Emaar-owned company declares bankruptcy

Via nzm we learn that the American-based home builder John Laing Homes, acquired in 2006 by Dubai-based Emaar, has filed for Chapter 11 bankruptcy protection. The report comes from Los Angeles Business.

The National also has a report:

Emaar’s purchase of John Laing in June 2006 was the cornerstone of its effort to expand into the US housing market. But Emaar, the Middle East’s largest developer, made the foray as the US housing market peaked.

Still on the John Laing website is the 2006 press release announcing Emaar's purchase of the home builder:

[CEO of John Laing, Larry Webb said]: "The combination of Emaar and John Laing Homes will provide us with additional financial and professional resources to expand beyond our traditional markets of California and Colorado. It's a strategy that Emaar has used successfully in driving growth in their regional real estate markets throughout the world, and we're looking forward to being a part of Emaar's vision for the future of global real estate development."

Upon closing, John Laing Homes will be operated as a division of Emaar. John Laing Homes' corporate headquarters will remain in Newport Beach, CA, and continue to be managed by Larry Webb, who, along with the senior management team, have agreed to multiyear contracts.

On April 17, 2006, Emaar filed voluntarily with the Committee on Foreign Investment in the United States (CFIUS), which has approved the transaction.

Dubai-based Gulf News last covered John Laing Homes on February 13th. The Gulf News story on the bankruptcy is here.

In the UAE, you can "be prevented from leaving the country or may even be imprisoned until [your] debt is repaid."

Dubai property prices continue fall

Gulf News

Property prices in Dubai could fall about 20 per cent on average, the chairman of the emirate's largest developer, Emaar Properties, said in remarks published on on Monday. He did not give a timeframe.
...
Asked about views that real estate prices could fall as much as 60 per cent, Al Abbar told Al Khaleej newspaper: "In my opinion a decline of 60 per cent is illogical. There will be a variation in the percentage of decline based on the location and level of units."
...
Property prices in the emirate fell 23 per cent in the last quarter of 2008, HSBC said last week.

The National(Jan. 21): HSBC report confirms Dubai property decline

UAE slowdown, downgrade

1. Agencies downgrade Gulf institutions (Financial Times)

Rating agencies have downgraded either the credit ratings or the outlooks for more than two dozen Gulf banks and companies, including a number of Dubai government-related entities, in a further sign of the region being impacted by the global financial crisis.

Fitch Ratings downgraded the individual ratings of Dubai Holding Commercial Operations Group, the real estate, leisure and telecommunications wing of a conglomerate owned by Dubai’s ruler, and Dubai Electricity and Water Authority (DEWA) from AA- to A+. The move was due “to the worsened economic outlook for Dubai and the likely pressure this will put on Dubai’s public finances,” the agency said.
...
Standard and Poor’s, meanwhile, revised its outlook on seven of Dubai’s government linked entities from stable to negative, including Emaar Properties, one of the emirate’s main developers, DP World Ltd, DIFC Investments, the investment arm of Dubai’s international financial centre, and Dubai Holding Commercials Operations Group.

S&P, however, reaffirmed the companies’ credit ratings.

2. Abu Dhabi braces for slowdown (Financial Times)

If oil prices average about $55 a barrel next year – some analysts predict a lower level – the United Arab Emirates’ crude oil revenues are expected to fall from between $90bn and $100bn estimated for this year to $48.8bn in 2009, according to research by National Bank of Abu Dhabi. That compares with $71.2bn in 2007, and with Abu Dhabi controlling some 95 per cent of the UAE’s oil reserves its main revenue stream looks set to be hit hard.

The upshot, bankers and businessmen say, is likely to be a slowdown and delay for some projects, and the government will have to consider intervening to help finance developments. At the same time, pressure is likely to build on the private sector, particularly real estate and construction-related companies, which will be affected by the slowdown and could also be crowded out as state-backed projects and entities suck up what credit is available.

