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Sat 14 Feb 2009 04:00 AM

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Arab, French business ties deepen

Arab-Franco relations appear to be intensifying as more Arabic investors scour Paris for summer retreats and French companies win contracts on some of the Middle East's most prestigious projects.

Arab-Franco relations appear to be intensifying as more Arabic investors scour Paris for summer retreats and French companies win contracts on some of the Middle East's most prestigious projects.

With nearly 80 million visitors a year, France is the number one attraction for global tourists. On average, approximately 500,000 Arabs from the Middle East visit the country each year.

In recent times more and more Arabs are opting to buy their own piece of French property, with Paris proving popular as a summer retreat.

"The Avenue Foch area of Paris is possibly the area that has generated the most interest and in the South of France Cannes has proved popular. Most clients like a degree of privacy with access to good restaurants and shops," says David King of Winkworth France, a British-based real estate agency.

"As the Dollar continues to strengthen against the Euro more Middle Eastern buyers are showing interest in Europe," says James Geddes, Head of Property Vision in the Middle East.

"In Paris, top-end properties are between 40-50% cheaper than London, and buyers from the Middle East are attracted by the large size and grand style of the properties," adds Geedes.

A lot of France's ex-colonies are in the Middle East and therefore historically there was always a lot of Syrian and Lebanese buyers in Paris, says Nigel Hindle, Director of Property Vision France, however the recent favourable currency changes has seen more interest among Gulf-based investors.

So what are Arab investors looking for in Paris? Property Vision, a subsidiary of HSBC, reports that Arab buyers generally opt for large apartments ranging in size from 250 to 500 sq m, priced from US$5-13 million.

France has a wealth tax but Hindle reports that this is not an obstacle for Arab investors as they can get around this by moving their money around European banks.

Wealth tax

This is done by lodging cash with a bank in London or Switzerland and borrowing money from a French bank. The difference between the interest earned and paid is often less than the wealth tax they would have to pay initially.

However, while the French market may be cheaper and more stable than other European markets it does not, however, offer the level of growth that Arabs are accustomed to at home.

"The French market across the board has definitely slowed down and we expect that in 2008 it will end up with flat or modest growth of 0-2%," says John Crawley of the Oui Can Do real estate agency.

Crawley reports that French builders have begun to cut back and the top five builders have reduced construction by about 20-25% in response to current conditions. Parisproperty market

While the general French market is stagnant Crawley says that the Parisian market is still performing well. He predicts that growth in Paris will be about 5-6% and as high as 9% in some of the upmarket areas where it is still a sellers' market.

In the Côte d'Azur, Crawley says it is possible to get bargains as a lot of Russian and Italian investors are exiting the market and prices being obtained are about 30% below what was possible a year ago.

While Arab buyers did buy property in Cannes and the Côte d'Azur in the 1980s, Hindle reports they are currently more likely to focus solely on Paris.

As 55% of French people rent rather than buy the rental market is still buoyant and Crawley reports that yields are still strong at about 4-5%, should Arab buyers wish to rent out their luxury hideaway.

In late 2008, the French Government introduced plans to reignite its property industry, consisting of interest-free loans for energy- efficient homes and Crawley believes that Sarkozy's plans have been well received.

The French property market is in much better shape to weather the current storm, says Crawley, as French banks have not been as highly leveraged and prices did not go up and down as dramatically as in the UK.

Not all Arab buyers in France have had a smooth path to Paris, as Qatar's Sheikh Hamad bin Khalifa Al-Thani has found.

In 2007, Sheikh Hamad bought a 17th-century mansion on an exclusive island on the River Seine for approximately US$112 million. The Sheikh plans to add an underground car park, elevators and additional rooms.

However, Paris' Mayor Bertrand Delanoe recently wrote to the French Culture Minister objecting to the Sheikh's plans, claiming they were "a real threat" to the city's heritage.

While Mayor Delanoe may have potentially soured Arab-Franco relations in the short term the two countries have enjoyed a healthy relationship in recent years.

Some of France's largest and most respected design, construction and architectural firms have been active across the Middle East.

The French Trade Commission reports that UAE-France bilateral trade is currently valued in excess of US$6 billion, with 80% made up of imports from France.

Louvre Abu Dhabi

At the INDEX 2008 exhibition in Dubai the number of French companies exhibiting soared by 70%, with 90 companies making the trip, compared to 53 in 2007 and 43 in 2006.

