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20 July 2024

Deyaar sets up unit to acquire distressed assets

Markus Giebel (SUPPLIED)

By Parag Deulgaonkar

Deyaar Development has created a strategic planning division through which it is looking to acquire distressed assets, a top company executive said.

"The new department will look at buying distressed assets across the globe with India and Turkey being the likely markets. We intend to add land bank to our portfolio through this acquisition drive," said Chief Executive Officer Markus Giebel.

The company has secured funds for its local projects, he said, adding it may look to raise funds to finance its overseas expansion plan.

"We have secured funding for all our existing local projects. But we may go in to raise funds to finance our overseas expansion strategy."

Deyaar will not be considering a sukuk (Islamic bond) or a convertible bond issue, it may look at a combination of several financial instruments such as project financing, debt instruments, joint ventures and fund structures. The company will post record fourth-quarter and full-year profits despite the slowdown in the property sector, Giebel said.

"We will have record fourth quarter and year-on-year profits. We were able to excel in the fourth quarter, while others struggled."

Giebel said the company has an eight per cent debt-to-equity ratio, and it is "under leveraged". "We have a lot of room and can easily raise cash for our expansion."

The developer plans to deliver five buildings this year. "We have many projects like that. It's wrong to deliver units that have not been promised to customers with the market the way it is."

The Dubai-based developer has in excess of Dh25 billion worth of projects under construction and in the pipeline, mostly in the UAE.

Deyaar is likely to make an announcement about its first overseas project – a Dh20bn joint venture master community with 15 million square feet of built up area in Jeddah, Saudi Arabia –during the first quarter.

"The final negotiations are going on and, if things go in the right way, we will make an announcement in the first quarter. Turkey is good value. We are looking at joint venture in Turkey and many countries in the Middle East and North Africa," he said.

With slowing sales in the market, the Dubai-based developer will be concentrating on increasing its revenue stream by strengthening its leasing portfolio.

"We are working to strengthen our rental department, as the property market is slowing down. We expect rentals to add 30 per cent to our bottom-line in future."

Currently, the company is renting out 16,000 units in Dubai, which includes its own and third party units.

Giebel had told Emirates Business earlier that governments need to play an important role in ensuring equilibrium and it was critical for real estate companies to closely scrutinise their cash flows, adapt their product portfolios and evaluate their non-core businesses.

"The time is right for companies to install market monitoring teams in order to effectively avert any possible imbalances in resource allocation."

The real estate sector in Dubai is in a transitional phase, and strategic international expansion will be a key to ensuring the diversification of revenues and a balanced portfolio of projects, Giebel said.

"Markets driven by a combination of a large and growing economy and strong demographics, such as Saudi Arabia and India, clearly offer substantial potential. Such opportunities exist elsewhere, too, and they must also be seized."

Giebel said: "Dubai and the wider region remain strong, and growth will continue. Today, we need to identify the longer-term opportunities and adapt our businesses to make the most of this moment. When we have the fundamentals right, the rest will follow."

Shares in the company on the Dubai Financial Market closed 4.16 per cent down at Dh0.46 yesterday. (With inputs from agencies)