3. Job losses in real estate continue in Dubai (Gulf News)

4. Oil falls below $40 despite Opec output cut (The National)

Citi loans Dubai $8B

Wow:

Citigroup Incorporated has arranged more than $8 billion (Dh29.3 billion) finance for various Dubai government entities in recent months, the global banking group said.

"This is in line with our commitment to the UAE market in general, and reflects our positive outlook on Dubai in particular," said Citi's chairman, Sir Win Bischoff in a statement.
...
Citi's renewed commitment comes amidst speculation on Dubai's sovereign debt obligations.

Late last month Mohammad Al Abbar, chairman of the Advisory Council of Dubai's government and chairman of Emaar Properties, stressed that the government was capable of meeting all its obligations.

According to the council's estimates, the government's sovereign debt stood at $10 billion, while its assets, excluding key infrastructure installations were more than $90 billion.

The total debt of government-affiliated companies is estimated at $70 billion, while assets are valued at $260 billion.

That's how Gulf News puts it.

The National says,

A source familiar with the deals said Citi was involved in securing financing for various Dubai companies, including parts of Dubai Holding, owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai. Citi has arranged to provide part of the $8bn directly, and has secured the rest from other lenders on behalf of various Dubai government-related entities, according to the source.
...
Among the companies facing the need for financing in the coming year is the Dubai Electricity and Water Authority (DEWA), which has Dh8.08bn of debt maturing in April. “Given current market conditions and considering that the authority does not have committed facilities for liquidity backup, Moody’s notes that the authority faces significant refinancing risk,” wrote Philip Lotter, a sovereign debt analyst at Moody’s, in a report last month.

In the past month, the credit shortage has led some Dubai companies to look for financing at higher rates than previously planned.

Interesting that Abu Dhabi has a substantial ownership stake in Citigroup. It's not stated, but perhaps Abu Dhabi has made a clear signal to Citi that it guarantees the loan.

Here's an irony from March 4, 2008:

Mideast sovereign wealth funds may fail to save troubled U.S. banking giant Citigroup Inc. unless more cash is pumped into the lender, the head of a $13 billion Dubai-owned investment firm said Tuesday.

Sameer Al Ansari, Chief Executive of Dubai International Capital told delegates at a private equity conference that it will take more than the combined efforts of the Abu Dhabi Investment Authority, the Kuwait Investment Authority and Saudi investor Prince Alwaleed bin Talal to save the bank.

Better late than never

I'm a little slow getting up a link to this article on Dubai from The Economist dated November 27. Some choice lines:

A few months ago, rich foreigners who had bought villas in Dubai were complaining about the quality of the sand on their artificial beaches or the difficulty of getting water to circulate around the twiddly fronds of the man-made island shaped like a palm.
...
While the stunning opacity of government economic data is increasing the air of uncertainty, Muhammad Alabbar, who heads Emaar, a giant state-controlled property developer, took the rare step of telling people how indebted the country is. Together, the government and state-owned enterprises owe $80 billion—148% of GDP. Dubai still has a far larger stock of assets, at least some of which are likely to be sold, to cover the debts, to Abu Dhabi or the federal sovereign-wealth fund of the seven-state United Arab Emirates, of which Dubai and Abu Dhabi are the two richest.
...
Since everyone else has been trying to copy Dubai, it is unclear how economic policy should be reshaped if the model has to be rescued.

For the reader looking for a good summary of recent development this article is a good one.

Just one small correction: I wouldn't call the "federal" sovereign wealth funds "federal." They are very much Abu Dhabis in name and in practice.

The National: Burj Dubai rents drop 50%

Residential prices for Emaar Properties’s signature Downtown Burj Dubai development have fallen by at least 22 per cent, with reductions of up to 50 per cent within the Burj Dubai tower itself, according to property brokers.

Some high-end developments in Abu Dhabi are also recording significant price declines in the secondary market, where properties change hands after being sold by the developer.

