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Dubai debt crisis could lead to fire sale of London properties
Nick Goodway and Jonathan Prynn27.11.09
Shares slumped in the City for the second day running as the scale of the Dubai financial crisis became clear.
In early trading the FTSE-100 Index was down 54 points, or just over one per cent, to 5140, as fears grew that Dubai's debts could usher in a second phase of the economic downturn.
It means that more than £60 billion has been wiped off the value of London shares in just over 24 hours.
The sell-off was triggered by an announcement by a Dubai state corporation that it could not pay its debts.
It has raised fears that Dubai investors could be forced into a fire sale of assets to raise funds, including some of London's most prestigious properties.
Some of the capital's most prestigious properties could be sold off in the wake of the financial crisis in Dubai, which wiped £44billion off London share prices yesterday.
Several could be put on sale if Dubai is forced to raise cash quickly to service its huge debts.
The properties include the Adelphi on the Strand and the Grand Buildings in Trafalgar Square, both owned by the giant conglomerate Dubai World's investment arm, Istithmar.
Last month Istithmar sold two properties on Regent Street and another in Oxford Street to London group Great Portland Estates at what agents described as knockdown prices.
Dubai investors paid £155 million for One Trafalgar Square four years ago and, despite a recent upturn in the market, it would be lucky if it managed to make that much through an emergency sale today. Istithmar's list of investments is valued at more than £2 billion.
They include a 20 per cent stake in Cirque du Soleil, the Canadian circus troupe which recently established a permanent basis in the emirate.
Another investment arm, Dubai Investment Capital, has a 17 per cent stake in Merlin Entertainments, which owns Alton Towers, Madame Tussauds and the London Eye, which is being lined up for a £2 billion stock market flotation later this year.
It also owns the budget hotel chain, Travelodge.
Last year Dubai investors bought the renowned Scottish golf course Turnberry for a reported £55million.
Other sporting interests include the Chris Evert tennis clubs in the United States, a ski resort in Aspen, Colorado, and major horse racing and stud stables including large parts of Newbury.
Dubai investors also bought the QE2 cruise liner for £50 million to turn it into a floating hotel to be moored off the Palm Islands development in the emirate.
The ship is currently moored in Cape Town, where it will be used for fans travelling to next year's football World Cup in South Africa.
DP World owns container operations at Tilbury and Southampton docks after its £3.9 billion takeover of British shipping giant P&O three years ago and is also building the London Gateway project, which will create one of the largest shipping, freight and logistics operations in Europe.
Through DP World, Dubai also owns a stake in Elizabeth House next to Waterloo station and has interests in properties in Fulham, Brook Street, Petty France and the Nag's Head shopping centre in Islington.
It is building the Aviator business park near Heathrow and the so-called Regent Quarter backing on to King's Cross Station.
Dubai holds sizeable stakes in several major London-listed companies, including a 21 per cent stake in the London Stock Exchange and a large holding in Standard Chartered Bank.
Reader views (15)
Life goes on in Dubai. The problem of the real estate is no different than elsewhere in the world. Dubai World I believe is a quoted stock so why are people equating Dubai World as the Emirate of Dubai. There is more to the Emirate than that.
When Cemex called a very similar shot earlier this year or in late 2008 I dont recall the media saying that Mexico was 'bust'. Everyone seemed to think it was a sensible honest approach to a huge problem.
By the way the restaurants and hotels in Dubai are pretty busy today, the city is still buzzing, the metro is still running, Sheik Zayed Road is still very very busy, the sun is still shining. Yes it might be a bit tougher tomorrow than yesterday but so what. Dubais problems appear miniscule to those of the UK if you believe all that you read or hear in the media.
Come on give the place a break. What have the UK media got against Dubai.
- Pedro, Dubai UAE
So now local authorities will be able to take temporarily (without compensation) the unoccupied properties through current legislation, from the owners and convert the offices into even more homes that they can charge council tax against to feed their bloated pensions.
Of course as most offices are open plan they may not be suitable for some, but perhaps others who are prepared to accept open plan and prepared to work for minimum wage could be moved into good quality centrally based housing stock.
In the meantime, the councils can take advantage of low housing demand by employing builders on benefits and training under 18 on benefits in building trades through a comprehensive housing reconstruction programme - NOT!
- James, City of London
The utter failure and stupidity of globalisation.
- Margy, London
Make no mistake people , we are in a DEPRESSION not a recession.
Britain CANNOT manufacture it's way out of the depression as we have NO manufacturing base to speak of (plenty of fast food joints , cheap clothing stores, but NO engineering industry ,NO car industry ,NO electronics industry ,NO steel industry ,NO textiles Industry ).
I could site plenty of other examples but it would make this post so bloody long .
I agree that people should stock up on essentials as britain is showing a tendency towards a weimar republic, and stirling at the moment is worthless(artificially propped up with loans).
Enjoy this christams as next year will shock people.
JUST REMEMBER YOU CAN'T EAT GOLD.
god bless you all .
MR ( I HAVE SEEN THE FUTURE) PASTRY
- Mr Pastry, london
Well said - Jonathan Charles, London!!!
- Mark, Walworth
I just saw Gordon Brown disappearing into a phone box with his cape flying. Expect him to announce that he is going to save the world again.
Welcome to your double dip recession. How much is this one going to cost the UK taxpayer?
- Nobby Clark, Perth, the Scottish one
Hmm ... building sand castles on a beach until the tide comes in. Ooops!
I see the price of oil going up again.
- Frank, Home Counties, England.
Storm in a tea cup, lots of demand for commercial property in London from euro land so $2bn of London property prime sites will likely move fast. Job done, makes zero difference who owns it, its still in London! The real hit will be to the greedy banks who piled stupid amounts of money into what was clearly a gigantic folly in the desert. The world's tallest building symbolises that ego driven development. One look at it tells you it is virtually useless as office space. The cost of elevators and cooling will make running costs very high. Pointless waste. Only good news is oil price drop. Typical sell on rumour market reaction, buying opportunity methinks, only two stocks really hit, HSBC, StanChart.
- James Macleod Ritchie, Oyster Bay Cove
Jonathan Charles how right you are
- Lindona, italy
"It means that more than £60 billion has been wiped off the value of London shares in just over 24 hours."
But when the stock market goes up by a similar amount, you don't report "£60 billion pounds were magicked out of nowhere" do you?
- Roy, England
Amazing no-one questioned this enormously speculative development of artificial islands. Risky at any time?
- Novparl, Croydon
Sound like there could be plenty of bargains to have in the coming weeks. Good for investors which escape or made money out of the previous banking crisis. I am sure there will be many willing buyers for those assets, most of which have been bought by dubai just to obtain expertise in building Dubai own facilities either currently under construction now or were in the planning stages.
It going to be interesting to see who are going to be the buyers if those assets are put up for sale.
- David Knowles, Chigwell
is it true that over £450 Million pound is owed to British construction companies? The UK is in a bad way, will we ever bounce back? we are not proud enough of our country to care what happens now!!
- Jane, London
Amusing that while these Arabs moralise and jail people for defaulting on personal debt, they now choose to do the same with what is effectively their own sovereign debt. It couldn't happen to a nicer bunch of spoilt slave-drivers. Oh schadenfreude!
- Jonathan Charles, London
Probably good news for the London property market as everyone is complaining of a lack of stock. Probably no need for fire sale prices. Of course from Dubai's point of view price will be a lot lower for them because of the depreciation in value in the £ during their period of ownership.
- Stephen C, London
