In a recent interview with Construction Week, Peter Riddoch says

“Something that we’ve been working on pretty hard, particularly during 2009, is what we call our Recovery Programme. We’ve been very committed to the construction and delivery timetable of our projects; in fact we called last year the year of construction.

We’ve been able to speak to some investors who are nervous about the market and have offered them the chance to come out of a project that will be completed much later in the future and move into another project that will be completed, lets say this year or the early part of next year.”

Link to full article

In response to ‘Palm Springs investors face millions in losses article

Damac’s action tantamount to FRAUD

Posted by Palm Springs Investor, UK on 1 April 2008 at 04:24 UAE time

“Damac said it understood the situation was serious and unfortunate, but that it was “completely outside Damac Properties control”.

What a load of codswallop. Damac has known about the re-design of the Palm Jebel Ali for ages, and I’m sure Nakheel would have kept them informed of progress in the re-design. It’s astounding for Damac to suggest that it has ’suddenly’ learned that the original plot will not be delivered, and so has had to cancel the project. Damac seem to think that those who invested in the Palm Springs are a bunch of brainless fools who are not able to see through this LIE.

If Damac are not able to honour their contracts for failure to deliver by Nakheel, then they should be suing Nakheel, rather than penalising investors with whose money Damac has had all of these years.

It is extremely surprising that the Dubai authorities are not stepping in and investigating Damac, if not on investors behalf, then to safeguard the reputation and of Dubai as a safe place to invest.

These latest comments by McLoughlin reveals that Damac’s business ethos is driven by greed, and I applaud Brown and the Palm Springs Investors Group for standing up to Damac’s underhand illegal tactics.

Palm Springs

Posted by stuart mayhead, Abu Dhabi, UAE on 1 April 2008 at 08:17 UAE time

So is this going to be when they judge the bubble to have burst? Or is it just a leak….

Palm Springs mess

Posted by George, Dubai, UAE on 1 April 2008 at 09:45 UAE time

If Nakheel redesigned the plots, then Damac should have either informed the investors in time, or sue/ask for compensation/alternative plot(s) of the same properties from Nakheel now.

While I can feel sorry for the original investors, the ones asking for the compensation of the secondary sales are obviously not entitled to any refund beyond the original price and any interest that the developer is accepting. Their risk – as long as they thought that the value is going up, they kept quiet, right? – and their loss. They would be happy if the project went through and they had 100% returns on the investment.

And, I really fail to see how a flat that is never going to be built can be valued, let alone worth millions??? Don’t you people who speculate on a value of something that is not happening see that you too pump up the bubble a little too much, and are really helping the same developers whom you want to sue now?

Let’s kick back and watch … the game is on …

Who’s to blame?

Posted by The Thinker, Dubai, United Arab Emirates on 1 April 2008 at 10:31 UAE time

Well, who is to be blamed, is it DAMAC who just promotes but never forces a investor to buy or is it the investors pouring in millions without seeing a brick on ground.

There a very true old saying, ‘SEEING IS BELIEVING’ & there is a counter line that says that only the risk takers reach the top (but for the risk takers, it can be rewarding or a dive in the dump while the believers would have lost a good opportunity if it was really good later).

The Dubai Real Estate is like a gambling table, you speculate & invest. The chances of making it big is high but if you loose, you do not blame the casino, you blame your self. After all, before & after investing, you believed in speculation (until DAMAC’s announcement) and took a very strategic decision.

First Rule of Investment

Posted by Kieran, London, UK on 1 April 2008 at 10:57 UAE time

Only fools think that high returns are not the reward for high risks…

These investors can pursue this claim but they need to risk having the world know they were either gullible enough to think this was a guaranteed return or thought they were party to some nefarious deal whereby their returns were guaranteed unless, of course, DAMAC or their agents gave them assurances that there would be a massive return, thereby, through that assurance, underwriting the risk.