The price corrections underscore how the credit crunch and prospects of a global recession are affecting the property market, particularly high-end developments.
According to statistics from the international estate agents Hamptons, which is owned by Emaar, prices in the Downtown Burj Dubai area rose 88 per cent in the year to September. Other brokers said some prices more than doubled.

Read it all.

More:

Hotel room rates in Dubai are beginning to dip as the economic crisis bites into spending in the leisure and business sectors, industry insiders say.

Four- and five-star properties in the emirate have cut room rates between 10 per cent and 30 per cent, Aloke Dey, the manager of Sharaf Travel Holidays, one of the largest Dubai-based tour operators, said yesterday. “Right now, we are finding that there is a lot of availability and hotel prices are so much lower than last year.”
...
Avtar Singh, the director of operations at Lama Tours, also based in Dubai, ... said many Dubai hotels had removed their surcharges.

“This is basically an extra fee that hotels charge guests for air conditioning, Wi-Fi and other room facilities and it’s a hidden charge that many guests don’t know about,” said Mr Singh. “But once you remove it, the room rate drops by about 10 per cent, which is what is happening now.”

A hidden surcharge for air conditioning? That's low.

The National is "owned by Mubadala Development Company of Abu Dhabi, an investment and venture capital arm of the government which is led by the crown prince, Mohammed bin Zayed al-Nahyan."

For news on Dubai, I suggest reading The National.

Dubai house prices fall 19% in October

In one month. ONE month.

Wall Street Journal:

DUBAI -- This city's six-year property boom appears finally to be over, with asking prices for some homes here falling as much as 19% in October from the previous month, according to a closely followed survey.
...
Analysts at HSBC Holdings PLC said Wednesday that average asking prices for homes in Dubai fell 4% in October from September. Advertised prices for upscale Dubai "villas"--typically stand-alone homes in a master development--fell by 19% month-on-month, the bank found. In next-door emirate Abu Dhabi, average home prices fell 5%. (See full HSBC report.)

The report included only prices for the so-called secondary market. That includes second-hand homes. But it also includes unfinished property that investors bought from developers in the hope of selling again quickly for a profit.
...
Shares in Emaar Properties PJSC, a partly government-owned developer that is building the world's tallest skyscraper here, finished down almost 79% from its 52-week high in January.

The government and developers have scrambled to reassure investors. On Wednesday, Emaar said in a statement it would relax payment plans for customers in a bid to attract new buyers. Emaar's chairman, who is also part of the Dubai government, said earlier this week the emirate had established a committee to study ways to bolster confidence in the market.

Lloyds cuts back on UAE mortgages

Bloomberg:

Lloyds TSB Group Plc, the London-based bank that entered the U.A.E. market in 1977, stopped offering mortgage loans for apartments in Dubai and reduced the amount it will lend to 50 percent of the price of a villa from 80 percent, it said in a statement today. HSBC Holdings Plc, Europe's largest bank, will require customers in the emirate to earn at least 20,000 dirhams ($5,445) to get a personal loan, HSBC spokeswoman Andrea Jaishankar said in an interview.

The lending restrictions come after house prices in Dubai quadrupled in the last five years, fueling concerns that a slump is imminent. The government said this week it has set up a committee to restore confidence in the real estate market.

Emaar Properties PJSC, the Middle East's biggest publicly traded developer, dropped to the lowest in four years, and the Dubai Financial Market General Index fell 7.3 percent today.
...
Abu Dhabi won't allow Dubai's state- owned companies default on debt payments as the global banking crisis limits their access to funds, Abu Dhabi Commercial Bank Chief Executive Officer Eirvin Knox said.

``Dubai and Abu Dhabi are interdependent and one can't be isolated from the other,'' said Knox, who presides over Abu Dhabi's second-largest lender by assets.
...
``The leadership of Abu Dhabi recognize the federation and believe in it, and that involves all of the emirates,'' Knox said.

