Dubai-based Emaar Properties and Emaar Properties have frozen plans to issue dollar-denominated bonds amid a slowdown in the real estate market, Emaar Properties and informed sources said.
Three financial sources said the two companies planned to issue dollar-denominated sukuk, but they would have to pay a premium to attract enough investors because of worries about falling real estate prices in Dubai and emerging market turmoil.
Emaar and Nakheel have assigned banks in the past few months to issue Islamic bonds but have frozen plans, the sources said.
Emaar, which built Burj Khalifa, the tallest building in the world, said it froze a bond issue, citing higher interest rates, while Nakheel declined to comment.
"The issue of bonds was raised more than a year ago and frozen because of higher interest rates," said a spokesman for Emaar, which has a stake in the Dubai government. "The decision has nothing to do with market conditions."
Decrease in the current year
Dubai property prices fell from a peak in mid-2014 due to weak oil prices and sales.
Savills said residential property prices fell between 6% and 10% in 2018, and are expected to fall between 5% and 10% this year.
Emaar posted a 29% fall in profits in the third quarter of last year, while Damac, Dubai's second-largest property developer, said its profit fell 68%.
Nakheel, which built industrial islands off the coast of Dubai, was hardest hit by the collapse of Dubai's property market in 2009-2010, forcing it to restructure huge debt.
The company has not issued bonds since it was about to default on debt in 2009.
The market slowdown has put pressure on existing bonds for real estate companies that investors use as a measure of the new debt sales price.
Dubai bond yields, which have been issued by property companies in Dubai, have soared in recent months, posting weaker performance than those in other sectors.
Bank of America Merrill Lynch last week predicted a drop in reserved sales and a gross margin for Damac, saying they were likely to be under pressure from the property market and debt and land payments in the coming period.