By Ed Attwood
Developer's silence on delayed projects hampering positive outlook for stock, says analyst
Despite Deyaar’s recent confirmation that it would hand over five projects in Business Bay this year, analysts have expressed concerns about the firm’s upcoming pipeline of work.
In a statement on the Dubai bourse website this week, the Dubai developer said that the projects – worth a total of $327m – would be completed in the first quarter, and that it would finish all outstanding work by the end of 2011.
“There is no upside to the stock due to this announcement, because Deyaar aren’t really saying anything new,” one Gulf-based analyst told Arabian Business on condition of anonymity.
“What’s interesting is that the company valued these projects at $327m, with half of that as cash collection, which is quite optimistic.”
When questioned about the long-term prospects for Deyaar, the analyst said it was hard to be positive: “They haven’t said anything new for the last six months, and no-one at Deyaar appears to be talking with analysts. How can you be positive about the stock without any communication?”
The developer has not outlined its forward strategy since replacing former CEO Markus Giebel in mid-2010.
Further adding to Deyaar’s potential problems, the influx of new space into the Business Bay area is resulting in heavily increased competition and lower prices as a result, real estate analysts say.
“We are seeing limited transactions, however, the current low level pricing is beginning to attract the interest of potential owner-occupiers to Business Bay,” said David Quinn, head of UAE operations for Cushman & Wakefield.
“Investors in this area remain cautious due to the extremely high vacancy rate and high levels of supply. The significant rent reductions throughout Dubai have provided tenants with greater options in where to locate their businesses, and as a result the established areas have become considerably more affordable while the secondary areas have struggled to attract tenant interest.
“Many buildings in Business Bay are currently suffering as a result of the increased competition as further supply comes on line,” Quinn said.
Other concerns about the area focus on the lack of infrastructure, particularly from the perspective of access roads.
“The market can withhold an influx of staggered handovers throughout the year, however, Business Bay must ensure that the access and roads are fully completed early on in 2011,” said Laura Adams, a manager at Better Homes’ Dubai office. “In addition, prices by owners should also be in line with actual market rates.”
However, the long-term view on Business Bay is that its proximity to some of Dubai’s most-wanted real estate means that the value of commercial property there will remain high.
“A number of companies would like to purchase now, however are holding off until they can take possession; following which, we expect more buyers than renters as most would like to eliminate the monthly rental repeat,” said Andrew Elliott, a consultant with Better Homes Commercial.
“Once these companies own their properties, the area’s popularity will improve as it’s close to Sheikh Zayed Road, DIFC and the Downtown District.”