Emaar to hold 55% more land in Dubai

Dubai's government took a majority stake in Emaar Properties, the largest Arab real estate developer by market value, by exchanging land for $7.6 billion worth of stock.The deal announced on Sunday with Dubai Holding, owned by the emirate's ruler, could increase Emaar's land holdings in Dubai by 55%, giving the developer more room to expand at home until foreign projects start generating profits, analysts said.

Emaar, developer of a $20 billion project it says will include the world's tallest building, and Dubai Holding did not give a value for the transaction or details about the land in Dubai, part of the United Arab Emirates.
Emaar will swap 2.364 billion new shares for land, they said in a joint statement.Based on Sunday's closing share price, the land would be worth 27.9 billion dirhams ($7.6 billion). The shares closed unchanged on Sunday, after an early rise of more than 2%.Emaar has ridden a wave of growth in UAE property markets since Dubai opened real estate to foreign investment in 2002. The company has expanded into retail, education and health care.

Emaar would benefit from synergies in these and other sectors through its partnership with Dubai Holding, which has operations in everything from real estate to hotels, Mohamed Alabbar, Emaar's chairman, was quoted as saying in a statement."Both Emaar and Dubai Holding will enjoy greater economies of scale, [and] extract improved cost structures from our construction contractors and suppliers," Alabbar said, without giving details.Dubai Holding operates two property companies, Dubai Properties and Sama Dubai.With demand for building materials and labour surging in the Gulf Arab region and Asia, construction costs in the UAE will rise at least 20% in 2007 after surging 25% to 30% in 2006, UAE developer Aldar Properties said last month.Emaar has 6.096 billion shares outstanding, of which the Dubai government owns 32%. Dubai Holding's stake in the expanded shareholding is 27.9%, giving Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum and his government a combined 51%."It effectively gives the government of Dubai, in its different entities, control of the company," said Tamer Bazzari, director of Dubai-based Rasmala Investments. "The key question is at what valuation Emaar got the land."Officials of Dubai Holding and Emaar would not comment on the value.The deal could bring about $4.59 billion worth of new land to Emaar Properties, boosting its land bank in the UAE 55% to $12.9 billion, Bahrain-based SICO investment bank said.The land could increase profitability by driving expansion in Dubai, SICO said, adding that it also represented a greater risk of exposure to the Dubai property market, which is projected to slow in 2007 after years of rapid growth.Emaar, which bought U.S. homebuilder John Laing Homes in June, is expanding outside Dubai with $60bn of projects in 14 countries, including Saudi Arabia, Pakistan, Egypt and India. Many of those projects are yet to break even, and expansion in the cooling U.S. housing market squeezed Emaar's margins in the fourth quarter. Emaar's profit margin in Dubai is three times that in the U.S. market, Cairo-based EFG Hermes estimated.