New property merger in Qatar as woes mount

Pressure on Qatari firms to merge to withstand the global financial crisis increased after the government ordered a merger between Barwa Real Estate and Qatar Real Estate Investment Co.

The merger – the fourth in the Gulf gas exporter in three months – comes as Gulf real estate markets suffer under the financial crisis and falling oil prices.

The two firms have a combined market capitalisation of $2.5 billion (Dh9.18bn).

"The move comes in line with the country's policy in investment to maximise higher return on investment in the Qatari shareholding companies while enriching the national economy and supporting the economic development in the State of Qatar," the firms said in a statement on the Doha bourse website yesterday.

Barwa Real Estate, an affiliate of state-owned property developer Qatari Diar, is still studying the terms and conditions of the tie-up, Tamer Khedr, Chief Financial Officer and Acting President of Financial Services of Barwa, said.

"They have a very stable, predictable cash flow," he said, adding it was too early to say whether Barwa would need to raise new capital to complete the transaction.

Shares in both companies have suffered alongside the property sector in the global downturn, with Barwa shedding 33 per cent last year and 25 per cent so far this year. Qatar Real Estate fell 42 per cent in 2008 and another 16 percent in 2009.

Khedr said Barwa aimed to finish what projects it had started but had no new plans to launch new projects.

Analysts said more consolidation may be in store in Qatar. "This is the fourth time it has happened in the Qatari market and on governmental orders," said Samer Al Jaouni, General Manager of Middle East Financial Brokerage Company in Dubai. "The purpose will be to create a much bigger entity which can take the pressure due to the financial crisis ... Qatar is trying to take action before things get worse."

Al-Jaouni said that real estate prices in some areas under development in Qatar had fallen by 30 per cent to 40 per cent from their peak.

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