The eastern effect

The full extent of the economic downturn on Middle East property companies is beginning to emerge with huge second quarter losses...

Now there are fears that developers will be hard pressed to find the finance to launch new projects in the future. Although others point out that consolidation may help.

Emaar, the largest developer in the Middle East has reported an AED1.29 billion net loss in the second quarter of 2009. It blames writedowns on its US subsidiary John Laing Homes.

The figures show what a huge difference a year makes in the real estate world. In the second quarter of 2008 the company posted an AED2.12 billion profit.

Also a year ago companies like Emaar were expanding abroad, hence its acquisition of John Laing Homes, but now many are staying closer to home and even pulling out of international projects as they lick their wounds.

'The first half of the year was extremely challenging as we steered the company through new market realities. We succeeded in identifying the right opportunities that co-existed with the challenges and focused on project delivery,' said Emaar chairman Mohamed Alabbar.

He emphasized that there were also positive outcomes in the first half of the year. He said that Emaar's shopping malls and retail subsidiary had created 10,000 jobs in its mall and hospitality projects.

But it has been hard hit by sales. Second quarter sales plummeted 65 per cent from AED5.60 billion last year to AED1.94 billion in 2009. Second quarter net operating profit sunk 79 per cent.

Others in the property sector claimed that the results were worse than expected. 'These results are worse than expected but it is important to highlight that the revenue mix is diversifying both operationally, in terms of greater recurring income, and geographically,' explained Sana Kapadi, analyst with EFG Hermes.

Meanwhile Abu Dhabi developer Aldar Properties' second-quarter net profit slumped 79.7per cent as it made no land sales during the first half of the year. The largest developer in the Gulf Arab emirate by market capitalisation made a second-quarter net profit of AED 251.4 million, some way short of an average analyst forecast of AED283.5 million.

Chief financial officer Shafqat Malik said it was a direct result of the lack of land sales.

Source: www.propertywire.com