1) Actual (Strategic) Value of “Distressed” Real Estate: Dubai World, the government-affiliated parent company under scrutiny, is strapped with an estimated $24B in debt,including $7.3B in deteriorating real estate assets held by their Nakheel subsidiary. On paper, these assets are distressed. In brick-and-mortar reality, they include new-to-market commercial and residential units that help define the Dubai skyline. Vacancy rates are transitory, but quality real estate will return value if strategically positioned as part of a larger initiative or economic plan. A shift, for example, in the commercial focus from financial services and tourism to energy, such as the creation of a solar-powered city, could restart investment and development.

2) Primacy of DP World: Dubai World’s marine and port subsidiary, DP World, maintains deep-water terminals in over 30 countries from the Americas to Asia. It is simply too valuable a commodity (commercially and politically) for the government to abandon to creditors in courts. DP World’s port presence across the globe is central to the UAE’s identity and prestige.

3) Capitalism 2.0: The Dubai crisis was an inevitable and necessary step in the maturation process of an emerging free-market economy. Sheik Mohammed bin Rashid Al Maktoum’s undisciplined approach to development, coupled with investors who naively assumed their bets were covered by state revenues derived from oil, created conditions that plunged the Emirate $80B in debt. Despite the poor timing of Dubai  World’s announcement of a standstill just prior to the Muslim holiday of Eid al-Adha, Dubai and its flagship company should emerge from the crisis with a new sense of purpose and propriety. Abu Dhabi will likely take the lead in helping Dubai restructure its financial institutions and reshape its strategic thinking as part of a wider effort to regain a measure of market integrity and public trust.

4) Human Capital: Dubai’s “oil reserves” are its people. They are educated (77.9% literacy rate), able, and multi-lingual with commands of Arabic, Persian, English, Hindi, and Urdu. The  serious, sophisticated investor recognizes this as a key attribute in any successful venture. Human capital is the critical “X factor” on a balance sheet.

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