The majority of exports are furniture, fittings and interior design products and services and this perhaps indicates that Middle East homeowners are big fans of French style and fashion.

France and the UAE's relationship also garnered worldwide recognition with the announcement that Abu Dhabi's Saadiyat Island mega project would include the Louvre Abu Dhabi, the first Louvre museum outside Paris.Due for completion in 2012, the historic agreement allows the Abu Dhabi museum to adopt the Louvre name, to borrow works of art and to stage special exhibitions.

As part of the deal Abu Dhabi will finance the refurbishment of a wing Paris' Pavillon de Flore. Abu Dhabi will also finance the restoration of the Château de Fontaine bleau's theatre, which will be named after Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE and ruler of Abu Dhabi.

Theming

The museum's renowned French architect Jean Nouvel was the recipient of the 2008 Pritzker Architecture Prize Laureate and in October last year Daniel Dutoit was honoured with First Prize in France's National Engineering Awards for his design and management of the Dubai metro project.

"The Middle East is a key area for the Haulotte Group. We have been working in this region for some time now and hope that a higher level of safety requirements will apply to Middle Eastern countries in the near future," says Arthur Danelian, Manager of Haulotte Middle East FZE.

The French company, one of Europe's largest suppliers of people and material lifting equipment, announced it was expanding its presence in the Middle East with new offices in Libya in 2009 and Algeria in 2010.

Haulotte Middle East FZE currently delivers approximately 1,000 machines to the Middle East each year. At The Big 5 2008 exhibition in Dubai, the company launched a new telescopic big boom - a lifting device which has the capacity to rapidly lift up to 350 kgs.

France is a global force on the design and architectural stage and one of the niche markets it has carved out in the Middle East has been in the area commonly known as "theming."

French Leisure Group [FLG], which has an office in Dubai, is made up of a number of French architectural and design companies which specialise in this unique service.

Paris-based architect Clément Mansion points out that while FLG has only been working in the Middle East for three years those behind the company have nearly 30 years experience and cut their trade working on large internationally renowned projects such as Disneyland Paris.

Prestigious projects FLG has been involved with include Wild Wadi, the Burj Dubai Mall, Arabian Dreams and the Entertainment and Education Theme Centre. Mansion reports that they have also been involved in a competition for a tower for Damac and has worked on some projects in Bahrain.

Language barrier Mansion also claims the pace of projects moves much faster in the Middle East than in France - the company has projects booked until 2010 although Mansion observes that Dubai is a tough market for French companies to break into. He says this is because the Dubai market is very much controlled by English and American companies.

While English-speaking superpowers are the main players in the Middle East, France is making credible steps into the region. The attraction appears mutual as Arab buyers look for summer retreats, just as long as they don't raise the ire of the Mayor of Paris!

Arab contracts won by French Companies• The French Trade Commission reports that more and more French companies are being awarded design and build contracts in the Middle East and French companies have been involved in a roll call of some of the Gulf's biggest and most high-profile projects.

• Bouygues, one of France's biggest construction companies, is currently working on the US$276 million new Ritz-Carlton Hotel in Dubai for Union Properties. Located at the Dubai International Financial Centre, the hotel will have 341 guest rooms and 124 serviced and managed apartments.

• Scheduled to open in June, the highlight of the 14-storey building will be a 10-storey waterfall tumbling down the building directly into a courtyard.

• Bouygues was also awarded the design and build contract for Union Properties' Dubai Formula One Theme Park. Elsewhere in the Middle East, Bouygues worked on the upgrading of Lebanon's power grid in 1995, the redevelopment of the Beirut Seafront in 2000 and currently it is building the Equestrian Club in Saudi Arabia.

• VSL, a subsidiary of Bouygues which specialises in the development of post-tensioning systems, was involved in the construction of the Dubai Mall.

• In 2001, Vinci Construction was involved in the design and build contract of the Abu Dhabi Mall.

• Soletanche Bachy, who is based in France but work in over 100 countries worldwide, has been awarded a US$272 million contract by Abu Dhabi's Aldar for the embankment work on the Al Raha Beach project.

• In October 2008, Soletanche Bachy also began preliminary work on the Nakheel Tall Tower, which when complete in January 2010 will be the world's tallest building.

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