Emaar to review foreign operations

Dubai's Emaar Properties builder of the world's tallest tower, will conduct a strategic review of its foreign operations which may lead to a greater focus on its hospitality and retail resort business, three sources said on Thursday.

The review by McKinsey & Co mainly relates to the developer's property division as opposed to its thriving hospitality sector, said two of the sources, speaking on condition of anonymity.

It will cover Emaar's overseas units which span the Middle East, Africa and Asia, in countries like India, Egypt and Saudi Arabia.

Emaar shares closed down 1.54 per cent on the Dubai index.

The developer is expected to announce the plan later this month, sources said. An Emaar spokeswoman dismissed the report and a McKinsey spokesman declined to comment.

The review may prompt Emaar to focus on expanding its hospitality business in key emerging markets, such as China and Brazil as well as Africa.

The developer operates malls, hotels and golf resorts as well as building residential communities and mixed-use projects.

"Emaar has been struggling in some of their international businesses including India and Egypt," said Majed Azzam, real estate analyst at AlembicHC which has a neutral rating on the stock.

The developer, whose hospitality and mall business has been a key income driver after the property bust, has said it plans to expand its hotel brand globally.

Italian designer Giorgio Armani partnered with Emaar to open his first hotel at Dubai's Burj Khalifa last year and more are planned. The second property is slated to open in Milan in 2011.

In February, Emaar Chairman Mohammed Alabbar said the company will see significant revenue streams from international operations this yea



The builder's operations in its Indian joint venture came under fire after it built the Commomnwealth Games Village, a development plagued by shoddy construction and delays. The developer was penalised by Indian authorities which cashed its $45 million bank guarantee.

In March, Emaar denied a media report that it was valuing its Indian joint venture's assets in preparation for an exit or partial sale.

Last year, it dropped plans for a $600 million resort project in Indonesia, first announced in 2007 before the global credit crunch and property slump.

"We have always been a bit cautious on their international operations," said Azzam.

"Real estate is essentially a domestic business. You need to have clear understanding of the local market and the relationships before you forge internationally."

Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments, said Emaar's strategy of expansion and diversification in the Gulf was impeccable.

"But when you talk of international operations, it is a different way of penetrating the market."

Last month, Emaar posted a 45 per cent drop in first-quarter net profit, missing analysts forecasts, as revenue dipped and losses from associate firms rose.





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