Contractors say no to property in lieu of payments

Contractors are being paid in the form of real estate

Speaking this morning at the Construction Week Dubai Conference 2009, Dutco Balfour Beatty general manager Grahame McCaig said that the offer of real estate in lieu of payments to contractors does not make sense.

“We've certainly been offered a huge amount [of real estate] to offset debts. But the issue for us is if for example we are given, let say 25 apartments, how do we then turn them into cash to pay our workers, subcontractors or suppliers?” asked McCaig.

“Cash is the lifeblood of the market.”

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Jones Lang LaSalle MENA head of investment transactions Ian Ohan agreed that lines of credit were proving costly to contractors, however, he suggested that developers and contractors may be able to find ways of making the relationship work.

“In many cases, the contractor has already done a huge amount of work. Now, if the contractor can find a way of covering that gap at cost price, they could do so in exchange for a preferred equity return.

“Effectively, the contractor could become, for example, a 25% shareholder in the developemnt and that could potentially lead to exceptionally high returns.”