Moody's Investors Service said that the recently proposed consolidation of Dubai's two largest master real estate developers, Emaar Properties (rated Baa1) and the real estate activities of Dubai Holding Commercial Operations Group rated A3), would create a dominant entity in Dubai's property market that would control the market as well as benefit from economies of scale and stronger bargaining power vis-a-vis contractors, Moody's said in its Special Comment titled “The Dubai Property Market in the Wake of Consolidation”. “Consolidating Emaar and DHCOG's real estate interests into one entity will create a new giant in Dubai's market, with unrivalled access to a sizeable land bank,” said Martin Kohlhase, an associate analyst in Moody's Corporate Finance Group based in Dubai and author of the report. “Furthermore, several drivers - such as the opening of Dubai's Metro (public transportation system), the inauguration of Burj Dubai (the world's tallest skyscraper) and the end of the school year/beginning of the summer period - will shape Dubai's residential property market in the near term and lead to greater differentiation within Dubai's residential areas, from which Emaar and DHCOG's real estate divisions may benefit.” However, following the announcement of the merger, Moody's placed both Emaar's and DHCOG's long-term issuer ratings on review for possible downgrade on 30 June 2009. “Larger government ownership in Emaar may not be sufficient to mitigate the detrimental impact that the merger would have on the company's fundamental creditworthiness,” Kohlhase said. “Furthermore, ongoing market weakness and the prospects of weaker cash flow over the near to medium term will impact the combined group going forward.” The United Arab Emirates is leading the way in development in the Gulf region with almost $930 billion worth of projects currently underway, according to a new report. A study from the Kuwait National Bank said that this amounts to 45 percent of all projects planned in the Gulf area, which amounts to some $2.1 trillion. The report showed the extent of the boom in development in the region. The value of property construction is four times higher than had been estimated in June 2005 and represents an annual growth rate of nearly 50 percent. “The UAE accounts for by far the biggest share of project activity, totaling around $929 billion and affirming its position as the leading GCC country in attracting capital investment. Some 81 percent of the UAE projects are in the construction sector,” the report said. The report noted that the construction sector dominates in every GCC country, while the total value of projects in the UAE is far higher than anywhere else. Saudi Arabia has a much larger base of non-construction related projects, which at around $224 billion, is 28 percent more than in the UAE. “This probably reflects the larger size of the Saudi economy in absolute terms, necessitating a greater degree of industrial diversification,” the report added. Also the higher value of non-construction related projects in Saudi Arabia stems largely from the petrochemical, power and utilities sectors. At a combined $127 billion, the value of the Kingdom's projects in those sectors is about 35 percent larger than in the UAE, the report further said. The overwhelming balance of non-construction-related projects in other GCC countries comes in the oil and gas, power and utilities sectors, with the latter reflecting the region's growing domestic power needs, the report added. __
