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by This email address is being protected from spam bots, you need Javascript enabled to view it on Sunday, 05 October 2008
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Legal disputes between company owners and negative financial ratings has done nothing to boost investor confidence in The Blue City. Despite difficult times, CEO Richard Russell says Oman’s most ambitious development will be implemented and delivered on time.
It can't be easy to paint a positive picture about a project that has seen its fair share of negative press but the new CEO of Blue City Company One, hired just three months ago to deliver the first phase of a US$20 billion city development, says he doesn't fear a thing.
"I would like to see the vision implemented and delivered. Do I fear that this won't happen? No, not really. We're not going into this with our knees shaking because it can't be done. There are always challenges but it isn't something we're afraid of," stresses Richard Russell, CEO of Blue City Company One.
Located 45 minutes from the capital city of Muscat, The Blue City, (Al Madina A'Zarqa in Arabic,) will total around 32 sq k and will be situated along the coast of Al Sawadi adjacent to the Gulf of Oman. The project, a vision set forward by His Majesty Sultan Qaboos Bin Said in his 2020 plan aims to diversify the country's economy.
The future
Around 12 phases of development are expected to take place over a time span of at least 20 years with investment emphasis targeting six economies - hospitality, healthcare, education, sport, entertainment and commercial trade.
"If you look at the demographics, 65-70% are under the age of 20 which means you've got this resource that you need to provide opportunities for and that's the impetus behind this 2020 plan. This is diversified development for the country," says Russell.
Blue City Company One, a sub-developer, float under government-backed holding firm Al Sawadi Tourism and Investment Company (ASIT) - the master developer.
Around 15 institutions, mainly big banks, have invested in Blue City through the purchase of bonds administered by the Bank of New York. These bonds, like equities, are traded on the Irish Stock Exchange.
The bond issue thus far totals around US$925 million which is being spent on construction. The sale of residential units is used to supplement this money.
In August of this year the project came under fire following a Fitch agency rating that warned of financial weaknesses due to stalled revenue targets. Reports suggested this was due to a redesign of the master plan. Legal problems also ensued over the ownership of the parent company. Russell claims the Fitch rating is a misunderstanding.
"The rating from Fitch is a bit misleading. The financing for phase one is already done. The rating said there was a disconnect on how we're collecting some revenues but what happened is the revenue collection was late and that's why they put the negative rating on but the actual number of units sold was above projection," he says.
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