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Kuwaiti developer considers merger of some of its units

Kuwait's real estate developer Al Mazaya Holding is considering consolidation among some of its units to lower costs and is taking provisions in 2008 as the global downturn hits the Gulf property market.

"We are going to consolidate among our own companies... You can't have full manpower in companies that don't have projects," Salwa Malhas, executive vice president of Mazaya, which is also listed in Dubai and has 18 subsidiaries, told Reuters.
"(The decision) won't be before announcing our end of year results," she said.

The Kuwait-based developer said last week some of its clients had defaulted on loans, forcing the firm to take a series of precautionary measures that could affect earnings.

"The fourth-quarter will take... a hit because most of our real estate assets were re-evaluated and there was a drop in real estate prices," she said.

The firm is also booking unspecified provisions in 2008 to weather a sliding property market and defaults by investors, she said, declining to comment further.

Al Mazaya told Reuters in October that it planned to go ahead with an initial public offering in Qatar in November despite the turmoil in financial markets and would launch $9.5 billion of Dubai projects.

Malhas said these plans are now on hold and any future expansion plans are being reconsidered by the firm.

"For the coming six months we will be very conservative in taking any step to get into markets or buying new lands. We are concentrating now on projects under construction," she said.

Al Mazaya Qatar, in which Al Mazaya Holding owns a 10 percent stake, said in August it would launch the IPO to increase its capital from 500 million Qatari riyals to 1 billion riyals as it looks to benefit from a property shortage in the world's largest exporter of liquefied natural gas.

The Qatari firm's management has decided to put the IPO plan on hold due to the financial crisis, Malhas said.

Property prices across the Gulf region are facing downward pressure as a regional economic boom that was fuelled by high oil prices came to an end late last year.

Dubai's property sector has been hit most severely, with the average cost of residential real estate falling about 25 percent from peaks last year, Morgan Stanley said last month.

Despite the crisis, Malhas said the firm had no debt problems and did not default on any loans.

"Our policy has been very conservative. We did not default on any single investment for anyone," she said.

Kuwait's Global Investment House, the country's biggest investment bank, owns an 11.49 percent stake in Al Mazaya, the bourse data showed. (Reuters)

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