Sorouh reschedules Reem project

Sorouh Real Estate is looking at rescheduling its Shams project on Reem Island in Abu Dhabi and cutting prices on others.

United Arab Emirates - Abu Dhabi - April 22 - 2009 :  Two men walks at Sorouh showroom during Cityscape Abu Dhabi in Abu Dhabi National Exhibition Centre. ( Jaime Puebla / The National ) *** Local Caption ***  JP63 CITYSCAPE AD.jpg
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DUBAI // Sorouh Real Estate is looking at rescheduling its Shams project on Reem Island in Abu Dhabi and is cutting prices at some of its developments because of slow sales, an executive said yesterday. The efforts to streamline the company come as it announced second-quarter earnings of Dh151 million (US$41.1m), a 75.5 per cent drop compared with the same period last year.

"We really are responding to the market," said Paul Warren, the Abu Dhabi developer's chief strategy officer "We aren't pretending nothing is going on. The management is really focused on cash and delivering top-quality projects." The earnings, announced yesterday, would have been significantly lower if it was not for a Dh70m boost from the dissolution of a partnership with Tameer Holding on the Gate Towers, a huge skyscraper project that is part of Shams Abu Dhabi.

Mr Warren said that was a "one-off transaction". The Shams Abu Dhabi project, a 579-hectare master-planned community at the opposite end of Reem Island from Abu Dhabi Island, is one of the biggest challenges facing the company. Sorouh sold 104 plots of land to sub-developers, some of which are now facing difficulties in getting their tower projects moving. Mr Warren said the company was focusing on helping sub-developers nearest to its Sun and Sky towers, a pair of skyscrapers within the Shams project that are scheduled to be delivered early next year.

The company is also talking to potential partners about investing in the project. Sorouh has set up a working party to address the issues at Shams Abu Dhabi. "This group's sole job is to work with the sub-developers to make sure they can meet their communities," Mr Warren said. He said Sorouh was considering a plan to reschedule the project's phases according to their proximity to the Sun and Sky towers, so people living on the island do not feel like they are living in a construction site.

Sorouh has recently made deep cuts in prices at its Alghadeer project in Ghantoot and the Gate Towers on Reem Island to reduce the number of defaulters and ensure the projects go ahead. About 80 per cent of the buyers at Alghadeer have accepted the offer. The discussions with Tameer Towers customers are still under way. Sorouh had also increased its rental portfolio to Dh1.4 billion, which will lift its regular income over time.

But the amount of overdue money owed to the company rose to 8 per cent of overall receivables, from 4 per cent in the first quarter, showing that some buyers are having difficulties paying. Chet Riley, an analyst at Nomura Securities, said the company was positioning itself well to handle the slow market, and the second quarter was one of Sorouh's most challenging. "They called the trough in the last quarter but really the trough was in this quarter," Mr Riley said.

"I think the pinch point has passed and from here on in, they are in better shape." A major milestone will be the delivery of the first phase of Golf Gardens, a development near the Abu Dhabi golf course just outside of the city centre, in the third quarter, Mr Riley said. Mounir Haidar, the chief executive of Sorouh, said: "Despite the tough economic environment, long-term demand remains promising and we are actively managing the company's cash position. "This, combined with the ongoing investment in Abu Dhabi's infrastructure, makes us well placed to capitalise on our strong position when the markets recover."

Net profit for the first half of the year was Dh281.42m, compared with Dh977.61m in the same period last year, the company said. Most of the income reported comes from past sales that are counted as the project is delivered. Sorouh said yesterday it expected a "gradual quarter-on-quarter improvement" for the rest of the year as more projects are delivered and rental income starts to come in. Sorouh's share price yesterday shed Dh0.06, or 2.27 per cent, closing at Dh2.58.