Abu Dhabi realty firms in advance merger talks
Abu Dhabi, November 7, 2012
Abu Dhabi's top two developers - Aldar Properties and Sorouh Real Estate - said their government-backed talks were at an advanced stage.
The two companies also both reported higher quarterly profit on Wednesday, albeit with impairments and asset writedowns as valuations fell, highlighting glum conditions.
Their merger talks were started against the backdrop of continuing oversupply and declining house prices. Prices in Abu Dhabi were expected to fall 5 per cent this year, a Reuters poll found.
"The due diligence is pretty much complete. It is only a matter of a little more patience before a final announcement," Sorouh Real Estate chief financial officer Richard Amos said.
"These things take quite a lot of time," he said. The two companies, which started talks in March, had previously said a decision on whether to merge would be reached by June.
Aldar - the larger company and which built the Yas Marina Formula One Circuit, home to the Abu Dhabi Grand Prix - said a valuation review ahead had prompted it to write down Dh737 million ($201 million), mainly related to hotel assets.
Aldar took provisions for impairments and write-offs of Dh932 million, compared with Dh2.5 million a year ago. Sorouh took a fair value loss of Dh126.5 million on investments.
Abu Dhabi has spent over $10 billion on Aldar, equivalent to the amount it needed to rescue Dubai from a bond default in 2009. In return, land on Al Raha beach, the Ferrari World Theme Park, and other key assets, were sold to the government.
Aldar posted a 43 per cent rise in third-quarter net profit which rose to Dh206 million, on revenue that nearly halved to 1.6 billion. Profit grew as the company wrote back Dh431.5 million of excess accruals and recoverable costs written off previously.
Meanwhile, Sorouh reported a net consolidated profit of Dh129 million, up 55 percent. Income got a boost after Sorouh reversed Dh40 million in contingency provisions for its Sun and Sky towers, which have been completed.
The quarterly revenue fell 9.8 per cent to Dh803 million. The developer said its results were buoyed by revenue from national housing projects - government-awarded schemes to build homes for UAE citizens - which rose to Dh607 million from 68 million.
Shares in Aldar and Sorouh were both down 2.2 per cent at 0930 GMT.--Reuters