dubai skyscraper 88 248.
(photo credit: Bloomberg)
The Saudi investment firm run by a Saudi billionaire with a big Citigroup stake is pressing ahead with plans to build the world's tallest building despite the global meltdown.
The announcement comes as the OPEC powerhouse nation taps cash surpluses from crude oil's record rally last year to offset the effects of the global recession. A new bond market was also launched on the Saudi exchange on Saturday, opening up the financing options to companies constrained by tight lending conditions elsewhere.
Kingdom Holding Co., headed by Prince Alwaleed bin Talal, said it had selected Dubai-based developer Emaar Properties to oversee development of over one-kilometer-tall Kingdom Tower and Kingdom City. The 100 billion Saudi riyal ($27 billion) twin projects in the western port city of Jeddah are billed as among the largest ever undertaken in Saudi Arabia.
While Saudi has seen billions in projects delayed or canceled, the government has been quick to "step up their own contract awards in order to make up for the slippage in the pipeline of private-sector projects," said Howard Handy, chief economist at Saudi's Samba Financial Group.
"Although there has been a slowdown... we don't expect this to be very deep or very prolonged because most of the projects in the kingdom are well-funded and will be viable over the medium and longer term," Handy said.
Emaar, one of Dubai's biggest developers, is already building what is already the world's tallest building in the glitzy United Arab Emirates sheikdom. That tower, Burj Dubai, has topped out at about 800 meters and is due to open later this year.
Alwaleed, who is ranked the world's 22nd richest man by Forbes magazine, said in a statement Saturday that the Dubai government-affiliated firm was selected because of its experience in such megaproject.
Emaar did not respond to a request for comment.
The Kingdom Tower, which would be more than twice as tall as New York's Empire State Building, is touted as the centerpiece of the Kingdom City project, a broader venture that covers 23 million square meters (59.6 sq. km.) of residential, commercial, educational, retail and hotel facilities about 20 km. from Jeddah's old city.
Kingdom City - expected to house 80,000 residents - was first announced several years ago. It reflects Saudi Arabia's push to expand its economic and social hubs, and diversify its economy to better deal with the needs of an increasingly younger population in need of housing and jobs. The company did not provide a time line for construction or a breakdown of costs.
Saudi officials, whose country sits atop the world's largest proven reserves of crude oil, have said they will spend about $400b. over the next five years on major projects. In large part, the government is upping spending - at the risk of running its first deficit in years - to sustain growth and offset the impact of project cancellations or delays.
International real-estate consultants Jones Lang LaSalle said in a report earlier this month that Riyadh had awarded about $137b. in public projects between October and April, far eclipsing the roughly $62b. in cancellations or delays in the country.
Saudi's push reflects the kingdom's strength relative to some of its Gulf Arab neighbors, who have been hit harder by the global downturn.
Emaar's home-base of Dubai, for example, is struggling with debt from a years-long building boom. Tighter credit markets, a drop in foreign investment and a sharp fall in property prices have led to the shelving of a number of high-profile projects, including one by competitor Nahkeel to build another world's tallest building.
Emaar's first-quarter profit tumbled 73 percent from a year earlier to $65 million, and the company has come under pressure from shareholders upset over a steep drop in the company's stock price.
"In the broader context, the kingdom is in a much stronger situation than Dubai," said Samba's Handy. "We've had some delays in the project pipeline, but broadly the kingdom is well-equipped and well-funded to press on with the project program."