Real Madrid canceled a planned $1 billion soccer-themed resort in the United Arab Emirates after the project’s organizer defaulted on payments.
A licensing agreement with RAK Marjan Island Football, the Luxembourg-based organizer of the project in the emirate of Ras Al Khaimah, was scrapped after the company defaulted on payments and “didn’t provide guarantees,” the Spanish soccer team said yesterday.
Louis-Armand de Rouge, chief executive officer of RAK Marjan Island Football, didn’t return calls seeking comment. Real Madrid said the club assumed no financial risks in the plan.
The project was announced in an April 2012 ceremony attended by Ras Al Khaimah ruler Sheikh Saud bin Saqr Al Qassimi and former French soccer star Zinedine Zidane, who is Real Madrid’s sporting director. The plan included a 10,000-seat stadium, a marina, residential and retail properties, a football training academy and a 450-room five-star hotel on the artificial Marjan Island.
“It’s very hard to raise finance domestically, let alone internationally, for those projects,” Digvijay Singh, an analyst at VTB Capital Plc, said yesterday. “To me, it was just a matter of time before the project was called off as the interest was just not there.”
The project’s developers had projected it would attract 1 million visitors a year to Ras Al Khaimah, one of the seven emirates that make up the U.A.E. The sheikhdom, which has little infrastructure compared with bigger neighbors Dubai and Abu Dhabi, had 835,000 visitors in 2011, according to its tourism authority. Dubai had 9.3 million.
The cancellation is the latest sporting setback for Marjan Island. In 2009, the government agreed to build facilities for America’s Cup teams and sponsors on the island in return for the publicity the world’s oldest and most prestigious sailing race would generate for the emirate. The race never happened there after a New York judge upheld a rule stating that competitions held from November to May must take place in the southern hemisphere.
The Gulf region will hold the soccer’s World Cup for the first time in 2022 after Qatar won the rights to host the event. The plan is embroiled in controversy amid efforts by FIFA, world soccer’s governing body, to move the tournament to winter from summer, when temperatures in Qatar can reach 50 degrees Celsius (122 Fahrenheit).
The Real Madrid project was one of the first announced in the U.A.E. after the global credit crisis caused a property bubble to burst. Developments including a $1.1 billion Tiger Woods-branded golf resort were shelved after the market crashed.
Dubai is seeing a nascent recovery in its property markets, with prices rising at the fastest pace in the world in the second quarter from a year earlier, broker Knight Frank LLP said in a survey this month.
Just three months ago, Dubai’s prime corporate property buyers couldn’t raise money from international banks and “even now we are at the very beginning of the credit cycle as far as corporates are concerned,” VTB Capital’s Singh said. “For Ras Al Khaimah to think they could raise the money in the international market is a bit far-fetched.” Farfetched
RAK Marjan Island Football assumed all the financial risks of the project, Real Madrid said in its report. The soccer club, which agreed to a 22-year license, said it will search for alternative projects in the U.A.E.
“This shows name alone can’t carry a project and bring investors,” said Taher Safieddine, a Dubai-based analyst at Shuaa Capital PSC. “Investors now look at the track record of a developer, its ability to raise money and finish the development.”
Real Madrid posted net income of 36.9 million euros ($50 million) for the 12 months through June 2013. That’s 52 percent more than a year earlier after prize money from competitions and exhibition games climbed, according to the annual report.
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