However, that may well indeed be the case. UAE sales agents (and there are so many of them these days) with their hyperbolic talk about massive returns and guaranteed investments may be advised to have their lawyers double check their publicity material and make sure their staff are trained well or this lawsuit and future ones could start to cascade down the property-boom feeding chain eating the weak.

The authorities have recently, and rather belatedly, been taking steps to regulate these sales and are to be applauded for that but, unfortunately, a lot of things were said and done pre-regulation, that might come back to haunt the market.

That coupled with the fact that there is a huge amount of property just now coming to completion so the builders must be praying that their new owners are too ill educated or naive to spot the shoddy workmanship and poor finishing prevalent in the region and launch a tidal wave of warranty claims for repairs and bringing properties up to the standard portrayed in the sales publicity. There is no evidence to suggest that most of the developers actually have the kind of solid, cash, foundations and secured credit lines to survive any major turbulence in this market, let alone to go paying out compensation back to burnt investors or aggrieved owners.

Caveat Emptor and nowhere is this truer than buying “off plan”.

Facts

Posted by Ilyas, London on 1 April 2008 at 12:18 UAE time

Some people don’t seem to understand what this is about. Nothing to do with volatile markets, because if the value had gone down that is something the Investors understand, nothing to do with workmanship, oversupply blah blah.

Damac have used investors money to buy the plot, and then when the price goes through the roof they want to renege on the their commitments and sell it for more.

People posting on here talking about falling markets and all the rest this simply is nothing to do with the issue, investors paid for something on Palm Jebel Ali and thats what they should get. Not some shoddy excuse about a redesign.

AND if the price had collapsed of course Damac would then have said to the investors to buy in a redesigned palm springs, just so happens they have seen an opportunity to make more money buy selling them afresh.

Palm Springs

Posted by theshadow, Dubai, UAE on 1 April 2008 at 13:51 UAE time

It may not be criminal but it’s shady as you can imagine. Not only DAMAC are to blame though, the real estate industry here is equally guilty of distorting reality in their efforts to get people to buy buy buy.
I just don’t see how this works though – surely if a developer announces a development and offers it for sale they’re obligated to deliver the project as advertised?

If not, that says a lot about the maturity of the real estate industry here and the type of people it has attracted. I’d rather spend my hard-earned money elsewhere on something solid instead of a coloured, computer rendered bubble that might burst at any given moment for no valid reason.
It really is ludicrous.

The Damac fiasco

Posted by Palm Springs Investor, UK on 1 April 2008 at 14:05 UAE time

“As stated before in this thread; sit back and watch and enjoy.” Kieran

What about the first rule of good government, of regulating the real estate industry? I’m sure you wouldn’t be sitting back and enjoying things if your local Wimpy builder did the same to you if they felt their profit margin had become too small to make it worthwhile to deliver the property you had purchased several years ago….

“The Dubai Real Estate is like a gambling table, you speculate & invest. The chances of making it big is high but if you lose, you do not blame the casino, you blame your self.” The Thinker

You have a very poor opinion of Dubai – simply a huge gambling place billing itself as being run along Islamic principles. The Sheikh of Dubai paints a very different picture of Dubai…

“Don’t you people who speculate on a value of something that is not happening see that you too pump up the bubble a little too much, and are really helping the same developers whom you want to sue now?”

You do not seem to understand the simple fact that Damac have reneged on the contracts given to investors not because of any property bubble, but SIMPLY TO STEAL MONEY THAT RIGHTFULLY BELONGS TO INVESTORS. It is not as if they do not have money to pay compensation at current market rates, or do not have a plot on the Palm Jebel Ali to build the Palm Springs project.

Palm Springs Mess

Posted by Lee, Dubai, UAE on 1 April 2008 at 15:18 UAE time

Wow! Lots of opinions on this one!!! I feel for the investors, end users, speculators, etc. who will not be receiving their property. And for those who were secondary buyers, well, these buyers could lose big time depending on the premiums they paid. But who should be sued or held accountable?