Default Swaps

The cost of protecting against a default by Dubai Holding Commercial Operations Group LLC, the emirate ruler's investment company, increased more than fivefold between July and October, according to traders in credit default swaps. The five-year contracts were priced at 900 basis points today, soaring from 241 in July, according to CMA Datavision.

Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase indicates a deterioration in the perception of credit quality.

Dubai Holding's 6 percent bond due in 2017 has declined 28 percent since Oct. 1, raising the yield to 14.1 percent.

``Dubai's spreads are far greater than risk assessment warrants,'' said Knox. ``I don't think there's going to be a default among a Dubai government entity.''

Dubai to create central management system for its government and state-owned entities

Khaleej Times:

Dubai is comfortable with payments due on its debt for the next couple of years because the value of its assets far outstrips obligations, Mohammed Alabbar, Member of the Dubai Executive Council and Chairman of Emaar Properties told the closing session of the World Economic Forum’s first-ever Global Agenda Summit on Sunday.

Alabbar, who was also the co-chairman of the summit held in Dubai, said the emirate was planning to create a central debt management system for the government and state-owned entities to manage the debt.

“The Government of Dubai is fully covered to service its debt for the next seven quarters,” he said.
...
“For several analysts, the Dubai Inc. story is tied in to its real estate sector. They miss the mountain for the hill. True, the real estate and construction sectors are key growth drivers. But let us not forget the big picture. The Dubai economy is driven by traditional sectors such as re-exports and trading; tourism and retail; transportation and logistics; manufacturing; the free zones and the business hubs for IT, media, financial services, education and healthcare. These are the sectors that drive real demand.”

He said demand for real estate continues to outstrip supply, and that will be the case for several years to come because of the region’s economic resilience.

Dubai real estate: mixed messages

WSJ Blog:

A six-year real estate boom in Dubai that spurred a $475 billion building frenzy has ended, according to agents who say sales are collapsing amid fears that the global economic downturn will hit the sheikdom.
...
“Our commissions have fallen by up to 70% recently,” said Khaled Daji, an agent at Al Jabal Real Estate. “The most hit are the projects under development and those luxurious high end. We plan to survive for another six months to see how this crisis unfolds.”

But the city’s biggest developers like Emaar Properties PJSC and Nakheel are adamant that sales remain robust. Mohammed Alabbar, Emaar’s chairman and one of the architects of Dubai’s real estate boom, said in the company’s third-quarter statement that “we are very confident of our company’s fundamentals and future growth.”

That hasn’t stopped investors dropping the company’s shares.

Would you know a bubble if you saw one?

The financial crisis emanating from the US is largely rooted in a housing price bubble fueled by low interest rates, rules that allowed zero down and more. Or, as with all bubbles, it certainly looks like a bubble in hindsight.

How about in Dubai? Consider this article from the Wall Street Journal in August 2008:

Property prices, meanwhile, have risen on average by 79 percent since 2007 and 25 percent in the first six months of 2008, according to New York-based investment bank Morgan Stanley.

Home prices on Nakheel's Palm Jumeirah - one of three separate man-made-island clusters in the shape of palm trees off the coast of Dubai - have risen more than 600 percent since sales started in 2002, with some villas that were sold for $700,000 five years ago now attracting offers of more than $3.5 million, according to Dubai-based property agent Better Homes.

"There is a general consensus that certain sectors of the real-estate market in Dubai are currently being driven by speculation rather than market fundamentals," said Craig Plumb, head of research at property and investment-management company Jones Lang LaSalle in Dubai.

Although RERA is looking at measures to restrict flipping, developers also are imposing tougher resale rules. Homeowners at Nakheel's Trump International Hotel & Tower have to wait a year before they can sell their units on the secondary market, and Emaar Properties is restricting secondary sales of its properties until buyers have paid 30 percent of the total cost.

Of course Morgan Stanley itself has been in the news since August 2008.

