Arabtec sets up property development arm as UAE market recovers

Arabtec signage at a residential unit construction site on Reem Island in Abu Dhabi. Silvia Razgova / The National

Arabtec has set up a property development company to exploit the UAE’s surging property market.

The Dubai-listed builder of the Burj Khalifa will initially roll out projects in Dubai and Abu Dhabi, and plans to develop affordable housing projects in Saudi Arabia, Egypt, Morocco, Algeria and Iraq.

Across the Middle East and North Africa, there is an estimated shortage of more than 3.6 million homes, according to Arabtec.

“With the [UAE’s] real estate industry now showing strong signs of recovery, expanding into the development market presents itself as an attractive proposition,” said Hasan Abdullah Ismaik, Arabtec’s chief executive.

Next year, the prices of Dubai properties are expected to rise the most across the world, says a report by the realtor Knight Frank. In Abu Dhabi, home prices in freehold areas rose 14.4 per cent in the third quarter, up from 11.2 per cent in the preceding quarter, said the property consultant Cluttons.

Since the start of this year, the share price of Arabtec, which is building the Louvre in the capital, has soared more than 50 per cent.

Analysts said the firm’s move into property development would offer synergies between its main business and its largest shareholder, Aabar Investments, an investment vehicle of the Abu Dhabi Government.

“We believe this strategy would be quite beneficial for Arabtec, as it would give them control over the whole value chain and would make their entry into high-margin developer business,” said Hettish Karmani, a research manager at Global Investment House. “Since Arabtec is owned by Aabar Investment … we believe the recently announced government projects, related to housing and development, will flow towards the company.” Arabtec said some of the Dh2.4 billion in proceeds raised from its rights issue would be used to expand its affordable housing projects.

However, its new subsidiary would not require a large capital investment. Ashraf Zeitoon, Arabtec’s head of corporate communications, said because Arabtec did not have its own land bank, it would set up property joint ventures with wealthy individuals and developers in the UAE. The firm did not disclose the names of any potential joint-venture partners but said it would announce a number of new projects in due course.

Amer Khan, a fund manager at Shuaa Capital, said joint-venture partners would be crucial.

“Will it be Emaar? I’m not too sure whether Emaar would be willing to bring them into a project as Arabtec is a client of theirs,” he said. “Abu Dhabi is an option because of the tie-up with Aabar and Aldar. But does Aldar need Arabtec for a joint venture for any future project? [Arabtec] is a great construction company but doing something you havn’t done before … is a risk.”

Arabtec shares were unchanged yesterday in Dubai. Shares in Depa, in which Arabtec holds a 24 per cent stake, jumped 8.4 per cent on Nasdaq Dubai.