When Saudi Arabia's Kingdom Holding announced Emaar would help build the world's tallest tower in Jeddah, the news sent its stock soaring on the promise that the UAE property giant would lead a revival of fortunes for the industry. Three days later, it seems the celebration may have been premature. After days of silence, Emaar on Monday released a statement saying contract negotiations to build the 100 billion riyal (Dh98.06bn) Kingdom City have yet to be finalised. Amid the confusion, Emaar's stock made a quick retreat.
"Emaar has entered into an agreement with Kingdom Holding, acting on behalf of the Jeddah Economic Company for the development management of a large real estate project in Jeddah, currently planned to include a 1km [tall] Kingdom Tower," a statement to the Dubai Financial Market by Mohammed Alabbar, the Emaar chairman, said. "The agreement only stipulates providing Emaar resources for the management of the development process relating to the project and there is no requirement for Emaar to invest in this project."
That statement seems to conflict with that of Kingdom Holding, which said on Saturday it had chosen Emaar as developer and supervisor of the mixed-use project in Jeddah. Mr Alabbar said Emaar did not announce the deal at the same time as Kingdom Holding as all required agreements had not been finalised. He said Kingdom Holding made the announcement without informing Emaar. Kingdom Holding was unavailable for comment yesterday.
Mr Alabbar said the project was still undergoing a feasibility study. In early trading on Sunday, Emaar's shares surged 7.1 per cent to Dh4.18 on the news, but tumbled 5.74 per cent on Monday amid uncertainty about the deal. Its shares dropped another 1 per cent yesterday, closing at Dh3.90. A Dubai analyst called the controversy a "public relations disaster". "It has affected the whole market here," said Aymen el Saheb, the head of operations at Drahem Financial Brokerage in Dubai.
"It is not the fault of Emaar as there are several terms in the agreement which are to be negotiated and premature disclosure by Kingdom Holding prompted a volatile trade in Emaar shares. We expect the market to calm down a bit after Emaar's clarification." Kingdom City will include Kingdom Tower, which at 1,100 metres would be the world's tallest building, taking over from Emaar's 818-metre tall Burj Dubai.