S&P Global Ratings has upgraded Emaar Properties' long-term issuer credit rating based on expectations of a more robust business performance amid the strength of Dubai's property market.
The upgrade to "BBB" from "BBB-", with a stable outlook, reflects the attractiveness of projects from Dubai's biggest listed developer, benefitting from positive property trends in the emirate, the ratings agency said in a statement.
The outlook mirrors S&P's projection that Emaar will continue to demonstrate steady operating performance and low leverage while being able to sustain its strong market position and capture the bulk of renewed interest from international buyers, it said.
S&P also noted that Dubai's business-friendly environment, market dynamics and reputation as a safe haven in the Middle East will also play key roles in supporting its business.
"Dubai remains an attractive business and residential destination, given that it offers low taxation despite the introduction of a 9 per cent corporate tax starting June 2023," S&P said.
"The stable outlook reflects our expectation that the company will sustain strong credit metrics in 2023-2024 on the back of the market rebound and debt reduction efforts completed pre-pandemic in 2019, which we expect to continue as we expect to see healthy demand."
Dubai's property market has continued its recovery from the Covid-19 pandemic, boosted by renewed interest from investors and buyers.
The industry had a record-breaking year in 2022, registering 90,881 transactions, exceeding the previous high of 81,182 in 2009, property consultancy CBRE said in its recent Dubai Residential Market Snapshot report.
Dubai's property market also registered strong growth in the first quarter, with total transaction value up 80 per cent annually to Dh157 billion ($42.8 billion) in the first quarter of 2023, according to official data. Total transactions rose 49 per cent to 38,715 during the three-month period.
"Off-plan properties accounted for roughly half of all deals, and prices continued to increase at double-digit rates, benefitting all developers who have been actively launching new projects," S&P said.
Emaar — the developer of the world's tallest building, the Burj Khalifa — reported in May that its first-quarter profit had surged 43 per cent to Dh3.2 billion, with revenue reaching Dh6.3 billion, boosted by strong property sales and operations across its units.
The company's property sales backlog hit Dh55.7 billion, which it said will be recognised as revenue in the coming years — a positive sign that the company will be able to improve future revenue, S&P said.
S&P noted the strength of Emaar's portfolios locally and overseas, which have helped the company's bottom line and complemented its UAE base.
"We estimate that Emaar Properties generated about 53 per cent of its gross profit from real estate development, both in the UAE and internationally, mainly in Egypt, India, Turkey and Pakistan."
And with developers having moved to full cash collection during construction phases and on handover for recent projects, this allows developers to de-risk the construction much faster and also alleviates working capital pressure, reducing funding requirements, S&P said.
"With close to Dh29 billion in CFO [cash flow from operating activities] generated in 2021-2022 cumulatively, Emaar by far outpaced its historic cash flow generation, with only Dh5.1 billion CFO in four years over 2017-2020," S&P said.
"This illustrates the strong pre-sale momentum, with the company collecting massive down payments, [and] also accelerating collections on new projects."
Compared with other private developers in Dubai, Emaar benefits from a large landbank, "which further enhances its competitive position and reduces future cash flow requirements in potentially more challenging market conditions", S&P said.
Dubai remains an attractive business and residential destination, given that it offers low taxation despite the introduction of a 9 per cent corporate tax starting June 2023,
S&P Global Ratings
Government data shows Dubai's economy expanded 4.6 per cent on an annual basis in the first nine months of 2022. S&P estimates that the emirate's GDP rose by 4.4 per cent for the entirety of last year, compared with 3.6 per cent globally.
S&P projects 3 per cent GDP growth for 2023, backed by "continued strong momentum" in key sectors including hospitality, real estate, trade and financial services.
Business activity in Dubai's non-oil private sector economy continued to improve at a “robust pace” in May, boosted by stronger output and employment.
The emirate's seasonally adjusted S&P Global purchasing managers' index reading softened slightly to 55.3 in May, remaining well above the neutral 50 mark that separates expansion from contraction, S&P reported earlier this month.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
UAE currency: the story behind the money in your pockets
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Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
More on animal trafficking
Company%20profile
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Mohammed bin Zayed Majlis
'Cheb%20Khaled'
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Disability on screen
Empire — neuromuscular disease myasthenia gravis; bipolar disorder; post-traumatic stress disorder (PTSD)
Rosewood and Transparent — heart issues
24: Legacy — PTSD;
Superstore and NCIS: New Orleans — wheelchair-bound
Taken and This Is Us — cancer
Trial & Error — cognitive disorder prosopagnosia (facial blindness and dyslexia)
Grey’s Anatomy — prosthetic leg
Scorpion — obsessive compulsive disorder and anxiety
Switched at Birth — deafness
One Mississippi, Wentworth and Transparent — double mastectomy
Dragons — double amputee
Race card:
6.30pm: Baniyas (PA) Group 2 Dh195,000 1,400m.
7.05pm: Maiden (TB) Dh165,000 1,400m.
7.40pm: Handicap (TB) Dh190,000 1,200m.
8.15pm: Maiden (TB) Dh165,000 1,200m.
8.50pm: Rated Conditions (TB) Dh240,000 1,600m.
9.20pm: Handicap (TB) Dh165,000 1,400m.
10pm: Handicap (TB) Dh175,000 2,000m.
Warlight,
Michael Ondaatje, Knopf
The%20specs
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THE BIO
Favourite car: Koenigsegg Agera RS or Renault Trezor concept car.
Favourite book: I Am Pilgrim by Terry Hayes or Red Notice by Bill Browder.
Biggest inspiration: My husband Nik. He really got me through a lot with his positivity.
Favourite holiday destination: Being at home in Australia, as I travel all over the world for work. It’s great to just hang out with my husband and family.
