June 2, 2010 3:00 am

Dubai Holding unit hit by tumbling property market

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The non-financial arm of Dubai Holding, the group owned by the emirate's ruler, yesterday reported a 2009 net loss of Dh22.8bn ($6.2bn), a reminder of the deep impact of the real estate crash.

Dubai Holding Commercial Operations Group's loss was mainly due to real estate impairment charges amid the tumbling Dubai property market and were announced as the unit holds talks with banks to refinance a $555m loan due in July. DHCOG said revenues had fallen by 28.5 per cent to Dh9.5bn in 2009. Its property arm reported declining real estate sales and project delays.

The results mark another step towards dealing with the emirate's $109bn gross debt after another conglomerate, Dubai World, secured initial agreement with banks on a proposed $23.5bn debt restructuring.

Units of Dubai Holding - owned by ruler Sheikh Mohammed bin Rashid Al Maktoum - are negotiating with creditors to extend parts of the group's $12bn gross debt.

For example, Dubai International Capital last week asked for a debt extension until the end of September as it faces a $1.25bn syndicated loan repayment in June. Dubai Group, another financial arm, also faces upcoming maturities.

DHCOG plans to try to persuade bankers to roll over loans as it will take time to monetise assets valued at Dh124.5bn, most of which is locked up in the company's real estate assets and Dubai land bank.

According to its financial statement, DHCOG has gross debt of Dh15.2bn, including about Dh10bn in bonds and Dh5bn in loans.

DHCOG, described by analysts as the "least impacted" wing of Dubai Holding, has engaged PwC as it negotiates a rollover of a $555m loan due to banks that include RBS, Citigroup and Standard Chartered.

The talks are going well, say people close to the discussions.

DHCOG includes the merged property companies Dubai Properties, Sama Dubai and Tatweer, as well as Jumeirah, a hotel chain, Tecom internet and media business parks and telecommunications interests.

"DHCOG is well placed to meet its financial obligations in 2010," said Ahmed bin Byat, chief executive of Dubai Holding. "There is no need to restructure outstanding debt as discussions are taking place with banks to roll over our existing facilities at commercial terms," he said.

DHCOG said it expected the Dubai real estate market to stabilise this year and recover in 2011. But some analysts are concerned that upcoming supply will outmatch demand and cause prices to decline further after halving since the peak in 2008.

Dubai Properties Group said it plans to hand over 21,000 units by 2012 as it completes mature projects but defers some early-stage developments until economic conditions improve.

Contractors and consultants have made claims over cancelled and delayed projects, with the company estimating its economic liability for these claims at Dh4bn.

Jumeirah saw occupancy levels falling to 73.4 per cent across the hospitality chain's portfolio as revenues also dropped, but the hospitality business was less impacted than other markets, said DHCOG.

Separately, Drydocks World, a unit of Dubai World outside the troubled conglomerate's restructuring proposal, on Monday appointed a new board, replacing chairman Sultan bin Sulayem with Khamis Buamim, amid talks to restructure $1.7bn in debts.

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