Merged Emaar, Dubai Holding will dominate local property market

The merger will change the shape of the industry in Dubai, says the ratings agency Moody's Investors Service.

The merger announced in June between Dubai's two largest master property developers, Emaar Properties and Dubai Holding Commercial Operations Group (DHCG), will change the shape of the industry in Dubai, says the ratings agency Moody's Investors Service. In its latest Dubai property report, Moody's says the consolidation of Emaar and DHCG would create a dominant entity in thelocal market. Once the merger is concluded, most likely before the end of this year, the new company would have strengthened bargaining power with contractors and benefit from economies of scale, the report said. The merged company would also have access to a substantial land bank.

"Several drivers - such as the opening of Dubai's Metro (public transportation system), the inauguration of Burj Dubai (the world's tallest skyscraper) and the end of the school year, and the beginning of the summer period - will shape Dubai's residential property market in the near term and lead to greater differentiation within Dubai's residential areas, from which Emaar and Dubai Holding's real estate divisions may benefit," the report said.

On June 30, Moody's placed both Emaar's and Dubai Holding's long-term issuer ratings on review for possible downgrade. "Our review will assess asset valuation, government ownership, dividend policies, the new capital structure and strengths of the combined cash flows, as well as the liquidity profile of the new entity," the agency said. [e-mail]