Deyaar CEO: We’re Not in Talks with Union Properties

DUBAI - Deyaar Development denied on Tuesday that it was in talks with its peer Union Properties for a possible merger between the two Dubai-based listed developers — a subject of intense market speculation since the suspension of trade in the shares of home loan providers Amlak Finance and Tamweel late last year.

By Aruna Urs

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Published: Wed 8 Jul 2009, 2:54 AM

Last updated: Thu 2 Apr 2015, 4:42 AM

Rumours of consolidation in Dubai’s troubled real estate sector got a second wind after Emaar Properties announced last month that it was looking at a possible merger with three unlisted developers owned by conglomerate Dubai Holding.

Deyaar Chief Executive Officer Markus Giebel said categorically that while the Dubai government was looking at consolidation opportunities in the emirate’s real estate sector, his company was not exploring a merger with Union Properties.

“There is nothing going on,” Giebel said. “We are looking at many things. The government is looking for consolidation. But there is nothing we comment on,” he told reporters on the sidelines of a real estate conference - Cityscape Connect - in Dubai.

Two Dubai government-owned banks, Emirates NBD and Dubai Islamic Bank, are the largest shareholders of both Deyaar Development which is developing the downtown Business Bay, and Union Properties, which has an ambitious Motor City project in its portfolio.

The global economic crisis has crimped cash flows at most UAE property developers as banks have cut credit lines and home buyers have defaulted on their payments. The crunch in funding has forced these developers to explore merger opportunities to cut costs and consolidate projects.

In June, Emaar, Middle East’s biggest property developer, announced plans to merge with Dubai Holding’s Tatweer, Sama Dubai and Dubai Properties.

To beat the slump in the domestic market, Deyaar is looking at other developing countries around the region. “We have identified deals in five countries but we have not signed them. I just came back from Lebanon,” Giebel said, without giving details.

“As a developer, you have to balance your risk-reward curve, and the most conservative investment is probably Saudi Arabia. If you get a good partner, it is going to be a solid investment (with) low risk. The highest risk investment is of course if you go to Afghanistan, Iraq, Iran or Pakistan. In between, everything would be possible,” he said.

In a move to boost shareholder value despite a slump in property prices, Giebel said that the company expects to close a Dh500 million ($136.2 million) distressed debt fund by year-end. The fund is intended to clean up balance sheets of developers by buying distressed debts including its own. Deyaar will start raising funds in the next two weeks and should complete the task by the end of the year, he said.

Deyaar is setting up the fund with Dubai Islamic Bank, or DIB, which owns a 42 per cent stake in Dubai’s second-largest developer. Deyaar and DIB have already put Dh200 million into the fund.

In an effort to avoid defaults by homeowners, the company has extended its payment period, cut its prices and tied up with banks to facilitate lending. The biggest risk of defaults arises at the time of hand-over, when the buyer has to pay a final installment that in some cases can equal up to half of the purchase price, Giebel said.

Using the analogy of a hospital, Giebel said that builders have to try accommodate the needs of their customers.

“If you (customers) are shot in the leg or arms, I can help you,” he said, “but if you are shot in the heart, I can’t.”

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