x Abu Dhabi, UAESaturday 20 January 2018

Emaar sales plan to tackle Dh4.8bn debt

Emaar Properties, the region's largest developer, is selling off its prime assets to raise cash.

Emaar Business Park office along Sheik Zayed Road in Dubai.
Emaar Business Park office along Sheik Zayed Road in Dubai.

Emaar Properties is considering the sale of its Dubai headquarters in the face of Dh4.8 billion (US$1.3bn) of debt coming due in the next year.

The company has already been marketing several of the buildings it owns within Emaar Square as well as two buildings it owns in Emaar Business Park near the Greens on Sheikh Zayed Road.

Building number 3 in the Business Park, which has more than 200,000 square feet of space, is being advertised to some buyers at a price of about Dh1,200 per square foot, according to sources. Several floors of that building house Emaar's head office.

If Emaar sold the building, it could immediately sign a long-term lease with the new owner, say analysts. Such a transaction would allow it to quickly raise cash that was previously tied up. The investor would be guaranteed a major tenant at an agreed rate.

Such transactions could be heading to the region in a big way as companies seek to raise funds, said Blair Hagkull, the head of the regional office of the property consultancy Jones Lang LaSalle.

"We believe the sale and leaseback will increasingly be a tool for companies to unlock value in assets they have held for a very long time," he said, adding his company was in discussion with several others about such transactions.

The arrangement would also appeal to new funds, taking advantage of what Mr Hagkull said was a perceived bottoming-out of the market for higher-end properties.

Because of a proliferation of buildings across Dubai, high vacancy rates and too many owners, only a small number of properties are considered investment grade.

Emaar declined to comment yesterday about any specific transaction or plans for Emaar Business Park.

"Emaar has been selling commercial space as part of its normal business operations and is currently seeking the sale of such properties," said a spokeswoman.

The company's financial statements revealed the extent of Emaar's asset sales.

It earned Dh468.7 million on sales of buildings for the first nine months of the year, compared with just Dh70.7m in the same period last year. In the second quarter it sold one of its prized Emaar Square buildings for Dh331m.

Analysts say the Emaar office buildings are among the most sought-after in Dubai because they have longer-term leases with high-quality tenants and are fully owned.

Emaar has been trying to reduce its short-term debt burden this year. It announced a five-year $375m convertible bond in September for "general corporate purposes", including the ability to pay off obligations coming due over a longer period of time.

Other major developers have begun selling assets in the aftermath of the property downturn. Union Properties, the third-largest developer in Dubai, recently announced it had sold its nearly-finished Ritz-Carlton hotel next to the Dubai International Financial Centre for Dh1.1bn - some Dh400m less than its asking price.

Aldar Properties, the largest developer in Abu Dhabi, has considered selling some of its assets as it deals with debts. It sold the infrastructure of Yas Island, including the roads, utilities and Formula One race track, to the Government for combination of a debt write-off and cash injection.