-Should Damac sue Nakheel as one of the Palm Springs investors suggested? I guess they could but then Damac would never receive another plot in any Nakheel development ever again. I would be surprised if any Middle East master developers would ever want to work with Damac. Is Damac going to risk that??? I don’t think so.

-And who is to say when Nakheel told Damac? I think we need Nakheel to “clear the air” and come forward with the facts on this plot and their communications/dealings with Damac.

-Should previous owners be sued for their premiums? Who is to say they were not “tipped off” to problems and told to sell by Damac executives? I bought a property in JLT and a year later one of the representatives told me how late the project would be and that the finishes were going to be rubbish. He recommended I sell if I could which I did. If you think buyers are not getting “tips” for when to buy or sell in this market you are being naive.

Is anyone really surprised this happened? If anything I am surprised it took this long for it to happen. Developers are buying plots and less than a year later they are selling flats off plan, sometimes before master developer’s complete the infrastructure works. This was bound to happen. My wife and I bought a flat in 2005 only to have the building completely redesigned in 2006. We ended up with a flat on a lower floor because that was all that was left for us. I knew then the whole real estate game in Dubai was going to be risky until the government introduced laws to regulate the “monkey business”. But at the end of the day, this is still the wild frontier. There may be Escrow accounts, but where are the penalties for projects handed over 1, 2 or 3 years late?

Who knows how this will turn out…..but I am going to sit back and watch the entertainment!

Damac and the fun and games

Posted by Mike H on 1 April 2008 at 16:53 UAE time

Damac have been selling off plan now for 5 years. They must surely have sold 60 plus developments. In that period they have handed over 2 buildings if my memory serves me. It seems to me that its all about taking in the cash that they can and skirting around the deliverables with excuses like this. Before the escrow was introduced what was happening to all that money?
Hmmm interesting.
I wonder how their developments in Egypt and Jordan are faring. Maybe Palm Springs is financing those.

Update facts

Posted by Ilyas, London on 1 April 2008 at 17:00 UAE time

No one apart from Damac is really in the wrong here, Lee talks about who should be sued; the only ones who have gone back on anything are Damac. The have been given a Plot by Nakheel, but they will obviouly get a lot more money by selling it afresh then re designing and leaving it with the original investors.

I think most people cant grasp the simple con that is being carried out here – Nakheel have redesigned but have delivered on there side of giving plots – Damac want to make more money by selling at new prices so are trying t cancel peoples contracts.

One thing about unavoidable delays but completely cancelling investors contracts and offering 6% per annum so then can then sell at 300% of the orginal price that is a con………..

These are the kind of Developer that Distroy the Market Confidence

Posted by Sam Wahib, Dubai, UAE on 1 April 2008 at 17:47 UAE time

It is amazing to see the effort and amount that Damac spends on ADVERTISING…. while they do NOT spend enough effort on delivering on their promises. Other than 2 buildings in Dubai Marina, I’m not aware any othe project that was delivered out of the 50+ project they sold….In addition, and not a single Damac project has been delayed less than one year.

I can not imagine a project that was supposed to be completed in 2007, just gets cancelled NOW (after the completion date). These investor must have paid in 2004, now they will just get 6% interest while they could have got 200% to 300% return if they would have invested these sums in any other project in Dubai

When you deal with such developer you should look carefully at the contract, and make sure that you are covered with proper compensation should this happen to you.

Palm Springs Mess

Posted by Potential Dubai Resident, London, United Kingdom on 1 April 2008 at 19:55 UAE time

Whilst I feel some sympathy for gullible overseas investors who perhaps did not know what they were getting into, I have little sympathy for those who are driven by pure greed.

If the equivalent of the Wall Street Crash is likely to happen again, Dubai is the most likely location.

I have wanted to live in Dubai for several years, but have been priced out as I have seen properties rocket above London prices. I am sure many potential ex-pats have been, like me, waiting and watching for the inevitable bubble to burst.

