Saturday, November 22, 2008

HM investing in 'Omagine' real estate development near Muscat Airport

You'd think the development of more coastal tourist and housing developments right now would be a bad idea, but a publicly traded US company are still pressing for their Omagine project, and claiming that because the other investors include the Royal Court (and state they are acting for His Majesty) that this project will be OK. Muscati blogged about it more than 2 years ago here. The credit crisis and the drop in their share price has prompted a press release about how much cash it'll generate, with project finance and economics being lead by Bank Muscat. As their share price is down about 75% from the peak, its sounds like the release didn't work too well - their shares plunged another 20% yesterday.

You should have a look at their promo video - the script is so totally OTT. The development will take a 250 acre piece of land with 1 km of waterfront next to the Wave, and create some kind of high-tech set of info-tainment video globe things based on Oman.

NEW YORK, Nov. 20, 2008 (GLOBE NEWSWIRE) -- In a continuing effort to keep its shareholders and the investment community fully informed, Omagine, Inc. (OTCBB:OMAG) (the "Company") is providing the following update information regarding the status of its proposed Omagine Project in Oman:

The Omagine Project will be located on over 245 acres of prime beach front property just minutes from Muscat International Airport and downtown Muscat. It is an elegant and sophisticated blending of entertainment, hospitality, cultural, retail and residential components. Omagine's jewel-like architecture will mark the place and set new standards. The Project is set in an incomparable location and includes retail, hotel, commercial offices and several million square feet of distinctive residences for sale.
The Company will own 50.5% of the Project Company and has arranged -- for an aggregate of $110 million U.S. Dollars -- several minority equity interest sales totaling 49.5% of the Project Company to Consolidated Contractors International Company, SA, a $5 billion international company and the general contractor for the Omagine Project ("CCC"),
and to several prominent Omani citizens and entities including the office of Royal Court Affairs ("RCA"), which represents the personal interests of His Majesty Sultan Qaboos bin Said, the ruler of Oman.

Omagine's president, Frank Drohan remarked: "We are gratified by the continued strong support of the Royal Court, CCC and our local Omani partners. These strong strategic investor partners will serve the Project Company well in these unsettled financial and economic times.
It is the opinion of OMAG management that it would be difficult to find higher quality shareholders for the Project Company than the Royal Court, CCC and our local Omani partners. There is at any rate no shortage of qualified and willing investors in Oman and its surrounding countries (the "Gulf Region") who are ready, willing and able to invest in the Project Company on terms very financially favorable to the Project Company. Indeed, management has already declined several offers from such investors including leading financial institutions, as management now believes that sufficient capital has been arranged for the Project Company. Management believes that since Omagine is such a high profile project in Oman and since financial resources remain extremely high in the Gulf Region, that money simply isn't an issue. Given this situation, management focused on securing investor shareholders for the Project Company that bring more qualities to the Project Company than simply money -- qualities like superior knowledge of the local market, exceptional skills and the ability to execute.

And from their website:

Omagine, Inc. (the "Company") is publically traded on the OTC-BB (Stock Symbol: OMAG). The Company has proposed to the Government of the Sultanate of Oman (the "Government") the development in Oman of a USD $1.5 billion real-estate and tourism project (the "Omagine Project"). In May 2008, the Omagine Project was approved by the Government for development on a one million square meter site provided by the Government. The Company's management has raised $110 million of capital for the project from investors in Oman, including the office of Royal Court Affairs which represents the personal interests of His Majesty Sultan Qaboos bin Said, the ruler of Oman. The Company's financial advisor is Bank Muscat (the "Bank"), the largest financial institution in Oman. Management's internal financial model for the Omagine Project predicts approximately USD $600 million of free cash flow over the five year period subsequent to signing the "Development Agreement" with the Government of which 50.5% will flow to the Company. In July 2008 a draft Development Agreement, incorporating all of the commercial and other terms as agreed with and approved by the Government and accepted by the Company, was delivered to the Government. As required the draft Development Agreement is presently being reviewed by The Ministry of Tourism; The Ministry of Legal Affairs; and The Ministry of Finance. The Company anticipates that the Development Agreement will be signed in August or September 2008.

