Sagging land sales prompted a 72 per cent drop in profits last year for Reem Investments, the master developer behind two of Abu Dhabi's largest property developments.
The privately held company generated Dh238.7 million (US$64.9m) in profit, and earnings per share of Dh1.53 last year, it said. That compares with Dh785m in profit for the 2009 fiscal year.
"It didn't make sense for us to sell any plots of land at reduced prices," said Bambang Sugeng bin Kajairi, the chief executive of Reem Investments.
Reem is the master developer of Najmat Abu Dhabi, the Dh30 billion project on Reem Island, and Rawdhat, a Dh18bn development on 28 hectares on Airport Road near where it enters Abu Dhabi island.
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Despite the slowdown in land sales, the company maintains a strong balance sheet, Mr bin Kajairi said.
The company shifted its focus to developing infrastructure and collecting payments from existing buyers, he said. It collected Dh609m in land payments and the default rate has been less than 5 per cent, he said.
This week shareholders approved a plan to reduce the company's capitalisation by 50 per cent and return Dh777m to investors.
Earlier this year the company announced plans to begin construction of Nalaya Villas, 42 luxury villas in the Najmat development. The villas, which Reem expects to complete next year, will be offered for lease, the company said.
Reem Investments also announced an agreement with Nobu Hospitality to manage a hotel on the Reem Island development.
"The idea to do certain projects ourselves is to show confidence in the project," Mr bin Kajairi said. "That will help us increase the value of the land."
The company does not expect to raise any more capital to fund construction, he said.
Investments generated Dh49.6m to the group's income last year. This year the company is looking for opportunities in the healthcare, education and logistics sectors to diversify its income streams, said Abdulhamid Saeed, the managing director.
By the end of last year 90 per cent of the first phase of infrastructure work had been completed on the Najmat development and work had started on the second phase, including the development of the beaches, the company said. The infrastructure work on Rawdhat was completed in April last year.
Reem Investments was founded in 2005 with Dh1.55bn in capitalisation. In addition to its own development projects, Reem is a shareholder in Al Maabar, the company formed with fellow Abu Dhabi developers Aldar Properties, Sorouh Real Estate, Mubadala Development and Al Qudra Holding to develop projects in international markets. Mubadala Development is a strategic investment company owned by the Abu Dhabi Government.
Reem had benefited from taking a conservative approach during the boom times, the company said.
With the capital distribution this year, coupled with past dividends, the company says it will have returned 90 per cent of the original invested capital to investors
