Bahrain's SWF to bail out stalled developments

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Bahrain's sovereign wealth fund is considering investing in some of the country's stalled property developments to help kick-start them again.

Mumtalakat CEO Mahmood Hashim Al Kooheji said the company's real estate arm, Edamah, would invest in the part-finished projects if they were commercially viable.

At least four significant developments – Bahrain Bay, Marina West, Marina Reef and the Villamar residential complex - have stalled since the onset of the financial crisis, which saw the average value of real estate in the country plummet.

Much or all of their infrastructure has been completed as well as some phases, but much of the commercial aspects such as hotels and restaurants are yet to be finished.

Al Kooheji said while Edamah would not invest in the projects out of good will, its initial assessment was that it made commercial sense to move in.

“There's a new wave of activity coming out of Edamar to really look at these projects, but when we look at these things we'll look at them commercially,” Al Kooheji said during a Euromoney conference in Manama.

“Can we do something there to add value to the investments we have, can we work with [the developers to] start these projects? Frankly, I think there's room for us to be there.

“We can't force [developers to start construction] but if we can help them, I think there's potential for us to be there.”

Al Kooheji said the partially completed projects would be more valuable once completed.

In some cases, the residential phases of the developments were not performing as strongly as intended because all of the planned services were not yet available.

“We need to really utilise them. The foundation is there, the infrastructure is there … demand is there,” he said.

“We don't want to start the project from scratch. People have [already] made a huge investment in infrastructure … If you complement the project it will be successful. We are adding value to something that already exists.”

Al Kooheji said Edamar had already signed two international agreements in relation to at least one development but he would not elaborate.

The international investor would be involved from start to finish, including design, and would possibly contribute equity, he said.

There has been speculation that international investors in the projects, including hotel chains such as Raffles and Four Seasons, were no longer interested but Al Kooheji said property investors were coming back to the kingdom.

“When we talk to international partners and they show interest in a project that makes us confident,” he said.

Al Kooheji said Edamar also was investing more than 5 million dinars in its own property projects around Bahrain.

He also commented on the country's real estate downturn, saying there were no real losses because property values had only fallen in relation to the level of growth.

“People have felt a big real estate drop – I think it was not big,” he said.

“The value for property was 150-200 percent [growth], that came down to 50 percent, which is 150 percent of the [original] value.

“Nobody ever lost anything.”

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Posted by: Red Snappa

Interesting concept, it might head off court cases at Marina West, where the investors want the Bahrain government to appoint an administrator.

I also wonder what the possibility is of that approach being taken in Dubai?

Once upon a time, stalled but viable property projects were supposedly being taken into the Tayseer programme, a form of Government support as in a guaranteed to be delivered, a RERA promoted initiative, I recall. However, I've not heard any news on that subject for quite a long time on that subject? Is it still active?

Posted by: Bahraini Banker

As a Bahraini I am continually disappointed by the direction which the sovereign wealth fund is taking. Let us for once step away from the Arabic tradition of implying the meaning through our words and speak plainly. Mumtalakat should not be investing its funds in non-commercially viable projects. Now if Mahmoud is able to stick to his words (and I do say able as he is only the CEO and lets be honest decisions come from higher up) then his stated plan is both good for the company and Bahrain. I however fear, and am justified taking into account Mumtalakat?s dismal performance since inception, that this will just be another black hole where funds will flow from the debt of the nation into the pockets of the few. Sad to say that I have too often witnessed (ALBA, Gulf Air to name a few) situations where fraud, nepotism, and general bad management are never acknowledged and the people involved never held accountable. But then again should I be disappointed or shocked considering the state.

Posted by: leo50

disappointed, I would suggest.

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