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UAE’s Aldar Properties may see more provisions, analysts

Analysts: developer may still have overvalued assets.

February 9, 2011 2:18 by



A record write-off of assets may not end woes of indebted developer Aldar Properties , as the company may see further impairments, analysts said on Wednesday.

Aldar, which booked 11.3 billion dirhams ($3.1 billion) in impairments and fair value losses last year, may still have assets that are overvalued while some unsold property could also see losses in the coming years.

“We do not rule out further impairment charges on Aldar’s balance sheet,” said Jad Abbas, real estate analyst at EFG-Hermes.

Shares of Aldar, the builder of the Yas Marina Formula One Circuit, dropped 3.2 percent, as investors reacted to a 12.7 billion dirham loss reported for 2010.

The developer’s fourth quarter loss was calculated at $3 billion, its highest quarterly loss ever, as the company took impairments of 10.8 billion dirhams just in the final quarter.

The operational profitability of Aldar’s hospitality assets, comprising a chain of luxury hotels on Abu Dhabi’s Yas Island, are well below book value, analysts said.

Nomura estimates that its hotel assets will continue to generate losses of 1 billion dirhams this year.

“Aldar must still carry and finance the high depreciating hotel portfolio, where occupancies remain low and will likely continue to generate losses in 2011,” Chet Riley, MENA real estate analyst said in a research note.

He said Aldar continues to run operational losses, with a large portion of this attached to the low yielding, high depreciating operational assets.

“Hotel occupancy rates are still low with the racing week still being the only key event on Yas Island,” said Abbas.

“We don’t see the operational performance of these assets improving anytime soon.”

In January, Abu Dhabi came to rescue of the debt-laden developer, offering a $5.2 billion bailout. Aldar said it would sell various assets to Abu Dhabi for $4.5 billion, including the Ferrari World theme park.

“We assume the asset sale of the Ferrari Theme park and associated assets will be completed in Q1 2011, after all this probably is the asset that runs the highest losses,” said Riley.

Property prices collapsed in the UAE after the country was hit hard by the financial crises. House prices in Abu Dhabi are expected to fall another 15 percent this year, according to a Reuters poll.

Aldar’s unsold units entering the market may also not get the expected value, analysts said.

The company’s chief financial officer told investors last month that it would return to profit in 2011.

(Reporting by Praveen Menon; Editing by Reed Stevenson)



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