ZDJ Investors Urge Dubai Emaar To Halt AED90B Projects
By Stefania Bianchi
Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--A group of property investors are pressing Dubai's Emaar Properties PSJC (EMAAR.AI),the Middle East's largest home builder, to cancel more than AED90 billion ($24.5 billion) of projects amid rising fears that Dubai's real estate slump could spiral into free fall.
The Emaar Investor Group, made up of approximately 200 individual buyers, last week hand delivered a petition to the developer requesting the "cancellation or postponement" of the Warsan Estate, Asmaran and Maysan projects, which they say "are no longer viable under current market conditions."
The group is asking Emaar to either refund any money paid to date, to transfer any money invested to other Emaar units or to provide a credit note for an equal amount.
"The Warsan Estate, Asmaran and Maysan projects are no longer viable - there is no demand as many investors have already left the market leaving an oversupply, there is no money available to investors to continue payments, and there is no value in these projects as they are priced far above the market value of similar and better located projects in Dubai," the petition seen by Zawya Dow Jones says.
Investors are becoming increasingly nervous as Dubai's six-year property boom comes to an end. In recent months, financing has evaporated, sales have slumped, developers and brokers are cutting jobs and prices in some areas have fallen sharply. Amid the slowdown, developers such as Emaar are being forced to review project requirements.
Last month, the developer said it was putting future real estate projects on hold to stem the oversupply of units in Dubai's burgeoning market. The company said it will concentrate on completing all projects which have commenced construction, adding that new launches will depend on supply and demand.
"To continue with these projects will result in a worst case scenario for both investors and Emaar," the petition, signed by the 200 investors, says.
DEFAULTS COULD RISE
"Investors will default as they cannot continue paying towards a project whose market value is likely to remain far below the selling price for many years, and Emaar will suffer by losing many loyal customers, having significant legal and financing costs to manage defaults and the ongoing construction costs," the petition says.
An Emaar Properties spokesperson, in an emailed statement to Zawya Dow Jones, said the company has received a petition from investors regarding some of its projects, and will consider their proposals seriously.
"Emaar is committed to upholding the interests of all our customers and stakeholders and appreciate their concerns, especially given the current economic conditions," the spokesperson added.
Emaar's Warsan Estate, Asmaran and Maysan projects were launched in May and June 2008 at the height of Dubai's property boom. At the time, units sold for more than AED2000 per square foot, but since then property prices in some areas of Dubai have slumped more than 50%.
The AED90 billion Asmaran project, a joint venture between Emaar and government-owned developer Tatweer's Bawadi unit, is located in the emirate's $110 billion Dubailand development.
The 70 million square foot development was planned to be home to 55,000 residents and would include a family-orientated theme park.
The three block Maysan Towers project was launched within the Asmaran development, while 3.4 million square foot Warsan Estate was designed to have more than 500 luxury villas. Townhouses there sold for an average of AED5.5 million at launch.
As Dubai's property market continues to slide, investors are organizing themselves to tackle both large and small developers as well as Dubai's new and convoluted real-estate regulations.
"It is at times like these that customers most expect real estate companies to listen actively and communicate openly with them to find mutually acceptable and economically feasible solutions," the Emaar petition says.
Last month, The Dubai Property Investors Group, made up of more than 300 local and international investors, lawyers and real estate developers, petitioned Dubai's Real Estate Regulatory Authority to act quickly to avoid a "complete collapse" of the sector amid growing fears over the financial strength of some developers and their ability to deliver more than $1 trillion worth of projects.
By Stefania Bianchi, Dow Jones Newswires;
Copyright (c) 2009 Dow Jones & Co.
(END) Dow Jones Newswires