The Project Company
The Company is a real-estate development, entertainment and hospitality company focusing on development opportunities in the Middle East and North Africa (MENA) resulting from the aggressive growth strategies adopted by governments in the hyper-wealthy MENA region. These governments are seeking to diversify their economies through mega-projects that create tourist destination hot spots. Recent increases in the price of crude oil have only added to the already impressive amount of liquidity in the MENA region and have exerted enormous upwards pressure on the selling prices of real estate in the region.

The Omagine Project will be developed by Omagine SAOC (the "Project Company"), an Omani company presently under formation by the Company. The "Founder Shareholders" of the Project Company are the Company and Consolidated Contractors International Company, SA ("CCC"), a USD $5 billion company with worldwide operations and approximately 150,000 employees (see: As presently contemplated the Company will own 50.5% of the Project Company and CCC will own 12%. The remaining 37.5% of the Project Company will be owned by highly prominent Omani investors, including His Majesty the Sultan. The Project Company will be capitalized at approximately USD $110 million and will have the financial capacity to begin development of the Omagine Project almost immediately after the signing of the Development Agreement with the Government. Bank Muscat has agreed to arrange the necessary construction and other financing for the Project Company.

The $ 1.5 + Billion Omagine Project
The Company's planned Omagine Project is an integration of cultural, heritage, educational, entertainment and residential components. The development site (the "Omagine Site") is an amazingly pristine coastal stretch of beachfront approx. 20 kilometers northwest of Muscat and only 4 kilometers from Oman's International Airport. The one million (1,000,000) square meter Omagine Site (equal to approx. 245 acres) has one kilometer of beach frontage but will be developed to have over seven km. of water frontage of which 1.8 km. will be beach-front. The Omagine Project also includes several hundred thousand square meters of residential housing units that will be developed and sold by the Project Company. Significant commercial, retail and hospitality elements are also included. The Omagine Project is expected to take between 4 to 5 years to complete.

Management is aware that due to market conditions the value of the Omagine Site has increased sharply over the past 2 years and, provided such values are sustained, this increased value will have a materially positive effect on the Project Company's future cash flows as well as its financing activities. The Omagine Project's construction and capital cost is presently estimated at approximately U.S. $1.6 billion.

The Project Company's financial model which has been reviewed by Bank Muscat presently predicts an internal rate of return ("IRR") for the Omagine Project in excess of 20% and net positive cash flow in excess of approximately USD $600 million (the "Projected Cash Flow") over the five year period immediately subsequent to the signing of the Development Agreement.

Pursuant to the terms agreed in writing with the Government, the Omani investors and CCC, the Project Company will be owned fifty and one-half percent (50.5%) percent by the Company (the "Company Equity") and the Company Equity will remain the majority equity stake in the Project Company and the Government will not own any equity of the Project Company.

In May 2008 the Company announced that it received an official letter from the Government of Oman formally approving the terms by which the Omagine Project will be developed (the "Approval Letter"). As required by the Approval Letter, the Company formally notified the Government in writing on May 31, 2008 of its approval and acceptance of the Approval Letter and furnished the Government with various confirmations relating to the Omani and other shareholders of the Project Company and elements of the Omagine Project.


  1. Sounds like the man who does the voice for movie trailers .

  2. Having been here for two years now, and watching the "progress" that has been made at The Wave, one wonders how long this new project is going to take?

    If I was to invest in it, I would more than likely be interested in the short-term off-plan option.

    But will expats be allowed to buy into this?

    What about Salam Yiti? Any advice on whether I should opt in?


  3. Oman

    I know - a bit overdone.

    Hah. Advice? Stay in cash for 6 months and re-evaluate...

