It is not considering a merger with rival Nakheel, which has about US$20b of debt
Dubai’s Emaar Properties will focus its efforts abroad and on non-property sectors such as hospitality and hospitals, the company said yesterday, as a real estate crunch hits its home market.
On the day it was due to open the world’s tallest building, Burj Dubai, Emaar said it was not considering a merger with unlisted rival developer Nakheel, which is at the centre of a US$26 billion debt storm involving its government-held parent company Dubai World.
Emaar said the US$1.5 billion tower would provide a 10 per cent yield for the firm and that the opening would boost earnings for most of 2010. But investors took little heart from the outlook and sold Emaar shares down 2.2 per cent, pulling Dubai’s broader index down 2.1 per cent.
Emaar cancelled a merger in December with the property units of Dubai Holding in a dramatic strategic reversal following the financial implosion of companies tied to government-owned Dubai World, one of the emirate’s largest conglomerates. Dubai Holding is owned by the ruler of the Gulf emirate.
‘All the studies which we made, we couldn’t find a way ahead and it wasn’t the right time for a merger at this time,’ said Issam Galadari, chief executive of Emaar Dubai, at a media briefing.
Chairman Mohamed Alabbar told reporters there were no plans to merge with Nakheel, the largest property company in the Middle East, which is struggling under a collapse in earnings and a debt pile worth around US$20 billion.
The Emaar executives put a brave face on the launch of Burj Dubai, saying it was a positive move forward as the emirate’s property prices stabilised, despite wider expectations for continued stress in Dubai’s real estate sector.
‘You have to ask why we are building all this? To bring quality of life and a smile to people and I think we should continue to do that,’ Mr Alabbar told journalists. ‘Dubai is where our life is. We have beautiful long-term plans for development in Dubai,’ he said.
Emaar is the Arab world’s largest listed developer.
The needle-shaped concrete, steel and glass Burj Dubai, described by its developer as a ‘vertical city’ as it dwarfs existing skyscrapers, boasts new limits in design and construction.
Emaar has maintained the suspense over the final height of the skyscraper, saying only that it exceeds 800 metres. But it revealed yesterday that the tower will have over 200 floors, only 160 of which will be inhabited, while the remaining floors will be for services. The tower’s opening has been delayed twice and, unlike other projects, survived cancellations after the crisis hit the once-booming city.
‘We build for years to come. Crises come and go,’ said Mr Alabbar. ‘The world has gone through two years of difficult times. We must have hope and optimism.’
When Dubai’s ruler Sheikh Mohammed bin Rashed al-Maktoum opens the world’s tallest tower, it won’t be the world’s fullest.
The occupancy rate at Burj Dubai may reach 75 per cent this year, with office leasing proving the biggest challenge for investors, said Roy Cherry, an analyst at Shuaa Capital PSC. ‘Those who bought with the intention of leasing will face a difficult time, because few companies today can justify paying premiums for luxury,’ Mr Cherry said.
In the five years it has taken to build the tower, the sheikhdom’s debt-fuelled property market has gone from the world’s best performing to the worst, forcing officials to renegotiate loans and seek bailouts from neighbouring Abu Dhabi.
Apartment prices in the tower, which soared as high as 10,000 dirhams (S$3,809) per sq ft at the 2008 peak, have dropped to less than half of that.
‘It may still run at a premium to the rest of the market, but I’d be surprised if there were no defaults and if vacancy rates didn’t creep up’ since a large proportion of the developer’s sales were financed through mortgages, said Saud Masud, a Dubai-based analyst at UBS. ‘This is a symbol of the economic momentum that Dubai had and an ironic reminder of its property bubble.’
Source: Business Times, 5 Jan 2010
No comments:
Post a Comment