fadesa/Addoha

[simon b]

Present: Paul Staines (Saffron Villas)
Karim Elabeid (Saffron Villas)
Kenza Sefrioui (Addoha)
Ben Bachir (Counsel to the President, Addoha)
El Ayoubi (Vice President, Addoha)


Held at the office of Addoha, Casablanca 7th April 2008

I had a meeting with three senior executives of Addoha at their offices in Casablanca to discuss the current situation regarding Saidia. Addoha are a major Moroccan development company (capitalisation in excess of €6bn) who, last December, purchased a 50% share in the Moroccan activities of Martensa Fadesa. As part of the agreement, Addoha also took responsibility for the management of these businesses.

Over the past 6 months a number of issues have been raised in relation to Saidia and Fadesa. Many of our clients who have purchased on Saidia have been attempting to complete on, and take occupation of, their properties on AP-6, AP-4 and AP-2, with varying degrees of success. There has also been significant activity on numerous UK chat rooms expounding and debating various rumours regarding Fadesa’s financial position, progress on site, and the position of the hotels, as some of the hotels have stopped taking bookings for this year. All these issues were addressed.

1. Regarding the question of Fadesa’s financial stability, Addoha were obviously not in a position to explain the current situation regarding Fadesa’s financial position as they do not have access to the internal financial information of Martensa Fadesa Group. Recent press does however report that Martensa Fadesa have successfully rescheduled their current debt (amounting to €5bn) in line with their current financial situation which has been affected by two factors:
a. The global credit crunch and the knock on effect on property markets worldwide.
b. The current issues relating specifically to the Spanish market which has become increasingly illiquid over the past 6 months.
Addoha did however explain that they have pre-emption rights over the remaining 50% of Fadesa Morocco that they do not currently own, and that if necessary they would certainly exercise these rights to protect their investment, and by association the investment of our clients who have purchased property on the Fadesa projects.
2. Secondly we discussed the current employment situation on Saidia, and the rumors of strikes. The situation regarding the payment of subcontractors on Saidia is that these payments are currently on hold whilst Addoha, who have taken over management responsibility, review the contractual position and put the necessary contractual and other systems in place to satisfy their internal management systems. They are not attempting to get out of any agreements, rather to ensure that all existing agreements are documented and formalized. This includes signing contracts with many of the sub contractors where no formal agreements are currently in place. As a result, payments to many sub contractors are being held up. The financial position of SAS, and the other companies in the Fadesa Moroccan portfolio is strong, and all monies due will be paid once the outstanding items are audited. With proper agreements in place the sub contractors can then also look forward to a continued relationship on a much stronger basis, with regular and timely payment of their accounts. Addoha have a senior management team, including El Ayoubi, travelling to Saidia to undertake this work. The work is expected to take between 2 and 4 weeks, and construction work is therefore expected to be back to full strength within this time.
3. Regarding the Hotels on Saidia, only one hotel, Iberostar, has taken a formal position on Saidia, In respect of the remaining anticipated hotels Addoha have delegated the responsibility of concluding hotel contracts to CFG Group, an experienced Moroccan organization headed by the former Moroccan tourism minister, as hotels are outside Addoha’s area of experience. Their first priority is to formalize the agreements with Barceló and the other operators who currently have informal agreements to take hotels on site. In parallel CFG are in discussions with other hotel operators and investors with the urgent aim of securing additional hotels for the site.
4. As a result of the hotel issues, coupled with other delays in delivering a site ready for occupation, and delays by the Government in delivering the upgrades to Oujda airport and the connecting road, the formal opening of the resort is now expected in the second quarter of 2009. Addoha are currently preparing a schedule of how this will affect the completion and handover of properties.
5. In respect of the handovers currently in progress on AP-6, AP-4 and AP-2, Saffron Villas have agreed to provide full details of the current outstanding issues to Addoha who have committed to address them as soon as possible. Once Addoha have the information we will discuss and agree timescales for resolution of these issues. These will then be relayed to the appropriate clients. Most of the issues are relatively minor snagging issues which should be easy to resolve. The Addoha team will also meet our local representative, Mounir Belmahi, on site to identify the scale of these issues.
6. In respect of RT-1 (Magnum), which was sold as a premium product, in most respects this quality is being delivered. There are however some concerns relating to certain elements of the build and finish quality. Addoha has agreed to review these concerns and get back to us.
7. Lastly, we discussed the possibility of a senior executive from Addoha coming over to the UK to meet with and explain the current situation to the UK agency network. This proposal is under consideration.


I believe from this meeting that Addoha are serious about rectifying the current issues on Saidia and moving forward to deliver the resort that we are all expecting. It is obvious to us all that there have been many issues which have arisen over the past 6 months that have dented everyone’s confidence in Fadesa. Addoha seem committed to working together with us in a calm and constructive manner and I am confident having had this meeting that we can put this period behind us and all enjoy our in

[camel with three humps]

Thank you, Simon P, although I have not invested in Saidia, but in interested to read for my knowledge and the general business environment in Morocco.

[Mr Ri]

Simon

Thanks for your post, which is a reassuring tinged with disappointment (regarding more delays). I have invested at Mediterrania Saidia, but not on the Fadesa developments. Nevertheless, this news effects us all. Any further information you can provide will be most appreciated. A major step forward would be if Addoha can be convinced to develop, publish and maintain a credible programme for the major infrastructure elements.

[The Soup Dragon]

Welcome Simon

I note this is your first post. Please explain who you are and any interests you may have in Fadesa, Addoha, Saidia or Saffron Villas.

[camel with three humps]

Mr Ri,
In the over all scheme of things any delay should not be a issue. As you are finding out that in the absence of infrastructure and where you are relying on another developer to provide this you could be a victim of collateral damage.

[Investy]

Delays and porblems should always be expected with any large development.

I always thought it highly unlikely any hotel would open without there being a credible substantive tourist offering in place, and certainly not when the development resembles a building site.

If I were a hotel operator I would probably not open until the airport was ready and most of the development complete.

I cant see a viable tourism proposition emmerging until at least summer 2010, which is fine by me, I'm not too hung up on getting an immediate rental return if it so happens my property completes before the site as a whole.

I wonder whether the King is aware of the Fadesa issues?

[camel with three humps]

Investy: I share your views 100% on delays/infrastructure and not opening the hotels.

The king is well aware and why do you thing the project has been pulled from Fadesa. The Kings cousin or nephew is involved with Addoha and has reputation to deliver.

Saidia was the first of the plan Azur and Kings reputation was at stake not only in Morocco but the world.

[simon b]

Originally Posted by The Soup Dragon

Welcome Simon

I note this is your first post. Please explain who you are and any interests you may have in Fadesa, Addoha, Saidia or Saffron Villas.

Hello to you all my name is Simon I live in Portsmouth. I have been a keen buy to let invester and developer for 16 years. became concerned about uk house prices 2 years ago so sold my investment properties and just retain 3 with no liabilties began to invest abroad 3 years ago Bulgaria pre of plan then in late 2006 the Greens through Saffron Villas and in the future some property invesment funds/trusts.

[Investy]

Camel, lets hope the Kings relative has an eye for detail. The lamp posts and other electrical furnishings really dont cut it. People say the golf course is too flat, although I think its difficult to tell from photos (a commentator says he was surpised how different the Augusta course looks in real life compared to on TV - which illustrates the principle photos can be deceptive).

[Investy]

Simon, welcome aboard.
Your story reads like mine, I also sold UK B2Ls.