I visited Arabian Ranches when it had just been completed and could not understand why it looked like a ghost town, when nothing was apparently left for sale.

Now everybody will think twice about buying in the secondary market. It will take a few months before we see the impact, but once that secondary market shrinks, the carpet baggers will start to pull out of the primary market.

Eventually, we will get back to the situation where people are actually buying properties to live in, hopefully at more realistic prices.

Palm Springs

Posted by matthewwuillemin, dubai, UAE on 1 April 2008 at 23:52 UAE time

Until the real world of real estate takes hold here these things are going to re-occur. I could never understand how someone could re sell some thing on the secondary market that had not even been built yet. Really all that was happening is that folks are novating their contracts. You can do this in the real world but no funds change hands until the final settlement. And then the property may change hands several times in one day… that is how things work in more regulated markets. I believe that there could also be a legal case against the sellers in the secondary market as they have not delivered on the contract that they sold to the unfortunate latest purchasers either…. this is the beginning of the Dubai Sub prime crisis!!

Palm Springs

Posted by MW, Dubai, UAE on 2 April 2008 at 12:37 UAE time

This is an outrage and Damac are clearly looking to avoid the increased cost of building. I am very keen to join the consortium of those threatening action and would appreciate being contacted by those involved. Property values have tripled in this period of time. The Government needs to get involved to avoid this spreading across the Globe to all property investors.

On 31 March 2008 ArabianBusiness.com published another article on Damac’s shameful tratment of its most loyal investors. Below is a summary of the article. The full article may be viewed here.

Devastated investors in Damac Properties’ axed development on the Palm Jebel Ali are facing millions of dirhams in losses, one of the project’s investors has told ArabianBusiness.com.

Prior to the cancellation of the project, Palm Springs units were estimated to be worth more than double the original purchase price, according to investors.

Nearly 60 UK-based investors in the project have formed a group to take on Damac, giving the developer until April 11 to reverse its decision or face legal action.

London-based investor Karl Brown told ArabianBusiness.com members of the group were facing average losses on their investment ranging between 300,000-600,000 dirhams ($81,000-$163,000), depending on when they purchased their unit.

Brown said he bought his Palm Springs apartment on resale in March 2006 for 1.5 million dirhams and believes the property is now valued at more than 2.2 million dirhams.

However, he will only receive the original purchase price, estimated at about 1.1 million dirhams, plus 6% interest for each of the five years since the project’s launch.

Damac have told Brown that it was not the developer’s contractual obligation to refund money that was paid on resales.

UK investors’ losses are compounded by the rising value of the British pound against the dirham.

Brown said the group, the Palm Springs Investors Group, was appealing to Dubai’s Real Estate Regulatory Authority (Rera) and Nakheel, master developer of the Palm Jebel Ali, for assistance with the dispute.

There are quite a lot of comments at the bottom of this article published by ArabianBusiness.com, you can also add your comments there.

Damac threatened with lawsuit after project axed

Posted by H L Nagpal, London, United Kingdom on 30 March 2008 at 21:32 UAE time

It is foolish for a company like Damac to back out from a project just because it is going to make a loss. If Damac does not care about its goodwill, the UAE Government should make it honour its obligations as otherwise its effect will be far reaching. Investors in the West are investing heavily in the upcoming real estate of UAE on the understanding there is rule of law. Damac have launched projects at heavily inflated prices which are going to bring bumper profits to the Company. If the company is going to walk away from its contractual obligations, its effect on other projects by other developers will be enormous. One bit of bad news can ruin the whole market.

The writer has no interest in the project and is concerned on a matter of principle.

Management has no understanding of reputation

Posted by Dubai Warrior on 31 March 2008 at 06:26 UAE time

It seems that the incredible greed of Damac is strong enough to obscure its management from the potential incredible losses it can incur thanks to a tarnished reputation.

How many investors do they think will now be willing to put their money in their next project after the company forced the situation to become this public.

