DUBAI - Dubai's Emaar Properties , builder of the world's tallest tower, reported a 34 percent drop in third-quarter net profit on Thursday as it was weighed down by the emirate's battered property market.

Burj Khalifa (Burj Dubai), Dubai, United Arab Emirates. / Photo: Corbis

However, the developer's earnings marginally beat an average analyst forecast for a 36 percent drop in profits, as recurring income from its malls and hotels business grew.

The United Arab Emirates's largest developer by market value made a net profit of 406 million dirhams ($110.5 million), compared with 612.3 million in the same period last year, it said in a statement on Dubai's bourse website.

In the first nine months as a whole, recurring revenue from Emaar's hospitality and shopping malls accounted for nearly 41 percent of total revenue, with its malls business generating 1.6 billion dirhams in revenue, it said.

"This goes to show that Emaar's hotel and malls portfolio is the main value driver," said Ahmed Badr, head of MENA real estate and construction research at Credit Suisse.

Among Emaar's assets is Dubai Mall, the world's largest shopping centre. It also has a joint venture with Italian fashion house Georgio Armani to develop luxury hotels.

The developer's total revenue dropped to 1.86 billion dirhams in the third quarter compared with 2.8 billion a year before.

Emaar, around 30 percent owned by the Dubai government, took no impairments this quarter, unlike in the second quarter when it wrote off its investment in Dubai Bank that was valued at 172 million dirhams.

The developer is still to write off its exposure to troubled Islamic mortgage provider Amlak .

HOME SALES SUFFER

Dubai's once-booming property market hit a wall in 2008 and the decline worsened after the global financial crisis, ending a massive building spree. Prices are down 60 percent from their 2008 peak.

House prices in Dubai are expected to fall another 10 percent before stabilising, a Reuters poll showed this month.

Emaar said it handed over a total of 201 residential and commercial units in the third quarter and 712 in the first nine months of the year.

"The main reason behind the revenue shortfall versus our expectations were lower revenues from property sales," said Roy Cherry, lead real estate and construction analyst at SHUAA Capital in Dubai.

Emaar's earnings from apartment sales fell by 85 percent, it said in its last quarterly earnings.

The developer's Chairman Mohamed Alabbar said earlier this week it is in the process of raising around $700 million from banks.

The developer appointed a core management team in the second quarter for a strategic review of its global operations, sources revealed.

In a bid to revive the battered real estate sector and restore investor confidence, Dubai launched a real estate investment fund this week worth up to $1 billion with Canada's Brookfield Asset Management (BAMa.TO).

Shares of Emaar ended 4.8 percent higher, along with other property-related stocks, after the fund was announced.

($1 = 3.673 UAE Dirhams)

By Praveen Menon and Jason Benham

(Editing by David Holmes)