Retail and F&B top investment choices for Bahrain’s property market

Retail and leisure are seen as the main drivers of tourism for Bahrain. (Reuters)
Updated 02 August 2017
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Retail and F&B top investment choices for Bahrain’s property market

DUBAI: Retail and food and beverage developments remain popular investment choices in Bahrain as developers take advantage of the rising tourism and leisure sectors in the Gulf country.
Bahrain has been upgrading infrastructure and creating new tourist attractions to entice more visitors, as the island states aims to raise the sector’s contribution to the aggregate non-oil economy to 7 percent this year, from 6.3 percent in 2016.
“Experiential and entertainment focused retail concepts are beginning to influence shopping center designs,” consultancy CBRE said in its latest review of Bahrain’s property market.
Bahrain early this year held Shop Bahrain, a month-long retail-and-tourism festival, which attracted 130,000 shoppers mostly from the neighboring Gulf states Saudi Arabia, Qatar, the UAE and Kuwait.
Sales reached more than 8 million Bahraini dinars (SR79.8 million) during the event.
A number of government and private projects to underpin Bahrain’s push for tourism, and festival and waterfront and neighborhood projects are opening or currently under construction, CBRE said in its report.
The 272,000-square-meter The Avenues – Bahrain’s first combined commercial and entertainment mall — is set to open in a seafront location late this year.
The mall’s design boasts of roof made of ethylene tetrafluoroethylene — a fluorine-based plastic designed to have high corrosion resistance and strength over a wide temperature range — which will give “visitors an outdoor feeling while remaining indoors.”
The Oasis, a large regional shopping center, is also opening next year.
Retail and leisure are seen as the main drivers of tourism for Bahrain and global retailers “continue to work with the local market to evolve the offering,” CBRE said.
On the government side, Bahrain is investing $1 billion to modernize the Manama international airport, which will include the construction of a new passenger terminal building to accommodate the expected rise in visitor arrivals.
Bahrain is also planning to open a second causeway — the King Hamad Causeway — to Saudi Arabia, which will include a rail link. There is also a plan to expand the existing King Fahd Causeway, where a majority of the country’s 12.3 million visitors came through last year.


UAE companies challenged by debt and rising interest rates

Updated 39 min 50 sec ago
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UAE companies challenged by debt and rising interest rates

  • Debt restructurings on the rise, but below crisis levels
  • Central Bank of the UAE has raised interest rates four times since last March

There has been an uptick in recent months in heavily-borrowed companies in the UAE seeking to restructure their debts with lenders. Although the pressure on companies is not comparable to levels witnessed in the country following the 2008 global financial crisis, rising interest rates will eventually begin to have a greater impact, say experts.
Speaking exclusively to Arab news, Matthew Wilde, a partner at consultancy PwC in Dubai, said: “We do expect that interest rate increases will gradually start to impact companies over the next 12 months, but to date the impact of hedging and the runoff of older fixed rate deals has meant the impact is fairly muted so far.”
The Central Bank of the UAE has raised interest rates four times since the start of last year, in line with action taken by the US Federal Reserve. The Fed has signalled that it will raise interest rates at least twice more before the end of the year.
Wilde added that there had been a little more pressure on company balance sheets of late, although “this shouldn’t be overplayed”.
Nevertheless, just last week, Stanford Marine Group — majority owned by a fund managed by private equity firm Abraaj Group — was reported by the New York Times to be in talks with banks to restructure a $325 million Islamic loan. The newspaper cited a Reuters report that relied on “banking sources”.
The Dubai-based oil and gas services firm, which has struggled as a result of the downturn in the hydrocarbons market since 2014, has reportedly asked banks to consider extending the maturity of its debt and restructuring repayments, after it breached certain loan covenants.
A fund managed by Abraaj owns 51 percent of Stanford Marine, with the remaining stake held by Abu Dhabi-based investment firm Waha Capital. Abraaj declined to comment.
Dubai-based theme parks operator DXB Entertainments struck a deal last month with creditors to restructure 4.2 billion dirhams (SR4.1 billion) of borrowings, with visitor numbers to attractions such as Legoland Dubai and Bollywood Parks Dubai struggling to meet visitor targets.
Earlier this month, Reuters reported that Sharjah-based Gulf General Investment Company was in talks with banks to restructure loan and credit facilities after defaulting on a payment linked to Dh2.1bn of debt at the end of last year.
Dubai International Capital, according to a Bloomberg report from December, has restructured its debt for the second time, reaching an agreement with banks to roll over a loan of about $1 billion. At the height of the emirate’s boom years, DIC amassed assets worth about $13 billion, including the owner of London’s Madame Tussauds waxworks museum, as well as stakes in Sony and Daimler. The firm was later forced to sell most of these assets and reschedule $2.5 billion of debt after the global financial crisis.
Wilde told Arab News: “We have seen an increasing number of listed companies restructuring or planning to restructure their capital recently — including using tools such as capital reductions and raising capital by using quasi equity instruments such as perpetual bonds.”
This has happened across the region and PwC expected this to accelerate a little as companies “respond to legislative pressures and become more familiar with the options available to fix their problems,” said Wilde.
He added that the trend was being driven by oil prices remaining below historical highs, soft economic conditions, and continued caution in the UAE’s banking sector.
On the debt restructuring side, Wilde said there had been a “reasonably steady flow of cases of debts being restructured”.
However, the volume of firms seeking to renegotiate debt remains small compared to the level of restructurings witnessed in the aftermath of Dubai’s debt crisis.
Several big name firms in Dubai were caught out by the onset of the global financial crisis, which saw the emirate’s booming economy and real estate market go into reverse.
State-owned conglomerate Dubai World, whose companies included real-estate firm Nakheel and ports operator DP World, stunned global markets in November 2009 when it asked creditors for a six-month standstill on its obligations. Dubai World restructured around $25 billion of debt in 2011, followed by a $15 billion restructuring deal in 2015.
“We would not expect it to become (comparable to 2008-9) so barring some form of sharp external impetus such as global political instability or a protectionist trade war,” said Wilde.
Nor did he see the introduction of VAT as particularly driving this trend, but rather as just one more factor impacting some already strained sectors (e.g. some sub sectors of retail) “which were already pressured by other macro factors.”