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Sun 19 Jun 2005 04:00 AM

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Emaar suspended from Saudi Arabia after court dispute

MOHAMMAD Alabbar’s plans to invest US$3 billion in the Saudi property market are in tatters, after a court in Riyadh effectively barred Emaar from carrying out further work in the kingdom.

MOHAMMAD Alabbar’s plans to invest US$3 billion in the Saudi property market are in tatters, after a court in Riyadh effectively barred Emaar from carrying out further work in the kingdom.

Less than seven months ago, Emaar chairman Alabbar announced the creation of Emaar Middle East, formed in partnership with the locally based Al Oula Group. The new joint venture had claimed it would be behind over US$3 billion of real estate work in Saudi Arabia.

However, it has since emerged that Emaar also entered into a separate joint venture agreement with the Saudi Al Jaber family to form Emaar Saudi Arabia, taking an 80% stake invvvv the company. The family is understood to be furious that Emaar has set up a competing company within the kingdom, and last week instructed their lawyer Abdel Aziz Al Qasir to bring a lawsuit against Emaar Properties.

The lawsuit, ratified by Saudi courts, claims that Emaar Properties not only failed to fulfil its contractual obligations, but that it also entered into an agreement with a competitor. Emaar Properties is now forbidden from entering into any real estate joint ventures or establishing any new companies within the kingdom.

Al Jaber is believed to be demanding US$800 million in order to relinquish his 20% stake in Emaar Saudi Arabia. Qasir maintained that Emaar Saudi Arabia attempted to solve the dispute with Emaar Properties (UAE) in an amicable manner, but that the other party was unreceptive. He added that the partnership was viable and functioning.

In a statement on the Dubai Financial Market, Emaar confirmed that a “dispute has arisen with a Saudi-based company which involves a conditional agreement entered into by Emaar to conduct business in the kingdom. Emaar enters into such agreements from time to time with various investors, which does not create any obligations on either party unless the conditions are fully met.

“Emaar further reassures that the dispute with the Saudi company does not go beyond the ambit of the conditional agreement and as such will have no effect on Emaar’s local or international expansion plans, including those in Saudi Arabia,” the statement added.

Nevertheless, the news comes as a massive blow to Emaar International Development, a global arm of Emaar Properties. It is currently working on joint venture projects in Egypt, Jordan, Morocco, Pakistan and other Gulf Cooperation Council (GCC) countries.

The international division of Emaar Properties has also signed a deal with the Andhra Pradesh state government to set up commercial, residential and leisure facilities, and a high tech convention centre in the south Indian city of Hyderabad.

Last year, in line with its expansion strategy, Emaar established a joint venture with Al Oula Real Estate to set up Emaar Middle East to develop strategic projects throughout Saudi Arabia and across the AGCC region. Investment was initially targeted for two real estate projects in Dammam and Khobar, Saudi Arabia.

The new real estate development company was to be headquartered in Dubai with Emaar taking a 61% stake in the venture. Both projects, which include residential and commercial properties, were immediately incorporated after the signing of an agreement between the two companies in November last year.

The venture, which is presently gearing up for work eastern part of the kingdom, was later due to expand into other areas, as well the rest of the AGCC countries, excluding Dubai.

Alabbar himself was travelling and not contactable at the time of going to press. However, an Emaar executive who asked not to be named, explained: “There is a bit of confusion – it looks as though we cannot continue to work in Saudi until this dispute is settled, which is obviously a huge blow given the work we have been planning there."

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