Aldar and Emaar Properties, the UAE's two largest real estate developers, have formed a strategic alliance to develop Dh30 billion worth of local and international projects, a sign of a maturing property market, according to analysts.
The agreement, signed on Tuesday by Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, and Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, is by far the biggest collaboration between developers from different emirates.
“We are happy to witness the signing of this partnership, which will contribute to our development journey and help enhance the UAE’s position as a tourism destination of choice,” said Sheikh Mohammed bin Rashid.
“We want our companies to be at the forefront of our development and collaborate with each other to explore creative ideas for strengthening the UAE’s leadership, and enhancing the happiness and quality of life of our people.”
Under the terms of the agreement, signed by Aldar chairman Mohamed Al Mubarak and Emaar chairman Mohamed Alabbar, the developers will initially collaborate on two UAE-based projects: Saadiyat Grove in the heart of the cultural district on Abu Dhabi's Saadiyat Island, and the Emaar Beachfront project, a private island in Dubai located between Jumeirah Beach Residence and Palm Jumeirah.
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“My brother Mohammed bin Rashid and I are delighted to launch a strategic partnership between Aldar and Emaar, consolidating our efforts to enhance the competitiveness of our companies and institutions globally,” Sheikh Mohammed bin Zayed said on Twitter on Tuesday.
Strategic partnerships by real estate developers in different emirates have been rare thus far, but can ease pressure on cash flow, according to analysts.
“Aldar and Emaar have both cemented a strong reputation in the UAE – and the wider Mena region, particularly Emaar [internationally] – for quality of their developments and transforming the Emirate where they were founded into world renowned destinations,” said Taimur Khan, a Dubai-based senior analyst at real estate consultancy Knight Frank.
“Joint ventures such as this have their benefits for both parties as it provides them access to prime land and can help reduce pressure on cash flows during the build cycle.”
The most prominent collaboration to date has been Eagle Hills Sharjah Development, a collaboration between Abu Dhabi-based developer Eagle Hills and the Sharjah Investment and Development Authority (Shurouq). The collaboration, which in January announced Dh2.7bn worth of Sharjah projects, is chaired by Emaar’s Mr Alabbar.
The partnership between Aldar and Emaar is unlikely to lead to a merger between the two entities, according to Mr Khan.
“The factors that drive such JVs are access to land banks and the reduction of cash outflows not necessarily long-term mergers,” he said.
“Such partnerships will continue to show the maturing nature of the UAE’s property market and the growth in investments from recognised developers bodes well for the future outlook as it provides a degree of confidence to investors.”
Dubai and Abu Dhabi property markets have slowed in recent years in the wake of a three-year oil slump, that appears to have come to an end with the rebound in energy markets and Brent rising to above US$60 a barrel. A rising supply of residential developments has also contributed to a slide in sale prices and rents which has weighed down on the share price of some developers.