A government-backed shareholder of Barwa Real Estate has agreed to buy its stake in Barwa Bank, the indebted developer has said. The move would pump some QR2.4 billion (US$659 million) into the Qatari firm, in exchange for 37.34 percent of the bank.
The deal – which still requires legal and government approval – is part of an existing agreement that would see the Qatari Diar, which is owned by the Qatar Investment Authority, buy QR20 billion ($5.49 billion) worth of assets from Barwa Real Estate to help it reduce its liabilities.
The Diar already owns 45 percent of the Barwa Group, the parent company of Barwa Real Estate that also has interests in financial services and infrastructure.
The deal further extends the government’s reach into the economy through its ownership of one of the country’s largest real estate owners and developers.
Barwa’s domestic property portfolio includes residential and commercial projects, as well as plans for Oryx Island, a QR20 billion ($5.49 billion) resort off the coast of Doha that includes villas, private beaches, a water park and five floating hotels to accommodate 2022 World Cup fans.
The company is also building a $1 billion development in the Industrial Area called Barwa Al Baraha, also known as “Worker’s City.” The first phase of the delayed project – a large truck parking lot – was completed this month, and work is now underway to build housing for some 50,000 low-income expats.
Developer woes
In a recent publication, Cost of Living Reports Middle East said signs of excess supply are starting to emerge in Qatar’s real estate market, putting pressure on the bottom lines of developers.
The research firm said that both Barwa and the Diar started to sell off assets and lay off staff last July to cut costs and strengthen their balance sheets.
Reuters reported that Barwa Real Estate had liabilities of QR32.64 billion ($8.96 billion) at the end of the third quarter of 2013, down from QR50.47 billion ($13.86 billion) at the same point a year earlier.
The company remains in the black, although it reported a 40-percent drop in profit in its most recent financial results. It made QR467 million ($128.24 million) in the nine months ending Sept. 30, down from QR779 million ($213.92 million) a year earlier.
For its part, Barwa Bank has been growing in recent years, acquiring Qatar investment banking firm The First Investor in 2009 as well as lending companies First Finance and First Leasing Co. in 2010.
Its net profit was up 58.42 percent year-over-year, rising to QR442 million ($121.38 million) for the nine months ending Sept. 30, up from QR279 million ($76.61 million).
Its CEO, Steve Troop, previously told Reuters that it was seeking regulatory approval for an initial public offering, a rarity in Qatar in recent years.
In late December, state-owned Qatar Petroleum subsidiary Mesaieed Petrochemical Holding Co. became the first firm in four years to file plans to go public on the Qatar Stock Exchange.
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