Deyaar stock falls further as board weighs future

With no new projects, revenue questions arise.

Deyaar Development accounted for almost half of the trading volume on the Dubai Financial Market (DFM) yesterday as the property company's board met to map its future. Investors bought and sold more than 103 million Deyaar shares during the trading session, pushing the company's price down by 4.3 per cent to 33 fils. The stock is down more than 43 per cent for the year to date. Deyaar share activity has accounted for more than a third of all trades on the market since Tuesday of last week.

The board of directors met yesterday to discuss the company's future strategy and its financial position, according to a disclosure on the DFM website. Chet Riley, an analyst at Nomura Securities, said the larger issue for investors was what Deyaar planned to do in the years ahead. Since it had not launched any new building projects, it was likely to see its revenue dry up starting in 2012, he said.

"The concern is what is the strategy going forward," Mr Riley said. "This is something the board needs to consider." He said the company was seeing "strange levels of liquidity" but there was no immediately apparent reason for this. Three of Deyaar's top executives, including Markus Giebel, the chief executive, left in April after the board decided to move the company in a new direction. Mr Giebel was the architect of Deyaar's recovery strategy after the property recession, but he and the board could not reach an agreement on the final step of his plan to create a distressed-assets fund and increase recurring revenue, according to people familiar with the matter.

Another issue that has emerged publicly is Deyaar's connection to a high-end property development, Sky Gardens. Deyaar entered into an agreement - the exact nature of which is being contested by the different parties - in late 2008 to buy a third of the building but is now trying to cancel that agreement and get a refund of the money it has paid so far. The schools company Taaleem has filed a lawsuit against Deyaar and National Bonds - a company that was providing the financing for Taaleem's original purchase of a 33.3 per cent stake in Sky Gardens - in the DIFC Courts.

Taaleem seeks a ruling that it is not obliged to pay the outstanding payments due on the building, court documents show. Deyaar said in its first-quarter financial statements that it had paid Dh185.8 million (US$50.5m) to the seller but expected to get a full refund because the terms of the agreement had expired. National Bonds had an outstanding balance of Dh186.3m, the financial statements show.

"Management believes that the amounts paid by the group are recoverable from the seller," Ernst & Young, Deyaar's auditor, said in an introductory note to the financial statements. It added that a sale and purchase agreement had never been signed and "accordingly the terms of MOU have automatically terminated due to the passage of time". [e-mail]