Aldar Profit Falls 79.5% in Wake of Delayed Sales in Weak Market

Aldar Properties' decision to hold off land sales is reflected in its second quarter profits, which fell 79.5 per cent from last year to Dh253.5 million, the company reported on Tuesday. This marks the second straight quarter in which the company has reported zero land sales due to "challenging market conditions," according to an Aldar statement. The company reported Dh1.1 billion in first half profit compared with Dh2.6 billion in the same period last year. "Aldar is in negotiations relating to the sale of land plots but the challenging market conditions have extended the negotiation period," the company said. "However, Aldar maintains its long-term view regarding the Abu Dhabi real estate sector, which is clearly demonstrated by not rushing to complete any sale that undervalues its assets.

" The results fell in line with analyst expectations, considering the drop in land values in Abu Dhabi since last September. The company recorded Dh1.2 billion in land sales in the second quarter of 2008, comprising 78 per cent of revenues. Al Mal Capital Analyst Bobby Sarkar said land prices have fallen from about Dh600 per square foot last September to about Dh200, the reason why major developers such as Aldar and Sorouh are electing to hold on to them until market conditions improve. "[Aldar's results] are weak, but it's not something that investors were not expecting," Sarkar said. "Aldar remains one of the best capitalised companies in the market. With Dh13 billion of cash on hand, they have enough to sustain operations through the next 12 to 18 months.

"At the time of going to press Aldar had not released its full financial results. Sarkar attributed the drop in profits to the likelihood of a drop in revaluation gains which contributed Dh920 million to the company's first quarter revenues. Revaluation gains refer to income from land granted to Aldar by the Abu Dhabi Government at no cost, which is then developed and sold to contractors at a profit. Sarkar estimated Aldar holds about 50 million square metres of this land. As a sector, Sarkar said he expects all UAE property developers to show sequential improvement in their results beginning next quarter as they begin to deliver key projects.