What are the chances Dubai will default?

“Investors are now pricing in a real estate crash, that the banking sector is in trouble and that Dubai will default,” says Mohieddine Kronfol, managing director of Algebra Capital.

This from an article in today's Financial Times. More:

Shares in Emaar, a Dubai government-controlled developer, have fallen by more than 60 per cent this year, wiping Dh56.4bn ($15.3bn) off its market capitalisation.

Meanwhile:

Defying the world credit crunch, one of the Persian Gulf's leading developers pledged Sunday to keep taking the boom city of Dubai up and up -- announcing plans for a skyscraper that would be the world's tallest, at two-thirds of a mile high.
...
Economists estimate that property prices in the United Arab Emirates will fall 10 to 20 percent over the next two years.

Yet:

Gulf Arab property firms launched $100 billion of new projects on Monday, but the news failed to restore investor confidence as fears grew that the global credit crunch is biting and the local real estate market overheating.

Emaar first quarter results

Sweet or sour?

Gulf News starts sweet:

Emaar Properties has posted a net profit of Dh1.72 billion for the first quarter of 2007, an increase of 13 per cent over first quarter 2006 results of Dh1.52 billion.

Revenues for the first quarter increased by 74 per cent from Dh2.239 billion in the first quarter of 2006 to Dh3.904 billion while the annualised earnings per share (EPS) are Dh1.13 compared to the actual EPS of Dh1.06 for 2006.

Emaar's first quarter performance was marked by robust domestic sales for its new launches at Downtown Burj Dubai, including new commercial space in The Old Town Island and Burj Dubai Square.

The New York Times starts sour:

DUBAI (Reuters) - Dubai-based Emaar Properties (EMAR.DU), the largest Arab real-estate developer by market value, reported its slowest rate of profit-growth in the first quarter in at least two years as the U.S. housing market cooled.

The earnings missed even the smallest profit-forecast of four analysts polled by Reuters last month.

Net income in the three months to March 31 rose 13.3 percent to 1.72 billion dirhams ($468.5 million), or 0.28 dirhams per share, compared with 1.52 billion dirhams, or 0.25 dirhams per share, in the year-earlier period, Emaar said.

Compared with the fourth quarter, revenue fell almost 30 percent. Cost of revenue tripled to 1.98 billion dirhams.

Here's Emaar's income statement. See the note at the end.

Small investors pinched - by Emaar or by themselves?

Quote (my emphasis):

With many investors owing interest on their loans taken out to buy Emaar's shares, a rewarding cash dividend was their only hope. "About 20 to 60 per cent of any given portfolio is composed of Emaar, and the shares are mostly purchased through bank financing; hence this will result in pressuring the share price in the short term, as some investors might seek partial liquidation to settle the banks' dues,” said Nabil Farhat, managing director of Al Fajr Securities.
...
The property firm's annual general meeting descended into chaos after chairman Mohammad Al Abbar told shareholders they would only receive 20 per cent of the share’s par value of Dh1 as dividend for 2006, down from a cash dividend of 40 fils a share in 2005.
...
Al Abbar said the company thinks it is more important to invest in the long-term future of the company. "I criticise most of the companies in other Arab countries, because they only work for today," he said, adding that Emaar needs to have adequate capital to seize opportunities in countries such as India.

Matein Khalid provides an excellent take on the GCC stock markets.

Real estate buyer beware :: Khaleej Times
Industry watchdog :: Dubai market has "holes in the system"

Quote:

DUBAI — The hard line approach adopted by many real estate developers to buyers failing to keep up payment instalments, even on projects where they fail to meet the pre-sale completion date, is upsetting not only buyers but the entire real estate industry.

The problem is magnified for those investors who have bought properties from the large developers including Emaar and Nakheel.

