Skip to content

Dubai property development giant sees outlook downgraded to negative

Standard & Poor's Rating Services also warned that a prolonged downturn in the real estate sector could leads to deterioration in Emaar's currently healthy financial position.

'The outlook revision reflects a rapid weakening of the real estate markets in Dubai, and our uncertainties about the depth of the downturn and the pace of eventual recovery,' said Alf Stenqvist, a credit analyst with Standard & Poor's.

The ratings do, however, reflect implicit support from the government of Dubai and the group's current strong cash flows, low debt leverage, and strong asset base.

Constraining rating factors include the weakening of the Dubai real estate market, the concentration of Emaar's operating cash flows in a relatively small number of large projects, and the group's aggressive geographic expansion into markets with higher political and economic risk.

At the end of September the group had total interest-bearing debt of about $2.5 billion, the report from the company said.

Emaar is one of the largest property developers in Dubai, with sales of 17.6 billion dirhams in 2007 but its expansion in the Middle East and North Africa had so far offered only a limited cushion against the downturn in Dubai.

However the recent completion of a large shopping mall in Dubai should generate quite good and stable rental income in the years ahead.

The company has not yet had to make staff redundant although the real estate sector is suffering a severe loss of jobs.

Top developers such as Nakheel, Damac and Omniyat have announced hundreds of job cuts in recent weeks, and industry sources say new recruitments are down sharply.

The real estate sector slowdown has had a direct impact on related sectors such as property services firms and building material suppliers.

Al Shafar General Contracting, a Dubai-based construction company, announced the loss of between 500 and 1,000 construction site and office jobs as new projects become harder to get.