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Digging deeper: UAE’s property sector continues to get owned
With Aldar's lay offs, Surouh's misses target and Emaar's 34 percent drop, will Dubai's $1 billion investment injection be enough?
October 31, 2011 2:38 by Eva Fernandes
Dubai’s real estate seemed to be on everyone’s lips last weekend when news emerged about the $1 billion property fund launched last week. The fund which is to be seeded with $200 million initially aims to bring in a group of investors to raise the current amount to $1 billion–a much needed lifeline to a property sector that’s hoping to regain balance and dreaming of gaining full recovery after the property bubble burst two years ago.
Currently the amount in the fund comes from Investment Corporation of Dubai (ICD) and the Toronto-based Brookfield Asset Management. Sheikh Ahmed bin Saeed Al Maktoum, the chairman of Dubai’s Supreme Fiscal Committee and an ICD board member said “We see this agreement as another big step in our next phase of growth… It once more affirms Dubai’s attractiveness as a premier investment destination in this region.”
Kipp has many words for the launch of the fund, some of these words come from the most cynical and cautious part of us and some are from the part that wants to cheer for the city we call home. As to whether the fund will help heal some of the bruises the UAE’s (more specifically Dubai’s) property sector sustained over the years remains to be seen. But for now, its looks like there’s going to be a lot worse before it begins to genuinely get better.
We are talking of course of the big shocker of the week, Aldar Properties announced plans to let go almost a quarter of its staff in attempt to re-size its operations. Earlier today, Aldar said it will let go of 105 people-that is over 24 percent of the company.
“We need to ensure that we have the appropriate size, structure and skills for the current and future environment and that this new structure creates more accountability and greater efficiency built around lean core teams, as well as an additional focus on key functions,” said Ali Eid AlMheiri, Chairman of Aldar Properties.
This news is bitter sweet. It’s hard to imagine one person’s life going belly up in a redundancy and even harder to fathom what will become of the 105 that have lost their jobs. But the reality is that the bubble that burst in 2008 was partly because of the enormous and seemingly insatiable expansion that most property developers went through. And seeing companies practice posterity (at least we hope that what it is) and accountability by creating what looks like a better, more efficient way of doing business is a good thing. It should mean a more stable growth and a more stable company in the long term.
Staying in the capital’s affairs, a silver lining is seen in Abu Dhabi’s other major property developer Sorouh Real Estate released its third quarter results marking a 13.4 percent rise in its net profit. An increased number of handovers and rental income take the credit for the rise. The end of the tunnel isn’t too close though as Sorouh’s results missed analyst’s humble forecasts, which predicted a net profit of Dh129.6 million almost double of Sorouh’s Q3 net profit of Dh67.3 million.
Speaking of hits and misses, over in Dubai, Emaar has shown paltry third quarter results. Reporting a 34 percent drop, Emaar recently announced a profit of Dh 406 million, more than a few dirhams shy of its Dh 612.3 million profit during the same period last year. At the same time, Emaar did managed to beat anaylst’s forecast of a quarterly profit of Dh386.5 million.
It’s easy to see that the rocky road to real estate recovery isn’t about to end yet. So we’ll have to ask the folks at IIF to settle down and hold the celebrations. Having forecasted that the property sector has bottomed out and that there’s no other way but up just a couple of days ago, we hope none of the staff at IIF ever has to meet any of the 105 that lost their jobs at Aldar. Aaawk-ward.