The real estate market is shaky and without restoring confidence it can implode like a bubble as many have already said. The fact that it takes time for the effect to happen does not mean it doesn’t happen, or haven’t we learned from the stock market crash two years ago?

Showing True Colours!

Posted by Louie Tedesco, Dubai on 31 March 2008 at 08:28 UAE time

Thank you Damac for showing the world your real character – which is not the friendly, caring, persona that you try to typify on your glossy brochures and advertising. Your actions, after five years of sitting on customer down payments, by refusing to honour a huge contract with an international consortium of investors has added one more argument to not buying property or investing in Dubai.

In this modern era, people do talk, they send emails around the world and the internet is too open for such a breach of contract to remain hidden from the public. The right thing to do is to step forward, fulfil contractual obligations made five years back, suck up the loss now and move on to reap future profits that lay ahead. Until then, my money stays in my (foreign offshore) bank.

Damac cancels Palm building

Posted by Bob on 31 March 2008 at 09:44 UAE time

They have been using the investors money over the past 5 years to build and build and now we are offered 6% ROI?? DAMAC “Live the Luxury” Yeah right!

Damac

Posted by Heba, Dubai, Egypt on 31 March 2008 at 08:41 UAE time

I am not sure why people are angry, Damac is giving them two options, (1) get back your money with interest or (2) get another property for a discounted price.

Damac has not taken the money and fled away. It is a company trying to do the right thing for its customers. I can imagine how customers are angry becuase they thought they can make a profit out of the property, but this in itself shows that the customers motivation for anger is also greed..

In fact, the more people get angry and follow the herd, they stand to lose more ..

Palm Springs

Posted by Palm Spring Investors Group, United Kingdom on 31 March 2008 at 12:37 UAE time

Just a small matter of all those who bought on resale, they have lost anything up to £150,000…

Damac will not look at this issue and not refund the premiums. Why should Damac cancel the project when they still own the plot. It has only being relocated and they can redesign the Palm Springs…

They will wait a year or two and resell units built at the site for overinflated prices and make a large profit instead of a large loss.

Damac Palm Springs

Posted by Robert Miller, Newport, UK on 31 March 2008 at 14:57 UAE time

Having bought in to Palm Springs in 2003, the amount Damac are offering will mean that I cannot afford to purchase another property. Put simply, Damac could not build at a profit so will not build at all. Come on Mr Riddoch, do the lawfully and morally correct thing and return to us our investment and the growth we had earned by supporting you in your infancy. Last November I should have received a luxury apartment, instead I am going to receive less than I gave you and a similar apartment will now cost more than three times the price.
Just how many apartments have Damac actually built, review the amount they have sold and the amount they have actually built. They are a problem waiting to happen.

Ethics?

Posted by Ilyas, London on 31 March 2008 at 15:19 UAE time

Remember that Damac HAVE been give a plot by Nakheel, and they are using this as an excuse to get out of honouring the investors who bought early. Damac will get 3 times the amount from new investors so thats why they want to return the money to the investors. If the investors had put their money into virtually any reputable developer in Dubai they would have seen a nice return. All the time Damac would have presentations and tell people how much money their investors were making, they should now tell people that they cancelled a project so they could sell it for more to new investors!

Palm Springs Cancellation

Posted by Terry, UK, UK on 31 March 2008 at 15:17 UAE time

I am shocked and disappointed by Damac cancelling Palm Springs Project. I believe that Damac acted illegally and breached the contract with their investors.

I feel angry and hurt together with my family because our dream of having our apartment in Palm Springs has been shattered by Damac after nearly five years of waiting, where the prices in Dubai since have more than tripled and we cannot afford to buy any comparable apartment at the current market price.

Damac must honour their commitment to their investors without giving us unacceptable excuses. Damac has several plots in Palm Jebel Ali you can build Palm Springs or redesign it.

Palm Springs

Posted by jo on 31 March 2008 at 18:05 UAE time

We the investors of Palm Springs are disappointed by what appears to be a unilateral cancellation of the Palm Spring project at Palm Jebel Ali.

