Investing.com -- Moody’s Ratings announced an upgrade to the long-term issuer ratings of Emaar Properties PJSC (Emaar) today, moving them from Baa2 to Baa1. Emaar Sukuk Limited’s backed senior unsecured bonds and backed senior unsecured medium-term note program were also upgraded to Baa1 from Baa2. The outlook for both entities remains stable.

Moody’s Ratings AVP - analyst and local market analyst on Emaar, Aziz Al Sammarai, said that the rating actions were a reflection of Emaar’s strong revenue visibility over the next three years, its proven track record of conservative financial policy including debt reduction, growing earnings from its recurring income generating portfolio, and strong credit metrics.

Emaar has a strong position in the UAE real estate sector, as evidenced by its robust foundation, a proven track record across multiple real estate cycles, and consistently strong operational and financial performance. As of March 2025, Emaar reported a substantial revenue backlog of approximately AED 127 billion, offering high visibility into revenues over the next three years. This is supported by sustained market demand, solid cash collections from construction-linked customer payments, and the strength of the Emaar brand.

The continued expansion of Emaar’s recurring income portfolio is expected to enhance the company’s resilience throughout economic cycles. Revenue from this segment is forecasted to grow close to AED 10 billion by 2027, up from AED 4.7 billion in 2020 and AED 9.4 billion as of year-end 2024. This growth is expected to be driven by ongoing investments, a favorable operating environment, and the ramp-up of newly launched malls.

Emaar has consistently demonstrated a prudent financial policy, characterized by low financial leverage and strong interest coverage. As of March 2025, the company’s debt-to-book capitalization ratio improved to approximately 12%, down from 26% in 2020. Over the same period, EBIT-to-interest expense increased to around 24x for the last twelve months (LTM) ending March 2025, compared to just 2.3x in 2020.

Dubai’s real estate market is expected to remain stable over the next 12 to 18 months, following a period of significant growth. Between September 2020 and April 2025, average residential property prices rose by approximately 78%, driven by robust housing demand.

Dubai’s macroeconomic environment has strengthened, with real GDP growth contribution by sectors such as tourism, financial services, and logistics. As of April 2025, Dubai’s population reached 3.9 million, bolstered by expatriate inflows encouraged by a favorable business climate, long-term visa initiatives, and a low-tax environment.

The Baa1 rating reflects Emaar’s robust credit profile and track record of maintaining a conservative financial profile. The company’s liquidity is excellent with a cash balance of AED 25.4 billion as of March 31, 2025, and undrawn revolving credit facilities of AED 7.4 billion.

The stable outlook reflects Moody’s view that the company will maintain solid credit metrics and excellent liquidity through 2026 driven by strong revenue visibility and proven track record of good execution.

The rating is constrained at the current level given the high degree of revenue concentration within a single market. However, Emaar’s rating could be upgraded if the company is able to expand on a sustained basis its scale and market position significantly through diversification into mature markets with low price volatility, and grow its recurring income portfolio across asset types. Conversely, the ratings could be downgraded if there are sustained weaknesses in Dubai’s macro-economic environment or real estate market, or if the company decides to pursue a more aggressive financial policy.

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