Apr 02 2012
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Dubai's prime retail, hospitality assets prove resilient
These assets can weather further volatility: Fitch
"Retail rentals and hospitality revenues are holding up relatively well and performing better than expected in 2011 compared with Fitch's base assumptions," said Bashar al Natoor, Director in Fitch's Corporates team in Dubai. "This is partly because the turmoil affecting some Middle East destinations had a positive impact on Dubai's hotel, retail and residential sectors as well as active asset management by leading players."
Despite signs of stabilisation in Dubai's real estate market, Fitch cautions that the real estate and hospitality sectors could potentially experience increased vacancy rates and a higher risk of buyer and tenant defaults, due to depressed fundamentals, such as oversupply and low investor confidence and liquidity (albeit improving) and the effects of another global crisis. The latter would be closely linked to macroeconomic conditions in Dubai and the region.
MAF maintained strong financial metrics in FY10 and FY11, despite the challenging property environment in the UAE and exposure to Bahrain and Egypt. Operational performance was resilient, with the occupancy rate remaining at 98.6 per cent as MAF Properties benefits from an average lease length of 7.7 years, which compares well with European peers, a quality and diversified tenant base exhibiting an estimated 95 per cent lease renewal rate, and a low tenant default rate below 1 per cent.
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