the final race day. Sinders is a racing enthusiast; he owns a racing team in Dubai. But he also views the grand prix as a unique way to entertain clients. He said he was unable to access half of his clients, those who were sitting in the grandstand. “Tell Austin not to do that,” he told me.

So, Austin Formula 1, consider the message passed on.

Abu Dhabi’s Grand Prix

F1 fans aside, most Austin residents are not really familiar with the Grand Prix circuit and all that it brings to town. Here is my story on what it’s like in Abu Dhabi, and what might be coming down the road for the Texas capital. (I really enjoyed working again with the Statesman, new colleagues and old. And I was happy to be on Sunday A1 again!)

Abu Dhabi Grand Prix offers glitzy glimpse of things to come in Austin

By Angela Shah

Special to the American-Statesman

ABU DHABI, UNITED ARAB EMIRATES — As the day ends, pit crews soap and scrub down tires at the paddock. Rad Weaver of San Antonio pauses, smiles and takes a look around him.

“When you think about all they have accomplished here in just three years,” he said on a balmy evening Friday at the Abu Dhabi Grand Prix, “coming here makes me realize how much more work we’ve got to do.”

In just a few years, Abu Dhabi’s leaders carved up an uninhabited desert isle, transforming it into a Formula One marina to rival Monaco. On the Yas Marina circuit, the race cars roar and screech underneath the Yas Hotel, the spectators gaping from above. Next door at Ferrari World Abu Dhabi, wanna-be drivers get their thrills at what’s billed as the world’s largest indoor theme park.

The Yas Hotel & Marina overlooking the track

Weaver, a University of Texas graduate who is helping lead Austin’s F1   project for McCombs Enterprises, said he is confident that Austin, too,   will be ready to host the world’s Grand Prix fans in 2012. San Antonio   billionaire Red McCombs is a key investor in the venture, organized by   Austin promoter Tavo Hellmund.

While Formula One Austin has the same German architectural and design firm that designed Yas, Weaver said their track will have signature Central Texas touches.

“We’ll take advantage of the natural undulations in the topography,” he said. “Here, in Abu Dhabi, it’s flat. You can’t really see over the track in a lot of places. We’ll do it where you’ll have a lot of great vantages to see the cars.”

The spectacle will be viewed not only by the 300,000 fans Weaver expects to descend on the Texas capital for the week of the race. About 100 million fans around the world tune in by television for each Grand Prix.

“We’ll open up eyes around the world to Austin,” he said.

Though vastly different cities, Austin and Abu Dhabi share a similar opportunity in hosting a F1 Grand Prix race: the chance to market their communities internationally in a way that few other events can do.

“Abu Dhabi’s going through a profile-raising process to say that it’s more than just an oil-and-gas town,” said Chris Strong, an attorney with Houston’s Vinson & Elkins firm who is based in Dubai. “I think it could, for businesses looking to relocate or set up offices in the U.S., advertise Austin as a city that they ought to be considering as a place to have a base.”

At the premiere race in Abu Dhabi last year, Strong, who received both his undergraduate and law degrees from UT, entertained clients at the Paddock Club, a VIP area with boxes above the pit and an open-air pavilion on top of the roof.

“It’s a fantastic atmosphere there,” he said. “Famous race car drivers, Richard Branson walking through with actors and models.”

John Sinders, an investment banker at Clarksons in Dubai, also likes to entertain clients in the paddock area. “I’m like a lot of CEOs; you get called to go to a lot of dinners — it almost becomes tedious,” he said. “Coming to the F1 is something they’ll remember.”

Ferrari World Abu Dhabi

Austin is next to get a Formula One racetrack in 2012, and Abu Dhabi debuted its course last year, giving me the perfect opportunity to return to the pages of the Austin American-Statesman after more than 10 years! Austin is interested in Abu Dhabi’s F1 experience and I’m covering the event this weekend. But first, a story about Ferrari World Abu Dhabi which sits next to the track on Yas Island.

At Ferrari World, F1 fans can experience the rush of the race

Park in Abu Dhabi is a grander version of tourist destination envisioned for Austin.

By Angela Shah

Special to the American-Statesman

ABU DHABI, UNITED ARAB EMIRATES — The sounds coming out of him as his body traveled 150 mph were unreal.

“It was just weird, but I just couldn’t help it,” said Cory Ryan, a Canadian engineer who works for Schlumberger. “I’m sure people around me thought I was getting sick.”

The world's fastest coaster: 150 m.p.h

Ryan had just ridden the Formula Rossa, billed as the world’s fastest roller coaster and a star attraction at the newly opened Ferrari World Abu Dhabi theme park, adjacent to its new Formula One racetrack. The coaster, designed to resemble stretched-out Ferrari Formula One race cars, accelerates from a standstill to 60 mph in two seconds and reaches its top speed three seconds later.

Though just 1.6 miles and 92 seconds long, the eye-watering ride — passengers in the front car are given goggles to wear — literally takes your breath away with its twists, turns and dips.

No matter. Ryan, 22, said he loved the roller coaster. “It was so cool.”

Ryan, who is in Abu Dhabi for a two-month training course, was among the first guests at the futuristic Ferrari World, which opened last week. Park operators are hoping to iron out any kinks before the deluge of 100,000 people expected this weekend during the four-day Abu Dhabi Grand Prix race. The invitation-only grand opening will be Nov. 30.

Abu Dhabi’s racetrack, which debuted in 2009, was designed by the same German firm working on Austin’s proposed F1 facility in southeastern Travis County. Austin promoters are also hoping to turn that site into a tourist destination with concerts and other attractions, but nothing as over-the-top as Ferrari World.

That project began rising out of the sand dunes on previously undeveloped Yas Island three years ago as part of oil-rich Abu Dhabi’s plan to diversify its economy into tourism and hospitality. Abu Dhabi expects to spend as much as $40 billion of its petrodollars on Yas alone, building the racetrack, luxury hotels and attractions such as Ferrari World, the first to be opened by the Italian luxury sports car maker. The state-run investment company, Mubadala Development Co., sponsors the Italian F1 team.

By contrast, the State of Texas’s commitment for Austin’s Formula One facility is so far limited to $250 million over 10 years, to pay sanctioning fees.

At 926,000 square feet, Ferrari World calls itself the world’s largest indoor theme park. Nearly all of it is air-conditioned — a key amenity in this coastal city-state where summer temperatures can hit 120 degrees with 60 percent humidity.

The park is subdivided by its 20 rides and attractions, many of which are located within self-contained “boxes” that can be closed off and refashioned without affecting the rest of the park. The entire park can hold up to 10,000 people at a time, a load factor operators say they can meet during Grand Prix weekend.

“We’ve had all the stress tests,” says Claus Frimand, Ferrari World’s general manager. “We’ve tested the toilets, whether the food and beverages outlets can handle the traffic. It’s working.”