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2005: boom ... 2013: back to basics

The existence of two multibillion-dollar government-backed developers in an oversupplied property market no longer makes commercial or competitive sense.

Among the otherwise grubby contents of my toolbox is a shining object coveted by carpenters from Cricklewood to Khartoum.

A silver commemorative tape measure given to me at the May 2005 launch of Aldar brings a bit of bling to even the most mundane of curtain-hanging tasks. If James Bond had a clip-on tape measure, it would look like this. Aldar has brought plenty of glamour and glitz to the Abu Dhabi property market with Ferrari World, Al Raha Beach and other projects. Its merger with Sorouh brings a much more needed dose of practicality.

The existence of two multibillion-dollar government-backed developers in an oversupplied property market no longer makes commercial or competitive sense.

Both groups served a purpose as separate entities when they were born almost eight years ago, rapidly delivering a number of large-scale projects - although with slightly different operating models. Aldar spearheaded the vast strategic commercial and cultural projects in the capital while Sorouh generated much of its revenue as a master developer selling land plots for others to build on.

Today the wider property market of the capital is in a phase of consolidation and the merger reflects this trend.

The joining of Aldar and Sorouh could provide a template for further consolidation in Dubai, where large government-backed and heavily indebted property developers continue to coexist.

The sharp fall in Dubai credit default swaps this year reflects improved investor sentiment towards the emirate and some of its property-related entities. It is an opportune moment not just to refinance but to cut more costs by eliminating overheads, merging land banks and focusing marketing efforts.

It could be time for the merger and acquisition experts to run the measuring tape over them as well.

The tools are there - they just need to be taken out of the box.

 

scronin@thenational.ae

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