Moody's: Despite merger, Dubai real estate weak

Moody's Investors Service said it said the recently proposed consolidation of Dubai's two largest master real estate developers, Emaar Properties (rated Baa1) and the real estate activities of Dubai Holding Commercial Operations Group (rated A3), would create a dominant entity in Dubai's property market that would control the market as well as benefit from economies of scale and stronger bargaining power with contractors.

Moody's said it recognizes that consolidating Emaar and Dubai Holding's real estate interests into one entity will create a new giant in Dubai's market, with unrivalled access to a sizeable land bank.

Several drivers - such as the opening of Dubai's public transportation system and inauguration of the world's tallest skyscraper - will shape Dubai's residential property market in the near term and lead to greater differentiation within Dubai's residential areas, the agency said.

But, ongoing market weakness and the prospects of weaker cash flow over the medium term will impact the combined group going forward, Moody's said.

Both companies were placed on downgrade review in June after the merger was announced.

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