Emaar is the world's largest property company and Nakheel is one of the leading developers in the region with investments of $12 billion in local real estate projects. Other large developers are also said to have adopted a zero-tolerance stance towards payment arrears.
. . .
If buyers fail to pay these fees, the developer cancels the contract immediately without refunding any of the paid instalments and refusing to negotiate a new instalment package.

This happens even if the developer has failed to meet the completion date as agreed with the buyer at the outset. Consequently, many small investors are stretched financially trying to meet the repayment terms.

This may be because they struggle to meet ongoing and unplanned accommodation costs or because they are speculative investors who fail to derive rental income from the property when expected.

To protect their reputation for being firm on collections, Emaar and Nakheel need to be tough.

But perceptions also matter. The perception is that Emaar and Nakheel shift all the risk of completion delays onto the buyer without being clear with the buyer that that is what the contract says. Do they want that reputation too?

Completion delays come with the business of construction, even with the best of intentions. A good contract will make it clear to buyers what happens when there are delays.

UPDATE. I wonder if this article is representative?: 7DAYS - Should a 2 million dirham villa look like this?

Saudi Arabia plans $26bn 'economic city' :: Financial Times

Quote:

The project, expected to be largely financed by the private sector, is part of intensifying Saudi efforts to take advantage of the new oil boom to diversify the economy and create jobs for a fast-growing population.
. . .
The city will be located north of Jeddah on 55m square metres of land and will include a new seaport as well as financial and industrial districts. The project even has a tourism angle in a deeply traditional country, promising to create a waterside resort with hotels and an 18-hole golf course.

The project's lead developer is Emaar Properties, the company that has played a leading role in developing Dubai, the nearby emirate whose economic diversification model is being emulated elsewhere in the Gulf.

A statement from Sagia yesterday said a group of companies from Saudi Arabia and the United Arab Emirates had been formed to facilitate investments for the project.

They include the Saudi Binladen group, one of the largest contractors.

Freehold law 'need of the hour' :: Gulf News
Buyer beware

Quote:

Dubai : Absence of freehold law and formal regulations are likely to discourage buyers of freehold properties in the coming days, following a dispute between Emaar Properties and some customers living in Dubai Marina.

A dispute over service charges is forcing potential buyers to reconsider their decision or wait until the laws are in place. Most developers do not declare service charges at the time of sale, but fix them later at a higher-than-expected price, to the dismay of the homeowners.

"This is happening due to the absence of transparent legislation and lack of regulation in the market," said an eminent lawyer, requesting anonymity.

"Further delay in issuing property laws to regulate the growing freehold market will create more confusion and uncertainty among new investors; also it will allow certain developers to take the customers for a ride.

"This is a wake-up call to homeowners and a lesson for new investors to force the developers to mention this in the contract."

I agree that there is ambiguity surrounding freeholds. With ambiguity comes a responsibility for buyers to look for hidden costs that have not been spelled out by the seller.

It sounds as if contracts did state that service charges would apply for services for the upkeep of common property, but did not spell out the level of those charges. And it was left open how those charges would be set - and, equally important, how it would be determined that promised services were delivered. These are issues that are difficult to deal with in any legal setting.

Would a freehold law be a sufficient remedy? Law is not a magic wand. Isn't a well-developed independent judiciary as important? A freehold law might have some benefit in simplifying enforcement by bringing standardization to contracts. But it would not itself develop a judiciary that could enforce contracts, and it would not necessarily address the question of enforcement when there is substantial government ownership in companies such as Emaar.

Emaar is a large company with many properties. It has an interest in maintaining a reputation for honest dealing. (And Dubai's reputation is linked to Emaar's.) Thus, it is not necessarily the case that there is a need for a law or for a judiciary. Rather what is necessary is that Emaar can build and maintain that reputation. To do so it needs to demonstrate that it is carrying out the spirit of the contracts it enters into. And it needs to monitor the claims and promises of its sales agents.

Emaar may be doing all those things. It also has an interest in making contracts straightforward to external interpretation. Otherwise, it risks losing its reputation when buyers' complaints about high service charges have more to do with every buyer's preference for a low price than with a failure on Emaar's part.

