The Qatar government through it’s real estate sovereign wealth fund, Qatar Diar, has agreed to financially support Barwa Real Estate by purchasing troubled Barwa assets worth USD 7.1 billion.
Data from Reuters suggests that Qatar Diar, now owns a 45 percent share of Barwa. The real estate firm had accumulated liabilities of around USD 10.2 billion by the end of 2012 due to over-expansion. An official Barwa statement said;
“The sale proceeds will be directed towards extinguishing the company’s debts, reducing financing costs and improving the company’s financial position.”
Under the deal, Barwa Commercial Avenue, Barwa Al Sadd, and some other upcoming projects will be sold to Diar. These projects feature commercial complexes, showrooms, residential units, a five star hotel and office towers in the capital city Doha.
During the first quarter of the current year, the company witnessed a drop in its profitability by about 46 percent. Last year, the company had announced its plans to cut staff and sell assets worth USD 4.4 billion in Qatar and Egypt to retire loans.
Even so, Barwa is expected to continue with its grand plans of developing a USD 5.5 billion island off the coast of Doha. The project will feature luxury villas, a water park, and five floating hotels to accommodate World Cup 2022 soccer fans.
Back in 2008, Qatar also stepped in to the rescue of debt-ridden real estate developers. More recently, Abu Dhabi developer Aldar Properties was provided financial assistance of USD 10 billion by the government to help repay its huge debt.
Qatar, the world’s largest exporter of liquified natural gas, has aggressive plans to invest in infrastructure and other projects as it prepares to host the FIFA World Cup 2022. A major part of the preparations involves stabilizing the property market, which is reeling under the pressure of oversupply and a plunge in prices following the global financial crisis.
The Qatar government, through it’s powerful and active sovereign wealth fund, has continued to instill high levels of confidence in the Qatari economy, adroitly and proactively balancing value shifts in the marketplace brought on by the 2008 global financial meltdown.