Real Madrid canceled a planned $1 billion soccer-themed resort in the United Arab Emirate of Ras Al Khaimah after the project’s organizer defaulted on payments, the club said.
The licensing accord with RAK Marjan Island Football, the Luxembourg-based organizer of the project, was scrapped after it defaulted on payments and “didn’t provide guarantees,” Real said in its financial report distributed in Madrid yesterday.
Louis-Armand de Rouge, chief executive officer of RAK Marjan Island Football, didn’t return calls by Bloomberg News seeking comment.
The world’s richest soccer club said last year it was lending its name to a resort that would include a 10,000-seat stadium, a marina, residential and retail properties, a football training academy and a 450-room five-star hotel. The development was set to be completed by 2015 on the 40-hectare (99-acre) artificial Marjan Island. The resort was announced in a ceremony attended by Ras Al Khaimah ruler Sheikh Saud bin Saqr Al Qassimi and former French soccer star Zinedine Zidane.
“It’s very hard to raise finance domestically let alone internationally for those projects,” Digvijay Singh, an analyst at VTB Capital Plc, said yesterday. “To me, it was just a matter of time before the project was called off as the interest was just not there.”
The project’s developers had projected it would attract 1 million visitors a year to Ras Al Khaimah, one of the seven emirates the make up the U.A.E. The sheikhdom, which has little infrastructure compared with bigger neighbors Dubai and Abu Dhabi, had 835,000 visitors in 2011, according to its tourism authority, compared with Dubai’s 9.3 million.
The Real Madrid project was one of the first announced in the U.A.E. after the global credit crisis caused a property bubble to burst. Home prices slumped 65 percent in Dubai and 50 percent in Abu Dhabi in 2008, while major projects including a $1.1 billion Tiger Woods-branded golf resort were shelved. Since then, a nascent recovery is taking place in Dubai, leading to price increases that surged at the fastest pace in the world by the end of the second quarter compared with a year earlier, real estate consultancy Knight Frank said in a survey earlier this month.
Just three months ago Dubai’s prime corporate property buyers couldn’t raise money from international banks and “even now we are at the very beginning of the credit cycle as far as corporates are concerned,” VTB Capital’s Singh said. “For Ras Al Khaimah to think they could raise the money in the international market is a bit far-fetched.”
RAK Marjan Island Football assumed all the financial risks of the project, Real Madrid said in its report. The soccer club, which agreed to a 22-year license, said it will search for alternative projects in the U.A.E., without giving more details.
Real Madrid posted net income of 36.9 million euros ($50 million) for the 12 months through June 2013. That’s 52 percent more than the year earlier period after prize money from competitions and exhibition games climbed, according to the annual report. Sales rose to 520.9 million euros, a 1.3 percent increase.
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