Eshraq, Reem to create Abu Dhabi's 2nd largest property developer
By Waheed Abbas
Published: Wed 30 Aug 2017, 6:10 PM
Last updated: Wed 30 Aug 2017, 8:12 PM
Abu Dhabi-based developers Eshraq Properties and Reem Investments are in advanced merger talks to create the second-largest property development company in the UAE capital.
The companies said in a press statement that Reem will subscribe to new shares issued by Eshraq and then the latter will acquire the former's entire business and assets.
Mohanad Alwadiya, CEO of Harbor Real Estate, Senior Instructor and Advisor at Dubai Land Department, is of the view that this merger is the new regional trend and it's a good sign for the Abu Dhabi property market.
He believes that a successful merger will result in increase in the company's market share and have a better strategic focus and deliver better quality projects.
"There is a strong demand for affordable housing not in just in Abu Dhabi but in the whole of UAE and market is hungry for such housing. I think the new entity will also focus on affordable housing as there is strong demand from services industries," Alwadiya told Khaleej Times in a telephonic interview.
Such mergers have strategic focus and a lot of synergies to deliver bigger quality projects, Alwadiya said, adding that but there is a downside to such mergers also like downsizing.
Abu Dhabi Securities Exchange-listed Eshraq Properties' shares jumped 3.5 per cent on Wednesday after the news about the merger broke, with nearly 18 million shares changing hands worth Dh15.44 million.
Eshraq had assets of Dh1.46 billion in June 2017 while Reem had net assets of Dh5.3 billion by the end of last year. Eshraq posted net profit of Dh0.636 million in Q2 2017 as compared to loss in the same quarter last year. Reem reported Dh216 million profit, an increase of two per cent.
Aldar Properties and Sorouh Real Estate were the first two Abu Dhabi developers to announce merger in 2012, creating the largest property development company in the UAE capital with Dh13.61 billion in assets as of December 2011.
John Stevens, managing director, Asteco, said earlier that approximately 600 apartments were handed over during the second quarter, and more than 2,000 additional units are expected to be delivered over the next six months in Abu Dhabi.
The Abu Dhabi residential market, according to Craig Plumb, Head of Research for Mena at JLL, is currently experiencing a softening of rents and prices as potential investors and tenants have an increased number of high quality projects from which to choose.
"In more competitive market conditions, it is natural to experience mergers and consolidations and this is occupying in both the government and private sectors of the market. The latest such consolidation (between Eshraq and Reem) should create a stronger company with a significant portfolio of existing assets and a sizeable land bank for further expansion," he concluded.