April 30 (Bloomberg) -- Aldar Properties PJSC and Sorouh Real Estate PJSC fell in Abu Dhabi trading after the Gulf emirate’s two largest developers said first-quarter revenue declined in the last earnings statements before their merger.
Aldar, the bigger of the two companies, fell 3.3 percent, the most since March 4, after reporting a 55 percent slide in sales in a statement to the Abu Dhabi stock market today. Sorouh declined 1.6 percent after saying revenue was down 35 percent.
The companies agreed to merge in a 5.5 billion-dirham ($1.5 billion) deal that would create the Middle East’s third-biggest publicly traded developer by assets. Abu Dhabi’s government backed the tie-up as the oil-rich emirate increases its direct support for property development by reviving stalled projects and commissioning new work.
Net income at Aldar dropped by 68 percent. Sorouh reported a 22 percent increase in profit after accounting for funds that had been withheld until projects were completed.
A recruitment agency was hired to search for a chief executive officer for the combined company, Sorouh’s Chief Financial Officer Richard Amos told reporters in a conference call after announcing the results. Aldar and Sorouh have set up 17 committees to help integrate the companies, he said. The merger will become effective in June.
Sorouh is on track to grow its recurring revenue to 650 million dirhams by the end of 2015, Amos said. The developer will complete 7,000 units by the end of 2014.
Aldar’s recurring revenue from rentals, hotels and schools, climbed 12.9 percent to 406.7 million dirhams in the first-quarter, according to its statement.
Residential and commercial rents in Abu Dhabi are expected to drop further as an increasing supply of homes and offices are built after the global financial crisis crimped the United Arab Emirates’ real estate market, according to a CBRE Group Inc. report earlier this month. Home rents fell about 3 percent on average in the first quarter compared with the previous three months and 17,000 new homes are expected to be completed this year. Office vacancies are set to climb from a record high of about 35 percent as concern about slower economic growth prompts companies to cut costs and halt expansion, according to the report.
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