Bankruptcy at Emaar Properties' US unit should help the Dubai developer turn the page on its American foray and face worsening conditions in its home market, analysts said yesterday.
The largest listed Arab real estate developer has been forced to make impairments and write-downs of around Dh4 billion since it bought US home builder John Laing Homes for $1.05bn (Dh3.8bn) in June 2006.
"For a lot of investors, the investment itself was not viewed as the best decision, given the price paid with the asset being bought at the peak of the market," said Sana Kapadia, Vice-President, Equity Research at EFG-Hermes in Dubai.
John Laing Homes sought Chapter 11 bankruptcy protection on Thursday, citing a sharp decline in new home sales. The bankruptcy will allow Emaar to concentrate on performance in its home market, Dubai, which has been hit hard by the global financial crisis.
"The full impairment of goodwill, write-downs on inventory, which has now culminated in JLH filing for bankruptcy protection, is part of Emaar's damage management. The market could see this as a positive move," said Roy Cherry, Vice-President, research, at Shuaa Capital in Dubai. "Emaar's exposure to the US is now very limited. The focus is now mainly on its UAE earnings, which will continue to fade as long as no major new sales are made. They have barely made any sales over the last two quarters, and 2009 profit is likely to be lower than 2008," Cherry said.
Emaar fully impaired Dh2.52bn of goodwill and has made write-downs of Dh1.54bn on unsold housing stock since it bought John Laing Homes, he said.
Emaar's Chief Financial Officer Amit Jain declined to comment when contacted. Emaar Dubai Chief Executive Issam Galadari also could not be reached for comment.