Dubai property developer Deyaar reported a 90 per cent annual surge in its second-quarter profit as revenue rose amid a boom in the UAE’s real estate sector.
Net profit for the three months to the end of June climbed to Dh62.1 million ($16.9 million), the company said in a statement on Thursday to the Dubai Financial Market, where its shares are traded.
Revenue for the period jumped more than 52 per cent year-on-year to Dh316.3 million.
The company’s first-half profit rose 77 per cent to Dh118.4 million as revenue grew more than 70 per cent to Dh628.9 million.
“The positive … financial results were achieved due to strong performance executed by all business segments of the company, especially the property development business, which was the dominant revenue contributor,” Saeed Al Qatami, chief executive of Deyaar, said.
“Following our positive first-quarter financials, the [Q2] results were driven by several factors, including the success of recent projects and the increased frequency of the company's project launches.”
Dubai's property market registered strong growth in the first quarter of this year, with total transaction value up 80 per cent annually to Dh157 billion, according to official data.
Total transactions rose 49 per cent to 38,715 during the January-March period.
Average prices in Dubai's residential market increased by 16.9 per cent in the year to June, with apartment prices up 17.2 per cent and average villa prices rising by 15.1 per cent, according to a recent report by consultancy CBRE.
As of June, average apartment prices stood at Dh1,294 per square foot while average villa prices were at Dh1,525 per square foot, it said.
The UAE property market is registering growth on the back of government initiatives such as residency permits for retirees and remote workers.
The Emirates' move to expand the 10-year golden visa programme, the economic gains generated by Expo 2020 Dubai and higher oil prices are also supporting the property market's growth momentum.
Deyaar’s total assets reached Dh6.2 billion by the end of June, compared with Dh6.1 billion in December last year, it said. Total liabilities stood at Dh1.6 billion by the end of June.
The company is majority owned by Dubai Islamic Bank, the biggest Sharia-compliant lender in the UAE.
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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.”
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