TDIC, Leighton abandon $1.4bn JV plan

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JV ABANDONED: TDIC and Leighton have decided not to progress with a joint venture amid the global slowdown. (Getty Images)

Abu Dhabi’s Tourism Development and Investment Company (TDIC) and Leighton, the largest construction company in Australia, have abandoned a $1.4bn joint venture following the economic slowdown.

TDIC agreed to form a joint venture company with Leighton in December in 2007 but said on Wednesday that the changing economic climate now makes it more cost efficient to work with different contractors.

“TDIC and Leighton will continue to work together on various projects. Leighton will also be invited to tender for all future TDIC contracts,” the Abu Dhabi agency said in a statement.

TDIC would have held 51 percent in the venture, which was expected to generate annual revenue of $270m in the first year, to a minimum of $1.4 billion in the fifth.

Since then the UAE’s real estate and tourism sectors have been badly hit by the international recession.

TDIC said all of its announced projects, including residential, leisure and cultural projects on Saadiyat Island, are progressing as scheduled.

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READERS' COMMENTS

Due Diligence
Posted by jack, London, England on Sunday 21 June 2009 at 21:42 UAE time


Geraint has a point, having joined the 'failed' JV from a global multi-disciplined consultancy who, through due diligence of this particular Client, politely declined the offer to enter into a partnership, I can foresee future hesitation of similar relationships by 'quality' consultancies and contractors in light of the debt now effected on these ventures.

As awesome and inspiring many of these projects have been, the effort, cost and risk to achieve them has been hugely under estimated by key decision makers who have not experienced similar historical events such as Asia '98/99, whose exuberance and 'dollar' influenced blindness overrode the 'caution' expressed by those who where there.

Fairweather friendships
Posted by Geriant, Dubai, UAE on Sunday 21 June 2009 at 14:24 UAE time


Jack has a point here, that money can be saved by bringing the nitty gritty in-house, but that is a bad precedent for a country dependent on foreign expertise even now. If and when the economy turns, these same fairweather friends will have the dosh to bring in the "consultants" and foreign experts again. Who will be interested when they see how quick the sheen wears off the partnership and how one-sided the deals really are? The leadership should be look at long-term reputation, not just saving a buck in the short term.

JV Failures Litter UAE
Posted by Jack, London, England on Sunday 21 June 2009 at 12:51 UAE time


The whole point of a JV in this industry is to minimise the cost of the design and build process and maximise client profit.

I was in a JV consulting operation with a semi government client that was wound up earlier this year, the failure was not the relationship, though it was 'strained' at times, but a significant lack of funds to cover project costs, with some consultants and contractors not being paid for over a year at the time of close out.

TDIC has always operated as a high level client manager and steared cleared of getting into the 'nitty gritty' of project management. However, the knock that the UAE has taken with regard to investor confidence in mega projects such as Saadiyat Island, costs can be reduced considerably and control increased by bringing the 'nitty gritty' inhouse. No doubt this is an action to show investors they are on top of their game and Saadiyat is an impressive development with great components, but is the project now too much for the current market conditions...I would say it is...

Honeymoon flow wears off at Saadiyat
Posted by Geriant, Dubai, UAE on Thursday 18 June 2009 at 08:47 UAE time


For Leighton to up stakes on this one indicates all is not well on the happy isle of Saadiyat. There is too much happening too quickly for too few and the numbers simply don't stack up when TDIC claims it will be a tourism magnet. Leighton isn't going home because it wants to, that is for sure, because it relies almost exclusively on these deals to survive as the market back home is dormant.

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