Dubai real estate property law :: Strategiy

Quote (emphasis added):

Dubai's new property law, currently being debated and soon to be finalized, will inject a new burst of energy to the Emirate’s booming property market. The ‘fuzziness’ surrounding the exact status of ‘freehold’ and ‘long term lease’ properties in ‘exempt’ areas will finally be eradicated with its ratification. So far the legal vacuum has not had a negative affect on land sales due to strong backing by the Government of Dubai.
. . .
The current legal framework governing Dubai can generally be classified under two main categories: those laws governing properties lying in exempted areas where foreigners may buy freehold and long lease property, and the remaining areas where only UAE and Gulf Cooperation Council (GCC) nationals may own.

In essence, the Government of Dubai ‘exempts’ certain geographical locations and develops them in cooperation with quasi-government companies such as Emaar, Nakheel and Dubai Properties. Foreign ownership is the main driver for setting up these ‘exempt’ areas – an idea that is not lawfully permitted in the rest of Dubai where only UAE and GCC nationals may own land.

“Trust plays a key role in promoting the ‘exempted’ areas where no laws exist but where Dubai’s governance and courts system does have a certain amount of jurisdiction. Transactions are governed by contractual agreements between the main developers, the secondary market developers and brokers or the end buyers.”

These contracts, whether they pertain to villas, apartments or commercial space, are not considered as titles or deeds to ownership. Solving this issue is the main thrust of the new legislation, which will also include clauses to properly manage communal areas and public spaces as well as regulate new ideas, such as timeshare properties.

The law will also examine the relationships between the main developers and the secondary developers. Additionally, it will give banks the legal standing to be able to better enforce bad debt recovery and, therefore, reduce the costs of home loans to benefit the buyers.

There has, I believe, been some differences of opinion on whether property law in the UAE falls under federal or local emirate jurisdiction. The article quoted above did not address this issue.

Bird-filled Emirates wetlands diminishing :: WaPo

Quoting:

UMM AL-QUWAIN, United Arab Emirates -- The Khor al-Beidah lagoon is a pristine tidal flat teeming with wildlife, including endangered birds, sea turtles and manatee-like dugong that swim among its tangles of mangroves.

But a bevy of dredges and construction gangs are about to begin transforming a 1,500-acre parcel into a $3.3 billion luxury conglomeration of homes, shops, marinas and beach resorts aimed at foreign buyers and tourists.

The crown jewels of the development are private villas to be built on artificial islands with gated access _ and views over one of the few remaining mangrove archipelago left in the Persian Gulf.

Developers say the waterfront complex, called Umm Al-Quwain Marina, will skirt the mangroves and leave most of the 20 square miles of wetland untouched.

"Our aim is to create a community of special neighborhoods bordering an open stretch of water with views of the marina against a backdrop of the gulf," says Mohammed Ali Alabbar, chairman of Emaar, the Middle East's largest developer.

Environmentalists are aghast. They fear construction and people, cars and boats will drive off Khor al-Beidah's internationally famous wildlife, including birds that migrate from Siberia to Africa and the rare socotra cormorant that nests almost exclusively on the Arabian Peninsula.
. . .
The leaders of Umm Al-Quwain, however, are eager to bring big projects to their emirate, which is the least-developed of the seven states in the United Arab Emirates. It has little of the energy wealth of Abu Dhabi, the largest of the emirates, and few of the tourists of Dubai, one of the world's fastest-growing cities and tourist destinations.
. . .
The once empty Emirates coast is awash in construction that has buried coral reefs, mangrove swamps and other wildlife zones. The tidal lagoon here is one of the last such areas in the country, especially since the partial bulldozing of a mangrove swamp on the east coast.
. . .
What you're seeing in this region is on par with development in North America 100 years ago," says Robert Booth, Emaar's executive director.