Sorouh Real Estate, the company weighing a US$15 billion (Dh55.09bn) merger with Aldar Properties, has capped a quarter of rising profits for the country's big three developers.
Government housing contracts drove first-quarter profit 30 per cent higher to Dh83.59 million compared with a year earlier, Abu Dhabi's second-largest property company said in a stock exchange filing yesterday.
Sales more than doubled over the period to Dh967.2m as the developer switched focus from commercial schemes to national housing projects while at the same time boosting rental income. Sorouh has now handed over almost all the units sold in its Sun and Sky Towers development.
"There has been a change in the revenue mix," said Richard Amos, the chief financial officer of Sorouh. "Last year was dominated by the handover of the first commercial units in Sun and Sky - whereas this quarter was dominated by national housing. Those revenues are coming through really strongly."
Unlike other projects where profits are booked on completion, Sorouh recognises revenues from these national housing schemes as a percentage of completion in the same way that building contractors operate.
Sorouh's results come as the country's three largest property developers benefit from emerging from a near four-year decline in property prices.
Sorouh and other UAE developers are seeking to develop more recurring revenues from their investment portfolios as demand for off-plan residential property developments weakens.
The developer's commercial portfolio may also attract interest from property investment trusts or other investors who want to capture the returns offered by well leased commercial property in the emirate, according to the Sorouh chief operating officer, Gurjit Singh.
"At some point in time there will be investors out there who would like to look at revenue-generating assets to buy yield," he said.
Last week, a unit of National Bank of Abu Dhabi launched a Dh1bn commercial property fund aimed at tapping appetite for income-producing property assets in the Emirates.
Aldar, Abu Dhabi's largest developer, said on Saturday its first-quarter profit more than doubled as it handed over completed apartments to investors. Emaar Properties, the company based in Dubai that built the world's tallest tower, also reported a 44 per cent increase in first-quarter profit.
Sorouh and Aldar last month said they were studying a $15bn merger in what would be the biggest consolidation of listed property assets in Abu Dhabi.
"The evaluation process to look at the legal and business aspects of a potential merger is now under way and the ultimate outcome of this process will take into account the best interests of shareholders," the company said yesterday.
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