Emaar Third-Quarter Profit Falls on U.S. Writedown

By Shaji Mathew

Oct. 19 (Bloomberg) -- Emaar Properties PJSC, the Middle East's largest real-estate developer by market value, said third-quarter profit fell 3.3 percent as revenue declined and it had a $204 million write-off from its U.S. unit.

Net income dropped to 1.51 billion dirhams ($411 million), or 0.25 dirham a share, from 1.56 billion dirhams, or 0.26 dirham, a year earlier, Emaar said today. That compares with Citigroup Inc.'s estimate of 1.64 billion dirhams.

``Barring write-downs, Emaar earnings are pretty impressive,'' Robert Mckinnon, managing director of equity research at Al Mal Capital PSC, said today in a phone interview from Dubai. ``Going forward it'll be a tough operating environment for real-estate companies although Emaar may weather it by enhancing its recurring revenue in Dubai.''

The global credit crisis, which helped push the Dubai Financial Market Real-Estate Index down 29 percent in the third quarter, may end the emirate's six-year property boom, according to Morgan Stanley. That has encouraged Emaar to become less dependent on the Middle East by developing real estate in countries such as India, Egypt and Morocco.

Emaar wrote down 750 million dirhams related to John Laing Homes in the third quarter, compared with a write down of 165 million dirhams in the preceding quarter. Emaar bought the California-based company for $1.05 billion in 2006.

U.S. Write-Off

``Higher revenues from Dubai operations were offset by decreased revenue from John Laing Homes in the U.S.,'' Emaar said in a statement. ``The write-off was considered prudent in view of the current challenging times for all businesses, especially the financial and real estate sector in the U.S.''

The results were published after the Dubai market closed. Emaar gained 4 fils, or 0.7 percent, to 5.56 dirhams today, valuing the company at 33.9 billion dirhams. Emaar has plunged 63 percent this year, compared with a 59 percent decline in Dubai Financial Market Real Estate Index.

Developers will find it harder to borrow money as property prices in Dubai fall by an estimated 10 percent through 2009, according to Morgan Stanley. Residential property prices will probably peak in the first half of next year before starting to decline thereafter, according to EFG-Hermes Holding SAE.

Growth at Home

``We are very confident of our company's fundamentals and future growth, which is reflected in our decision to pursue the share buyback,'' Chairman Mohammed Ali Alabbar said in the statement. The Dubai-based developer has pledged to start buying 10 percent of its shares this month.

Emaar, the Dubai-based company that's building the world's tallest tower in the emirate, said revenue declined to 4.32 billion dirhams from 4.52 billion dirhams. Other income fell to 191 million dirhams from 318 million dirhams. Its biggest shareholder is the Dubai government.

The company's projects in the sheikhdom, the second largest in the United Arab Emirates, include six hotels, a theme park and 1,200 apartments as part of the Las Vegas-style Bawadi project in the desert outside the city.

``I think generally you will see some revisions downward on estimates on the medium-term to long-term numbers to reflect the changes in the business environment,'' said Ali Khan, head of equity trading at Dubai's Arqaam Capital Ltd.

To contact the reporter on this story: Shaji Mathew in Dubai at shajimathew@bloomberg.net.