Credit ratings of UAE’s largest listed real estate developer Emaar Properties PJSC and its subsidiary Emaar Malls Management LLC (Emaar Malls) have been upgraded to ‘BBB-‘ on the back of a strong performance in 2021 and a stable outlook for 2022, according to S&P Global Ratings.
Emaar Properties reported record-high property pre-sales of $7.5 billion (AED 27.4 billion) in 2021 amid a rebound in demand for residential real estate.
The firm reported a 16 percent year-on-year rise in its UAE revenue backlog to AED 28.6 billion, as well as a 46 percent rise to AED 17.4 billion for international operations, providing visibility on property development revenue in the next two-to-three years.
The group’s consolidated revenue soared 43 percent in 2021 to AED 28.3 billion, with notable improvements across all business segments. Its UAE development operations accounted for the bulk of the increase – approximately 70 percent – and further benefitted
from a 37 percent rise in value per unit sold, with the group able to sell at higher prices.
The S&P Global Ratings report authored by credit analysts Sapna Jagtiani and Tatjana Lescova, stated: “We think that Emaar Properties’ profitability may rise slightly in 2022-2023 after a strong 2021, despite higher raw material prices and general cost inflation, helped by advantageous construction outsourcing terms that are fixed and don’t allow for pass through of higher costs.
“With a pipeline of close to 25,000 new units under development in the UAE, including joint ventures and joint development agreements, and more than 8,000 units per year scheduled for handover in 2022-2023, we expect the group’s UAE development business to report AED 10 billion to AED 11 billion of average annual revenue.”
Meanwhile, Emaar Malls has been viewed as “material and core” to parent Emaar Properties, which would provide all necessary financial and operational support in case of need after increasing ownership to 100 percent.
This has led S&P Global Ratings to view the credit quality of both companies as equal.
“We, therefore, raised our long-term issuer credit and issue ratings on Emaar Properties and
Emaar Malls – as well as their respective debt instruments – to ‘BBB-‘ from ‘BB+’,” the report confirmed.
“The stable outlook on Emaar Properties reflects our expectation that the company will sustain funds from operations (FFO) to debt above 45 percent, and debt to EBITDA below 2x. Our stable outlook on Emaar Malls mirrors that of Emaar Properties.”
Healthy retail sales supported a rental rate recovery to close to pre-Covid-19 levels for
Emaar Malls and a 57 percent revenue rebound, excluding Namshi.
The retail sector has emerged from the contraction in 2020, with tenant sales exceeding 2019 levels and particularly strong demand for luxury products in 2021. This supported growth in rental rates is broadly in line with pre-Covid-19 levels.
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