Thursday, March 02, 2006

A Rich Landowner in Sharjah?

I met a young Emirati lady named Fatima (named after the Spanish shrine to Our Lady). She is related to the Sheikh of Sharjah, and he gave her 32,000 square meters of land. She has had the land appraised at €3,000,000, making her a rather wealthy young lady. Only, like jewelry, the appraisal and what she can actually get for it seem to be somewhat divergent.

She'd like to feel like a millionairess, which requires rather more than 32,000 square meters of empty desert with her name on it.

About a year ago, Farook, a real estate agent, dragged me to look at a school that was sitting empty. He said, with my Western degree, I would have no trouble getting a license to open the school, which was selling for €5,500,000, but he could get it for me for only €5,000,000. (He'd heard that the school was selling for €3,500,000, and was planning to take my €5,000,000, then pay the owner €3,500,000 and share the difference with his cousin.) He said, if I just put up the €5,000,000, I wouldn't have to do anything, he could get me all the teachers I'd need (his family and himself), I'd just have to sit back and count the money.

I tried to explain that a) I didn't have €5,000,000; and b) if I did, I wouldn't want to open a school with it.

Since Farook has a large family and pays a fortune in tuition, he thought I knew what a good investment the school would be, and couldn't understand why I didn't write a cheque on the spot. His English, or rather lack thereof, combined with his wish fulfillment meant that he couldn't understand my explanation of why I wasn't writing the cheque.

I did offer to write a newspaper ad, but first asked Farook for written details about the school, so I could make sure the ad was accurate. I never got them. Farook had never met the owner, he'd just been contacted by a cousin from Sharjah, and he'd immediately thought of me. I wrote the ad without the details, just based on what I'd seen, and Farook said he was going to put the ad in the newspaper and share the commission. Of course, he never did.

Meanwhile, each Western client of his real estate agency was told about this fantastic investment opportunity, and a Scottish lady named Ann said she knew people who were looking for a school. For reasons which escape me, Farook invited me to meet this lady.

'I want to present this school to some investors, but I need the blueprints,' she said.

'No need, we go now to see school. You like, you take, no need blueprints.'

'I have to present the blueprints to the investors. I'm not buying the school, and my investors want to see blueprints before they make the trip to Dubai.'

Eventually, Farook took me to meet the owner, who said she'd already sold the school (she hadn't) but her niece Fatima had a piece of land and permission to build a school. I asked Fatima to send me the blueprints for her land and school. I'd been waiting almost a year for those blueprints, when Farook called to say Ann really wanted a school, and asked if I could help.

So I took Ann and Farook to see Fatima and her aunt, The Aunt doesn't speak any English, but Farook and Fatima translated. (Their translations were not consistent.) The Aunt said she wasn't happy with the group that was supposed to take her school (the one I'd already seen), and asked if Ann wanted it. Ann said 'Yes, but I need to see the blueprints.' Fatima promised that she would send her aunt's blueprints, and we left. No blueprints arrived. I called, and Fatima said her aunt had, once again, sold her school, but Fatima's school (or rather her idea for a school) was available. I suggested we get together and talk, and Fatima said 'Please do not bring Farook,' so Ann and I went to see Fatima, who was with her aunt.

Fatima explained that she has empty land, and permission to build a school on it; however, she does not have permission to open the school, because she signed on as sponsor for an illegal school (every business in the UAE must have a local sponsor, even illegal ones). She can't open a new school until the illegal one is closed, but it has a contract which Fatima doesn't want to break until the new school is ready.

The school building Fatima wants to rent out will cost about €1,500,000 to build, but that's just the shell. Fitted out as a school, it will cost around €2,000,000. And no bank will loan Fatima any money for the building. Fatima can't put the land up as collateral, since it was a gift from the Sheikh, and she can't transfer ownership to anyone else.

Her plan is for someone to put up €2,000,000 cash to build the school, which, since it's on her land and since foreign ownership is limited to 49%, she will own 51%. The investor will then have to pay her rent of at least €200,000 a year.

Ann doesn't know anyone who wants to put up €2,000,000, with the understanding that their equity will only be €999,999, and they will have to pay €200,000 a year to rent their own building back.

So Fatima has assets of €3,000,000, but no way to use them for anything. Except maybe a picnic in the desert.

Then the aunt said, 'So where is our money? You told us a year ago you wanted this school, and we have held it for you for this entire year, though we have had many offers, but now we have a Pakistani buyer who is desperate, since there are many, many Pakistani children in Sharjah, and there is a need for Pakistani schools for them, so we can't hold it any longer.'

We promised we'd get back to her, then Ann and I left.

[NB. Fatima's aunt told me she spent €3,500,000 to build her school building. With the land, she wanted to sell it for €7,750,000, but ended up leasing it for €330,000 a year, so it's not clear what €5,000,000 would have bought me, if I'd been daft enough to give it to Farook. No one is legally allowed to own any property here, except for Citizens, and even Citizens' can't sell or transfer land that was a gift from the Sheikh, so it's not clear how, or to whom, either Fatima or her aunt hoped to sell their schools. The aunt, at least, is currently collecting €330,000 on her investment of €3,500,000 for the school building, and Fatima is getting paid by the illegal school to be their sponsor, so neither woman is starving, but they have a lot less than they think they should. As do we all.]

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