Sorouh builds property optimism

Sorouh posted a 29 per cent rise in net profit to Dh259 million for the first six months of the year compared with the same period last year. Jaime Puebla / The National

Sorouh Real Estate, one of Abu Dhabi's biggest developers, yesterday joined its Dubai peers by recording a big increase in profits as the property market recovers.

The developer behind Reem Island's Sun and Sky Towers posted a 29 per cent rise in net profit to Dh259 million (US$70.5m) for the first six months of the year compared with the same period last year.

"We are very pleased to be able to report a continued strengthening of profitability in the second quarter and for the first half of the year as the business continues on its path to maturity," said Abubaker Seddiq Al Khouri, the managing director at Sorouh.

Profits in the second quarter increased 33 per cent to Dh166m on the same period last year.

Emaar Properties, Nakheel and Union Properties also reported healthy first-half profits this week on the back of a recovery in the property market and growing Dubai economy. Sorouh's share price jumped 1.9 per cent to Dh1.05 on the Abu Dhabi Securities Exchange General Index following its announcement.

Aldar Properties, the developer behind Yas Island and Ferrari World, rose 3.5 per cent to Dh1.16.

Sorouh is in merger talks with Aldar and the two companies said in June the due diligence process would take several months.

There was no update yesterday on that process.

Sorouh's revenues were broadly flat at Dh1.65 billion for the first half compared with the same period last year with Dh1.2bn coming directly from national housing projects for Emiratis, which were awarded by the Government.

"We have had a great quarter," said Richard Amos, the chief financial officer for Sorouh.

"A lot of our revenue is being driven by national housing projects. It's a very important revenue driver for us at this point in time and we are delivering quality units for the Government."

About Dh1bn of revenues last year came from the sale of units in Sun and Sky Towers on Reem Island, Mr Amos said, marking a huge directional change for the company in focusing on national housing projects.

"We think it is very pleasing we have replaced those revenues by national housing revenues that are more sustainable," he said.

He added that contracts for about 15,000 national housing units had been awarded so far by the Government out of a total 60,000 planned under Abu Dhabi's Economic Vision 2030.

The master-planned communities for UAE nationals include Watani, Al Sila'a and Ghuraibah.

Sorouh also enjoyed strong demand for leasing in its properties and communities, with revenues in its investment portfolio increasing 22 per cent to Dh50m in the second quarter on the same period last year, reaching Dh100m for the first half this year.

Sun and Sky Towers now houses about 1,000 families as well as some commercial tenants.

Mr Amos said the education and healthcare sectors would be key areas the company would focus on for leasing, with both sectors making up the majority of 800 units signed for in the second quarter by corporate clients leasing units in the Al Rayyana development near Abu Dhabi Golf Club.

"In both those sectors, we have been successful in letting out with bulk business," said Mr Amos.

Tilal Liwa, a hotel owned by Sorouh in Al Gharbia, was profitable and recorded occupancy at about 69 per cent for the first half, the company said.

Meanwhile, Boutik Al Ain, one of the developer's signature community malls, is set to open in the fourth quarter of this year.

In total, the company collected Dh1bn in cash in the first half of the year and has Dh1.1bn of cash on its balance sheet, representing financial gearing of 41 per cent.

Net asset value of the company increased from Dh2.37 per share to Dh2.47 per share in the first half.

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