Aldar and Deyaar report losses

The property developers Aldar and Deyaar reported first-quarter losses on Thursday, showing the difficulties in the downturn for companies lacking significant business beyond off-plan sales.

DUBAI, UNITED ARAB EMIRATES Ð Oct 8: Aldar stand in the Cityscape at Dubai International Convention and Exhibition Centre, Dubai.  (Pawan Singh / The National) For Business. *** Local Caption ***  PS54-CITYSCAPE.jpg
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The property developers Aldar and Deyaar reported first-quarter losses on Thursday, showing the difficulties in the downturn for companies lacking significant business beyond off-plan sales. Aldar Properties, the largest developer in Abu Dhabi, posted a loss of Dh314.2 million (US$85.54m) for the first quarter because of low sales of land and homes.

Deyaar Development, in Dubai, reported a Dh100m loss after taking "significant provisions" in the same period. "In this economy, you need diversified revenue that is recurring," said Saud Masud, an analyst at the Swiss bank UBS. In Abu Dhabi, developers have for the past year been increasing their rental property holdings and focusing on winning government contracts to build public housing. Sales have remained slow because of the downturn.

Without an influx of new sales or cheaper financing, these companies may start to find it hard to continue with some of their larger-scale projects, Mr Masud said. Aldar pointed to the "lack of sales" as the main reason it posted a loss for the quarter. The company saw its revenue drop in the first quarter to Dh227m from Dh496.6m in the same period last year. "There is no shying away from the challenges which we are all facing in the market," said Shafqat Malik, the chief financial officer of Aldar. "Obviously there is an absence of major land sales or property sales ? We saw no land sales and few property sales for the first quarter."

Mr Malik said Aldar had increased its rental portfolio of hotels and offices to the point where it generated Dh140m of revenue in the first quarter, compared with just Dh18.8m in the same quarter last year. "This is the long-term backbone of any business like Aldar," he said. "By 2012, 2013, you will see a significant portion of revenue coming from these recurring income projects." Emaar, the largest developer in the Middle East, has benefitted from this strategy.

It reported this month that it had a first-quarter profit of Dh760m on increasing revenue from its mall and hotel portfolios. Deyaar did not give details on its performance from the first quarter other than to reveal a net loss of Dh100m after "making significant provisions during the first quarter of 2010". A source close to the company said the provisions came from an increasing default rate among buyers.

Deyaar is facing the additional challenge of diversifying its income after having nearly finished all its projects. The developer is to deliver five buildings this year, but it has little in its pipeline beyond that. Deyaar recently underwent a major executive shake-up that saw its chief executive, Markus Giebel, depart after the resignations of the company's chief financial officer and its vice president for strategic planning.

bhope@thenational.ae