  4. UD

    Am still recovering from the mad dash of liquidating what I had here!

    Six months at least for now


  5. Judging by the enormous efforts The Wave in currently devoting to advertising on radio and in newspapers their sales are under serious pressure. Yiti sales have been postponed several times and there are rumours that, especially in view of the Sama-link to the financial debacle in Dubai, the entire project is going to be stalled soon. Enough has already been said about Blue City: all sales-tests failed (and that was in the ‘good times’…). Omagine might very well be a good project, but will only work if income from sales is not required in the coming 1-3 years as nobody will be buying. So plenty of time for Omagine to think about viable development strategies, solid feasibility studies, good design-solutions and adequate work preparation. Now that would be something ‘original’ in Oman!

  6. Sit on cash you say... When (not if) this stuff will cost pennies on the dollar, wouldn't the dollar cost pennies as well?

  7. Omagine – with its glass/Perspex shells hardly looks like an Omani resort; perhaps a Dubai one. Yiti , with demolished mountains and walled up Khor will be unpleasant for the villagers there The developers have, as the advertising blurb says, kilometers of pristine beaches that are now pristine no more - at the very least they should be made usable for residents of Yiti and Muscat

  8. Pennies on the dollar is fine as long as you actually get what you paid for. Those who paid pennies for a nice property in Blue City will not be receiving anything in return, and I doubt that they will ever see their pennies back. For Yiti I believe so far nobody (except for Sama) has made any down-payment, but indeed damage to the environment has already been done. The Wave would probably still be the safest bet, but the risk has clearly increased.

    The Greek

  9. yes please sir what is the OTT

  10. I have it on the best authority that Yiti is closed down temporarily. Sama Dubai have placed all their projects on hold while they reevaluate. Blue City continues to be developed, with a promise of delivering a 5* hotel in time for the Asia Beach games...

  11. Dubai will most likely (have to)get priority for Sama's investment-money, so potential buyers for Yiti should better not hold their breath.
    The little money left for construction at Blue City might very will be directed at the delivery of a hotel. That would make sense, since tourism- and leisure-elements have, to a certain extend, always been the only potentially feasible parts of the entire development and might very well function as stand-alone projects (i.e no need to build the rest of the city). This does however mean that no money will be left for construction of the apartments for which buyers have already made a deposit.

  12. I understand they are now talking about depositors in Dubai who have only paid 5% are essentially more likely to write that off than complete the purchase... oops.

    OTT= over the top

    The wave phase 1 might be a good buy if they fell a further 50% or so perhaps...

  13. Formerly Alfa International, Omagine repositioned and rebranded itself in 2007 as it exited the apparel business. The company's Journey of Light subsidiary now intends to tap into the high-margin real estate development and luxury travel markets in MENA.

    They've changed from being a clothes company to a real estate company?????????

  14. Quote:

    "Anonymous Oo said...

    ...The little money left for construction at Blue City might very will be directed at the delivery of a hotel..."

    I am inclined to disagree with you. The "little" money they have is over 900 million US$. Thats more than enough to do 3 5* hotels (And the 5* hotel that is to be delivered for Asia Beach Games is actually done in the Six Senses style - lots of luxury villas). On top of that, the apartments have been sold and will go ahead as deposits are received for them. The Golf course (18 hole) and the hotels will be the main draw - nice resort only 3 hour drive from Dubai.... and an entire block of apartments has already been sold too... things are not as gloomy as one might think, in my humble opinion.

  15. Spending 900 million US$ is the easy part; providing the investors the required return on investment might prove more difficult for Blue City.


  16. 'Difficult'? Better word would be: 'impossible'.

  17. Anonymous Lurker said: "...the little money they have is over 900 million US$...".
    Lurker obviously meant: 'had', not 'have'.
    Many millions have in the mean time already disappeared via payments of consultants, contractors, insurances, advisors, etc.
    Would be interesting to know how much is left...but my guess is that available funds will be depleted soon.


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