x Abu Dhabi, UAESaturday 20 January 2018

Emaar and Dubai Holding talk mergers

Emaar, the developer of Burj Dubai, is discussing merging with Dubai Properties, Sama Dubai and Tatweer, which are all owned by Dubai Holding.

DUBAI // Emaar Properties, the largest developer in the UAE, is in advanced talks with Dubai Holding, a large business conglomerate owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, to merge with several of its property subsidiaries. It is the latest example of consolidation in Dubai's property sector, which is racing to cut costs after a dramatic slide in demand and asset values.

Emaar, the developer of Burj Dubai, is discussing merging with Dubai Properties, Sama Dubai and Tatweer, which are all owned by Dubai Holding. Emaar is 70 per cent owned by the public and 30 per cent by Investment Corp of Dubai, another Dubai government entity. "Emaar and Dubai Holding... with the assistance of their financial advisers, the Royal Bank of Scotland PLC and Merrill Lynch International respectively, are in the process of finalising a thorough assessment of the merits of this proposed consolidation," the statement said, according to Bloomberg.

Property prices and sales have fallen sharply since the start of the downturn in October, while developers, who were mostly reliant on off-plan sales to finance the construction of their projects, have struggled to collect payments, leading to rising defaults. Almost all developers in Dubai have laid off thousands of staffers as a result. Consolidation has been one way to help developers streamline operations, cut costs and better manage the construction of their projects.

Emaar is behind several completed developments in Dubai, such as The Greens, Emirates Hills, The Meadows and The Springs, areas where property prices have seen a slight rise in recent months due to their popularity. Burj Dubai, the tallest tower in the world, will open in September. "The key thing with this deal is putting the decision-making in the hands of people who can execute a development," said Robert McKinnon, the head of research at Al Mal Capital, an investment bank in Dubai. "Emaar has already proven it can do this."

However, the real issue could be how fairly minor shareholders in Emaar, a publicly listed firm, are treated as a result of the partnership, added Mr McKinnon. The merger would be the third significant step towards consolidation among Dubai Government-backed developers to take place this year. In February, Dubai Holding merged the administrative and back-office functions of Dubai Properties, Sama Dubai and Mizin.

Dubai World confirmed on Thursday that the property activities of its subsidiaries, Leisurecorp, Dubai Maritime City and Dubai Multi Commodities Centre, would now be managed by Nakheel, also owned by Dubai World. The move would "better accommodate current market conditions and optimise resources and expertise", the company said, adding that the changes would not affect the day-to-day core business of the companies.

"It's more about operational efficiency, saving money," Mr McKinnon said. "It won't change anything much as far as the individual companies are concerned." Mr McKinnon expects to see more collaboration among Dubai developers as they tap into the management expertise of those who have successfully completed projects. "In a relatively small market like Dubai, there were a lot of large real estate companies but very little management expertise," he said.

In November, Sama Dubai said it was reviewing its eight projects, which together are worth about Dh202 billion (US$54.99bn). At least two have since been put on hold - one in Bahrain and one in Saudi Arabia. Dubai Properties has about Dh348bn worth of projects, including the sprawling Business Bay. agiuffrida@thenational.ae