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Jan 13 2010

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Moody's downgrades Alaqaria to Baa1, keeps ratings on review for downgrade

The proposed change in ownership, by which Barwa would become the new direct majority shareholder of QREIC , impacts the high support levels that Moody's has so far incorporated into the ratings as QREIC becomes further removed from government levels. Although the government will retain a minimum direct 45% stake in Barwa , in Moody's opinion support mechanisms to Barwa and ultimately QREIC as a subsidiary of Barwa might not be extended in the same way. Accordingly, support assumptions have been lowered resulting in the two-notch downgrade to Baa1.

During the ongoing review of ratings Moody's will assess the status of QREIC as a government-related issuer (GRI) in addition to its baseline credit assessment (BCA). Baa1 ratings continue to take into account the integral part QREIC plays in the economy of Qatar and its strategic importance as a service provider to the national hydrocarbon industry, which warrants uplift from its BCA. The review will also focus on the BCA, or standalone credit profile including the operating performance, expansion plans, future funding requirements and the funding mix as well as how recurring cash flows match the debt maturities.

On January 10, 2010 QREIC and Barwa both announced the agreement of initial terms of their proposed merger under which QREIC will become a subsidiary of Barwa , subject to the acceptance of the tender offer for QREIC shares. Under the proposal, Qatari Diar, which currently directly holds 27% of QREIC and 45% of Barwa respectively, would retain a minimum 45% stake in Barwa and could -- depending on the outcome of the tender offer -- own indirectly 45% of QREIC . It is Moody's understanding that the proposed structure does not trigger a change of control clause of the sukuk as minimum ownership levels and board composition would be maintained.

The principal methodology used in rating QREIC was "The Application of Joint Default Analysis to Government Related Issuers", published in April 2005, which determines ratings on the basis of a company's baseline credit assessment, as well as credit enhancement for exceptional government support. Accordingly, ratings were assigned by evaluating factors we believe are relevant to the baseline credit assessment of the issuers, such as i) the business risk and competitive position of the companies versus others within its industry, ii) the capital structure and financial risk of the companies, iii) the projected performance of the companies over the near to intermediate term, and iv) management's track record and tolerance for risk. These attributes were compared against other issuers both within and outside of the companies' core industries and ratings are believed to be comparable to those of other issuers of similar credit risk. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

The last rating action on QREIC was on January 21, 2009 when Moody's placed all ratings under review for possible downgrade.

Qatar Real Estate Investment Company ( QREIC ; also known as " Alaqaria "), headquartered in Doha/Qatar, provides housing and related facilities in industrial cities under long term contracts to Qatar's growing hydrocarbon sector. Accordingly, its earnings are predominantly generated from long-term rental contracts with government and quasi-government tenants.

The company also has a small commercial real estate business. Alaqaria is 27% directly owned by Qatari Diar, with the remainder listed on the Doha Securities Market.

- Ends -

For more information, please contact:
London
David G. Staples
Managing Director
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

DIFC
Martin Kohlhase
Asst Vice President - Analyst
Corporate Finance Group
Moody's Middle East Ltd.
Telephone: +971-44-01-9536

© Press Release 2010