Following the purchase of our apartments in this project in 2004, Damac thanked each of us “for placing your trust in our company and making this investment in Palm Springs,” It is clear that this trust has morally and contractually been misplaced. Damac have abandoned their duty of care towards their loyal investors. Having relied upon your representations, and remained loyal to the project, despite numerous set backs and delays, we have been rewarded by their abandonment of the project.

By canceling the entire project, Damac has set a worrying precedent. This will inevitably have a major impact on the commercial credibility and trustworthiness of Damac in delivering on both current and future developments in Dubai.

Damac’s treatment of its clients

Posted by Sanj, London on 31 March 2008 at 20:31 UAE time

I am outraged at the way Damac have treated us. We have accepted delay after delay and been loyal to this project for the past 5 years. Many of the purchasers can no longer afford to get into the Dubai market let alone a comparable apartment on Palm Jebel Ali. It has been rumoured that Damac has canceled this project because they do not stand to make the financial gain because of the increase in construction costs in Dubai. A penalty that we the buyers are having to bear.

We hope that Dubai will make an example of Damac and insist that they fulfill their contractual obligations.

Damac Victims are not alone

Posted by Falcon, Munich, Germany on 1 April 2008 at 03:00 UAE time

The victims of Damac are not alone. They bring to daylight what happens day by day in Dubai.

We bought 2005 Falcon Tower JLT directly at Nakheel paying 45% by June 2006. In August 2006 we got a letter from DMCCA. stating that Falcon will not be built – a decision of Nakheel.

But we were assured that the Falcon Tower would be transfered to AL Fajer Properties, nothing would change for the customers. Today, 2008, we are getting letters from the lawyer of Al Fajer Properties trying to cancel every right to our purchased apartment. We have got our own lawyer – but they have refused to correspondence with him. The case is also with RERA, but until today without any response

Damac Palm Springs

Posted by Richard, London, UK on 1 April 2008 at 01:35 UAE time

DAMAC- Palm Springs this was a dream Five years ago and now in 2008 a COMPLETE nightmare.

Damac Palm Springs

Posted by Vic Groves, Guernsey, UK on 2 April 2008 at 12:09 UAE time

Is there any way that I can join in with any group of investors seeking legal action against Damac in respect of the Palm Springs cancellation? There are numerous references to the possibility of investors joining together to seek redress and I would like to join one such group as I feel it will have more credibility than pursuing a claim on an individual basis.

In the wake of it’s ‘cancelled’ Palm Springs project, Damac held an exclusive product launch of Jumeraih Village South on the 27th March 2007 at the Carlton Hotel in Kinghtsbridge, London. Little did they realise that the Palm Springs Investors Group also had plans to attend the event, not to be sucked in by false promises and glitzy presentations it has to be said, but to make the unsuspecting potential investors aware of Damac’s track record with the Palm Springs episode.

Although given very short notice, quite a few members of the Investors Group managed to be present at the event. One member of the Group told us “I went last night and met Andrew Ellis and a friend of his in the lobby and we managed to get into the presentation and spent about an hour bending the chairman’s ear voicing our complaints. I also stood up and exposed the company to whoever could hear, after a bit of fortification. This resulted in the UK Sales rep coming over to see us and he listened to what we had to say after initially trying to get us removed!“

The Palm Springs investors were also handing out leaflets to publicise the scandal (click here to view). Said another investor “This is only the start, if Riddoch and Sajwani think we are going to take this lying down, then they had better re-think.“ We have to agree with this sentiment; it is in the interest of Damac to resolve this issue quickly and fairly. After all, Palm Springs have been the most loyal supporters of Damac, having been patiently waiting for over 4 years for delivery of their apartments. One Palm Springs investor who is a lawyer by profession said “we’d prefer to be backing Damac 100% as soon as the situation is fairly resolved, just as we have been doing all these years.” We could not have put it any better.

Damac buyers consider legal action