Middle East Distressed Assets - Recovery Strategy

Darren Bellew
The fallout from Dubai’s real estate crash continues to have an impact upon the market. Banks and developers alike are seeking clarity on distressed assets.

Dubai’s stalled projects are now seeing some gradual movement and confidence has been boosted by several developers returning to market. But in the light of financial restructuring, the new construction approach is cautious, phased and scaled down. More attention is focused on robust preliminary feasibility studies before investment decisions are made.

Infrastructure remains a relatively strong performer, with both transport and utilities continuing albeit at a slower pace.

Infrastructure remains a relatively strong performer, with both transport and utilities continuing albeit at a slower pace. Dubai Metro is the forerunner to rail expansion in the Middle East, with passenger and freight projects being planned across the region.

Investor confidence remains low and lenders are currently very cautious. Banks and other financial institutions are grappling with their high levels of exposure to Dubai’s distressed projects. The UAE insolvency regime is for the most part untested.

Although this is changing, a multitude of different rules and procedures, with varying levels of enforcement, result in a complex picture. Creditors must grapple with issues including:

  • land ownership
  • transfer of property ownership
  • absent investors

Banks and developers alike find themselves evaluating incomplete projects and seeking clarity on the best way forward. In general, the more construction already completed, the better the outlook. Projects and individual building plans are typically being reconfigured, often resulting in fewer storeys or smaller developments in order to complete and achieve some return on investment.

Faithful+Gould offers guidance on the key technical, commercial and contractual issues surrounding distressed assets. Our Middle East operation offers project evaluation audit services and project rescue recovery strategies. These services are provided within the context of our global due diligence experience and insolvency expertise gleaned in other jurisdictions.

Where the recovery strategy leads to viable construction completion, we also offer cost management, project management and consultancy services for the continuation of developments. Distressed assets are also an opportunity for investment and our services can benefit clients who wish to explore this potential. Our global portfolio includes financial institutions, funders, distressed debt investors and developers.

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