Dubai Emaar’s Retail Spin-Off Plan Won’t Affect Rating – S&P

Emaar’s strong reputation with investors for delivering projects, plus the fact it has collected healthy deposits on the off-plan developments, meant it was very cash-rich.



Standard & Poor’s plans no rating action relating to Dubai’s Emaar Properties after the emirate’s largest listed developer announced plans to spin off its retail unit, an analyst covering the company said on Monday.

Emaar said on Saturday it planned to list 25 per cent of its shopping malls and retailing unit in a public offer expected to raise around eight to nine billion dirhams.

The move, which would see cash distributed to shareholders through a special dividend but see Emaar’s main revenue stream of recent years divested, won’t impact Emaar’s rating, which was upgraded in February to investment grade.

“They are in a comfortable funding position at the moment, hence we are okay with the fact (that) not only did they increase the cash dividend but also they announced this potential stake sale,” Tommy Trask, director of corporate ratings at S&P, told a media event.

Trask said Emaar’s strong reputation with investors for delivering projects, plus the fact it has collected healthy deposits on the off-plan developments it was planning, meant it was very cash-rich.

Emaar, which sold properties worth Dhs12 billion last year and generated Dhs10.3 billion of revenue, hiked its dividend payment for 2013 to 15 per cent from 10 per cent in the previous year, its announcement on Saturday detailed.

The shopping malls, retail and hospitality unit contributed 46 per cent of Emaar’s revenues in 2013 but Trask said a shift towards earning more from property development was already happening.

“A year ago, we were rating Emaar as a property investment company but last time we looked at the rating action, we looked at the prospective earnings profile and we thought the balance will change,” Trask said, indicating it was now judged as a developer.

“So in the next 2-3 years, you’re going to have more earnings coming from development and sale of properties than the income from investment properties.”