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Middle East developers report massive drop in profits

Disastrous losses of 202% in the fourth quarter of 2008 due to a Dh1.77 billion writedown in its US subsidiary John Laing Homes saw net profits fall by 54% to Dh3.05 billion last year.

Emaar, developer of the world's tallest tower, Burj Dubai, acquired John Laing Homes in 2005 when the sub-prime crisis first hit the US.

However, Emaar has done better than expected. 'The results have exceeded expectations. In a market which has more or less stopped in the UAE, from a transactional point of view, and given the write downs in the US, still to make a profit, is very good,' said Nicholas Maclean, managing director of CB Richard Ellis.

The important thing is that Emaar is still looking at future investments by going overseas, which is 'absolutely the thing to do', Maclean added.

Emaar is concentrating on completing all projects which have commenced construction and have put new projects on hold.

Explaining the decline in profits, Emaar said, it recorded a profit of Dh0.924 billion prior to considering the inventory write down in the fourth quarter and recorded a profit of Dh6.662 billion for the year prior to considering the total inventory write down during 2008.

'Lower overall results for the year 2008 is primarily due to slowing down of the real estate market in Dubai resulting from the current state of the global financial climate,' it said in a statement.

Meanwhile RAK Properties reported net profits of Dh379 million, down from Dh496 million in 2007, a decrease in annual profit over 2007 of 24%.

Total revenues of the developer fell to Dh425 million from Dh540 million in 2007. Investments, however, increased by 33% according to a company financial statement. Booked sales came in at just over Dh2 billion, a 91% increase over 2007.

RAK Properties said it intends to withdraw certain investments in the land bank and real estate-based funds which it acquired in previous years. The move marks a reorientation of the company's strategy to ensure it can meet its project commitments and not be forced to cancel ongoing projects.