Thursday, April 17, 2008

Blue City starts to fight back against the rumours and lawsuits

A very interesting press release yesterday by Blue City, aka Al Madina A'Zarqa. You can read full versions in Times of Oman [which you should note is connected to the project through family connections, so is a common source of relentless positive spin for the project], and also at such sources as Zawya

It is far from the usual puff piece, but is very specific about emphasizing that the idea that funding of phase 1 is secure. It seems a story designed to reassure those who have put deposits on phase 1 properties, the investors that hold the bonds, and to ensure the stories around the project don’t stop the next selling phase being underwhelmed, which could easily happen if people don’t have that most magic of things in such real estate developments: confidence. A significant suspicion of things not being right with the underlying solvency of the project would be potentially catastrophic for the Blue City. This release is clearly designed to stop the rot, and is a follow-up to the big ad placed several days ago showing pictures of the completed construction workers buildings, initial roads made, reassuring quotes from the Turkish contractors, and lots of happy workers eating lunch. News of the law suit and the squabbles between AAJH and Cyclone have, obviously, seriously concerned the bond holders, and probably some of the recent phase 1 deposit payers. Add the global financial meltdown, and the increasing competition for similar residential/golf club places, and there is clearly a significant threat to the solvency of the project which rumours had hanging by a thread anyhow with very little of the money left. The bond holders must be very, very nervous.

Hence the way this article stresses how the financing of BCC1 is independent of the shareholders. A sample:
The funding of Al Madina A'Zarqa's first phase differs greatly from other developments in the Middle East. Unlike most other real estate projects in the region, Al Madina A'Zarqa does not rely solely on the pre-sale of off-plan property to finance the development.

This provides investors and purchasers with the highest levels of confidence that the project is protected from all manners of challenge during its lifetime.

The nature of the press release can be judged on the adjectives: quote - firmly on course, progressing without delay, independent legal and financial structures, independently financed, operating independently of the shareholders, highest levels of confidence, protected from all manners of challenge, formally rated at investment grade, major international institutions … regard them as sound investment, strict loan agreement, monitoring and supervision … overseen by the Bank of New York, strict supervision of fund releases, backed by a robust and secure financial legal structure. The word Independent is used 3 times, and Supervision 4 times, in a 530 word release.

Personally, I’d feel a lot more confident hearing all this from an independent reliable auditor that I could subsequently sue in the USA. That it’s coming from the CEO of BCC1 hardly makes me think of this as a good thing. The fact that he’s doing it at all smells more like panic to me.

And I still can't believe they can get away with saying its 'just 30 mins from Seeb International airport.' How? By helicoper? An F1 car at 4 am?

More to come.


  1. 3o mins? Well, if you too can catch the gravy train to Blue City you will also come to believe it is possible.

  2. It's nice to see the management opting for the transparent approach. Isn't it the job of senior management to reassure a company's investors and stakeholders that it is on track and handling resources appropriately?

    Besides, why would you want to sue in the USA?

  3. Sue,
    1/ Its not usual for a company to issue a public press release addressing key details relating to the internal financial engineering of a development as a matter of normal business. Certainly there have been no such releases from any of the other apparently successful real estate developments in Oman [the Wave, Yiti, Muscat Hills, etc etc]. In this case I think it represents 'fire fighting', and as a bondholder or shareholder I would know this already, and would be updated directly (and in confidence) with independent audits of the project finance and adherence to governance procedures as defined in the contracts and articles of association. This thing is aimed at the public (and possibly Government), and is classic PR. That's what's interesting about the nature and timing of the press release. Why?

    2/ I'd want a USA based independent auditor to provide such fiscal assurance because SEC regulations are strict, and such an audit report could be a basis to seek compensation in the US courts should the statement subsequently be erroneous or misleading. A PR piece from the CEO in Oman is not actionable.

    In addition, you will note that the press release does not, of course, say how effective the project's financing structure has been, nor how the independence from shareholders has actually performed wrt project cost and tender fidelity.


  4. I would query why this item has been published only in the Times of Oman. Republication in Zawya doesn't count particularly because Zawya hoovers up what other people publish.

    The information appears to be targeted purely at an Omani market.

    Was it published in Arabic too?

    Was a Times of Oman reporter specifically briefed?

    Are there legal restrictions on publishing this item elsewhere in the Gulf?

  5. Why the Times of Oman? Simple. Anees Al Zadjali is the Deputy Editor of the Al Zadjali-family ragsheet. Ahmed

  6. When they say 30 minutes, they are talking about the new highway by the beach.

  7. Sue, as I said, there's a connection with the Times as Anon/Ahmed pointed out. Anees Al Zadjali happens to be both Deputy Editor of the Times of Oman and Chairman of ASIT (Al Sawadi Investment and Tourism) the top holding company involved with the project. As to why no-one else carried the press release, probably because at face value it was such a non-story advertorial for Blue City.

    There is a big Al Zadjali clan involvement (and investment)in Cyclone LLC, and as a result there is a huge conflict of interest on anything you read about Blue City in the Times. (not that you'd read about that in the Times of Oman, naturally).

    Anon2 - yeah, still don't believe in 30 mins...

  8. for fairness i have seen the press release in all newspapers in Oman, all of them carried it in prominent positions as positive news for the market and the country, why do we keep forgeting the significance of this project for Oman? Isn't is amazing that Oman has finally its own boom and the country is progressing? I am happy for my country and I see every effort for progress as a step forward, even with difficulties when you start. As our tourism minister said, these things are normal and will be solved

  9. yes it is true, all 6 newspapers had the press...english and arabic

  10. Re Anon (20th April). Yeah, life's a beach eh? I guess 30 min's is also possible if you drive a mindlessly stupid H2 Hummer (see:
    by way of not being in touch with reality); and more especially a black one (, who on earth would drive one of those senseless motors?). Anyway, hasn't the new coast road been canceled?). Bobindubai


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