Deyaar Development, Dubai's second-largest property developer, has sold much of its property and land to a "related party" in a move that will reduce its role as a property developer and grow its management business.
Deyaar in big land and property sale
Deyaar Development, Dubai's second-largest publicly traded property developer, has sold more than Dh2.2 billion (US$598.9 million) worth of property and land as it switches focus from developer to landlord. Deyaar sold the property to an unnamed "related party".
Financial statements show that Deyaar entered into an agreement to sell Dh1.33bn of property held for future development and land stakes worth Dh899.58 million as of December 30.
The previously undisclosed sale boosted revenuefor the year but still left the company with a Dh2.3bn loss after a major write-down of the value of its assets.
"It looks like they are just going to be a management company now," said Chet Riley, an analyst at Nomura Securities in Dubai
Deyaar did not identify the "related party" to which it had sold property, but analysts mentioned Dubai Islamic Bank (DIB) as a potential buyer.
The bank, which is 29.8 per cent owned by the Dubai Government, owns 40 per cent of Deyaar. A DIB spokesman declined to comment yesterday.
The agreement stipulates that Deyaar will receive the proceeds of the sale by June 1, 2016, and that the payment can be cash or in another form specified by the buyer.
Investors and observers have been waiting almost a year for guidance as to how the company's executives will find new ways of earning cash. Last April, three of its top executives, including Markus Giebel, the chief executive, left the company.
Last week, Deyaar said it would focus on the growth of its property and facility management operation, which oversees 14,000 units.
"As we enter a period of increased stability in the UAE property sector, in line with more positive macroeconomic conditions, Deyaar now looks to 2011 with renewed confidence, as well as with an enduring focus on customer care and service innovation," said Saeed al Qatami, the acting chief executive. Even with the sale of land and property, the company suffered its worst financial year to date last year. Deyaar had revenue of Dh2.6bn, but combined operating expenses and Dh2.22bn worth of provisions, revaluations and impairments left it with a major loss.
DIB, Deyaar's largest shareholder, has taken a more active investment role in the property sector over the past year. In September, it raised its stake in Tamweel to 57.33 per cent and injected new funds so that the mortgage provider could restart lending. DIB also unveiled a joint venture with the French company Eiffel Management to create what it called the first real estate investment trust (REIT) in the UAE. The company is called Emirates REIT.
Sylvain Vieujot, the chief executive of Eiffel, said yesterday that Emirates REIT was not the recipient of the land and property acquired from Deyaar, but added he was in discussion with the company about some of its finished buildings. "We are talking to a lot of people, including Deyaar," he said. "We are talking to banks, to direct owners, to financial institutions, to developers, even big companies that want to get assets off their balance sheet."
Emirates REIT said it was targeting assets of Dh1bn in the coming months and was considering a public offering of shares.
Deyaar's shares have lost more than a fifth of their value this year, falling 0.87 per cent to Dh0.228.