Burj already in the black

The Burj Khalifa is a bundle of superlatives before it even opens. Its most important distinction for Emaar Properties, the company that built it, is that it is already in the money. After selling 90 per cent of the units in the record-setting edifice, Emaar has pocketed a profit of at least 10 per cent on the US$1.5 billion (Dh5.51bn) cost of construction, said Mohamed Alabbar, Emaar's chairman.

"Tall buildings don't make money. They normally don't," Mr Alabbar said. "But to still sell it and make a return of more than 10 per cent? That's really fabulous." It is especially fabulous for a company that is still recovering from a property crisis that sent its revenues down by 60 per cent and pushed its share price down by almost 90 per cent. With the opening, Emaar seems to be staging a revival. While it lost Dh430 million in the first nine months of the year, it earned Dh636m in the third quarter. Investors who stuck with its stock last year took home a 71 per cent return and analysts are now singing the company's praises.

"We believe Emaar's strategy to invest in more recurring income-generating assets and to diversify internationally is paying off," said Athmane Benzerroug, an analyst at Deutsche Bank. "Emaar is less and less a Dubai developer." It may seem strange that Emaar's salvation may lie in escaping the market it created. Mr Alabbar set up the company in 1997 to transform Dubai into a regional hub to offset dwindling oil revenues.

Much of the inspiration came from Singapore, where Mr Alabbar spent five years following a stint at the UAE Central Bank. Emaar's early model was fairly simple, analysts say. The Government gave it land in return for equity and Emaar turned it into dwellings. Its first major project was Emirates Hills, a planned community of secluded villas nestled around a golf course where foreigners could buy property on a 99-year lease, a first for Dubai.

The development became a magnet for investors from Pakistan and India. One of its best-known residents was the late Pakistani prime minister Benazir Bhutto. The next year, Emaar turned to the Vancouver waterfront as inspiration for its Dubai Marina project. Arabian Ranches soon followed and, in 2003, Emaar announced plans to build Burj Dubai. Still, the Burj is only the centrepiece of a larger business district. It is in the surrounding Downtown Burj Dubai that Emaar figures it will recoup its Burj investment.

"We lose 2 per cent on the building. Everything else is gold," Mr Alabbar said.The problem was that Emaar was not the only one building. The company was lucky in its timing, as it finished and sold most of its projects before the global economic crisis began. Fortunately, it had not borrowed as heavily as its rivals, a fact Mr Alabbar lays to having gone public. "The disciplines of being a public company I think have saved us," he said. That and senior executives who, he said, "hate borrowing".

Analysts were therefore relieved when Emaar last month called off plans to merge with the property division of the heavily indebted Dubai Holding, which manages the personal wealth of Sheikh Mohammed bin Rashid, the Vice President of the UAE and Ruler of Dubai. While Mr Alabbar said the deal still made sense, he added that Emaar called it off to soothe nervous shareholders. "They don't want any burden," he said. "Especially after all that has happened."

Emaar's final saving grace, analysts say, has been its investments abroad. Since it first ventured into India in 2001, the company has in invested in projects in Egypt, Morocco, Saudi Arabia, Syria and Turkey. Its US foray went sour last year when John Laing Homes went bankrupt. Emaar now counts on foreign investments for almost half its revenues. Emaar is already helping to build a tower in Jeddah that is expected to surpass Burj Dubai in height.

"We know that there is work to be done," Mr Alabbar said. "Maybe three months from today, maybe six months from today, but we have no doubt that this region is moving on." * Additional reporting by Nathalie Gillet warnold@thenational.ae