Lines of poetry have been buzzing in my head since I was in Dubai last week. The buzz got louder yesterday with the announcement that the Dubai government can’t afford to pay a $4 billion Nakheel bond, which is due Dec. 14. The Dubai government wants another six months to repay the debt.
Luckily, all I have is a buzz in my cranium. European Tour chief executive George O’Grady must have a major headache right now.
Like me, O’Grady has just returned from Dubai, where he presided over the highly successful inaugural Race to Dubai. Europe’s top man said he was “extremely confident” that the European Tour would be back in the Emirate next year for the second installment of the Tour’s end-of-season championship.
Two things. One, he would say that, wouldn’t he? Two, I think he was extremely confident in the way a swan looks extremely confident while gliding across a pond. Like the swan, O’Grady was no doubt paddling furiously last week to make sure the Dubai government lives up to its five-year European Tour commitment.
If O’Grady was paddling hard last week, then he probably feels as if he’s drowning this week after reading the financial news coming out of Dubai.
How must investors worried about a return on their money feel about 58 professional golfers getting a share of $15 million when the Dubai government can’t find money to pay off its debts? Not good is the obvious answer.
The good news for those 58 players is that the Tour received the Race to Dubai money a few weeks before the Dubai World Championship. At least some people are getting money out of Dubai.
O’Grady’s task hasn’t been made easier by the revolving door at Dubai World, the government-backed parent company of property giant Nakheel, which also is shedding jobs at an alarming rate. O’Grady must be feeling a sense of déjà vu, given that original sponsor Leisurecorp went through the same process of getting rid of most of its work staff.
The setting for last week’s Race to Dubai must also worry O’Grady. The whole reason for holding the Race to Dubai on the Greg Norman-designed Earth course was to sell luxury villas. Leisurecorp insists that the villas have been sold, but if they have, then there doesn’t seem to be much money left to finish them.
It’s hard to get information out of Dubai, but my hunch is that investors may have put down payments on the villas but most are probably willing to lose the down payment rather than throw more money at a property in a part of the world that has bottomed out.
For example, my sources tell me that only 30 golf memberships have been sold at Jumeirah Estates.
Perhaps the biggest worry for O’Grady is the assurance he was given earlier this year that the Dubai government would honor its contract with the Euro Tour. Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of UAE and Ruler of Dubai, gave a public pledge to the financial center earlier his month that his government would honor Dubai World’s debts.
The financial world took him at his word only for him to backtrack this week.
Nakheel’s $4 billion debt is nothing compared to the estimated $80 billion the Dubai government owes in loans. In the grand scheme of things, $15 million might be chicken feed compared to the above numbers, but it’s huge to the European Tour.
At this point in time it would be a brave gambler who would bet on the Tour returning to Dubai next year.
Dubai appears to be in meltdown, which doesn’t surprise me.
I’ve been going to Dubai nearly every year since 1990. I’ve never understood the attraction of the place, never fathomed why the sheikhs thought it could become a major financial center, or why companies would want to establish bases there. After the way things have gone the last two years, it seems more people have jumped on my bandwagon.
And those lines of poetry? They come from Percy Bysshe Shelley’s ‘Ozymandias.’
“Look on my works, ye mighty, and despair!/Nothing beside remains. Round the decay/Of that colossal wreck, boundless and bare,/The lone and level sands stretch far away.”
Will the European Tour suffer despair in Dubai? Has the City of Gold lost its luster? Will those giant, garish skyscrapers and needless, giant palm islands fall into decay?
These are just a few of the questions concerning Dubai. O’Grady and the European Tour have a few more of their own.