Aldar, Sorouh Merger “Positive” For Market – Expert

The Abu Dhabi- based real estate developers are merging to form a new entity with Dhs47 billion in assets.



The merger of Abu Dhabi-based property developers Aldar Properties and Sorouh Real Estate is an encouraging step for the emirate’s real estate industry, according to an industry expert.

“The merger has to be seen as a positive move,” said William Neill, head of Cluttons Abu Dhabi.

“Pulling the two large developers together will hopefully provide synergy and more focused and controlled forward plan for future development in line with the 2030 plan,” he said.

“However, as with all mergers there are unfortunately likely to be casualties in terms of staff and contractors linked to the businesses,” he added.

The merger, announced on Monday, will create the largest listed real estate company in Abu Dhabi, with combined total assets of around Dhs47 billion and combined market capitalisation of approximately Dhs10.9 billion.

The proposed transaction would be a statutory all-share merger, with Sorouh shareholders receiving 1.288 Aldar shares for each Sorouh share they hold, the companies said.

Following the merger, Sorouh shares will be delisted from the Abu Dhabi Securities Exchange and the company will be dissolved as a legal entity.

The new company, renamed Aldar Sorouh Properties, will be owned 37 per cent by the Abu Dhabi government and related entities.

“Once the developers have been streamlined into one entity, we hope that announcements on future development and potential benefits will start getting realised in early 2014,” said Neill.

“Hopefully the merger will help balance the supply/demand issue that Abu Dhabi has experienced and allow the market to pick up again,” he added.

The Abu Dhabi property market “remains 18 to 24 months behind Dubai” and is not expected to experience an upturn in 2013, Alan Robertson, the CEO of property consultancy Jones Lang LaSalle MENA said in a report released this week.

“The foundations are however being laid for a recovery from 2014, with a number of major infrastructure projects scheduled to start later this year,” he said.

“Initiatives such as regulation on housing allowances for Abu Dhabi government employees, announcement of major government backed projects and Dhs330 billion stimulus package in Abu Dhabi will stimulate demand and market performance,” the report added.

Going ahead, Cluttons’ Neill remains skeptical on whether Aldar-Sorouh merger will encourage further consolidation in the UAE’s property sector.

“It is difficult to tell at this point in time. Hopefully once the dust settles on the Aldar / Sorouh merger we will be start to witness the benefits.

“The current position of Abu Dhabi’s property cycle will hopefully make the merger a success, however it doesn’t necessarily mean more mergers are needed throughout the UAE.

“We have to be careful that monopolies are not created with too much power that can dictate the markets and potentially deter foreign investment,” he added.