Emaar launches property unit IPO

Emaar Chairman Mohamed Alabbar said the IPO of its development business would deliver attractive dividends to investors. (Reuters)
Updated 22 October 2017
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Emaar launches property unit IPO

DUBAI: Emaar Properties, Dubai’s master developer, is to sell 20 percent of the shares of its UAE real estate unit in an initial public offering (IPO) that could value it at around $6 billion.
The IPO is the first significant listing on a UAE market since 2014. The proceeds of the offering will be distributed to shareholders of Emaar Development in the form of dividends worth at least $1.7 billion over the next three years.
The developer said the offer was “consistent with its stated strategy of bringing subsidiary companies to market once they have reached sufficient maturity.”
Emaar is the master developer behind projects such as Burj Khalifa, Dubai Marina, Downtown Dubai and Arabian Ranches.
Emaar is also the developer of the King Abdullah Economic City near Jeddah in Saudi Arabia, but this project will be unaffected by the forthcoming IPO.
Emaar Development is the second Emaar business to be spun off into a separate listed entity in the UAE, following the float of its malls business three years ago.
The newly listed company will be run by chief executive Chris O’Donnell, an experienced real estate operator in the UAE who was head of developer Nakheel during the financial crisis that engulfed its owner, Dubai World, in 2009.
He has been helping advise Emaar on the IPO preparations for some months.
O’Donnell said: “Emaar Development has a clear strategy to continue delivering high-quality integrated lifestyle communities, which offer an exceptional customer experience. Our strong sales backlog and access to significant premium land banks in prime locations — together with a growing real estate market in an enhanced regulatory and stabilized pricing environment — positions the business well for the benefit of future shareholders.”
Mohamed Alabbar, chairman of Emaar Properties, said: “The IPO of our UAE development business will allow potential investors an opportunity to participate in a pure play UAE developer offering strong and stable cashflows and an attractive dividend yield.
“Additionally, it offers the opportunity for Emaar Properties’ shareholders — including the UAE Government — to unlock the true value of our UAE development business.”
The government of Dubai owns 29 per cent of Emaar group via its sovereign wealth fund, Investment Corporation of Dubai, and can expect to receive around $566 million in dividends over the next three years.
A new board will be appointed to Emaar Development under chairman Alabbar, consisting of two Emiratis and one Saudi — Jamal Bin Theniya, Arif Al-Dehail and Ahmed Jawa — who are already on the board of the parent group.
In addition, a team of three Emirati executives — Aisha Bin Bishr, Adnan Kazim and Abdulla Al Awar — will become independent non-executive directors on the new board.
JLL, the real estate consultancy, said that Emaar Development had a gross asset value of 35.6 billion dirhams and net assets of 24.1billion dirhams last month.
Emaar Development reported sales of 6,539 units in the nine months to the end of September 2017 with a sales value of 15.4 billion dirhams, an increase of 32 per cent from the corresponding period for the previous year.
Average gross profit margin of 42 percent. on revenue was achieved in the same period, at the end of which it had 10.2 billion dirhams cash in the bank.
The IPO statement said that Emaar had “spearheaded the development of freehold master-planned lifestyle communities in Dubai; developed over 34,500 residential units since 2002, with over 24,000 residential units under development, across eight master-planned communities in prime locations.”
As of Sept. 30, 2017, Emaar Development has sold 80 per cent of its units under development with an average gross profit margin of 41 per cent for units sold, and a sales backlog of 18 billion dirhams over the next four years.
Mohammad Kamal, an analyst at Arqaam Capital in Dubai, said Emaar appeared to have sufficient resources to meet the planned dividend payments.
“We note that Emaar also has access to 5.5 billion dirhams of debt withdrawn at the subsidiary level that will be fully ‘upstreamed’ to the parent entity, which can theoretically (but not necessarily) be used to support the special dividend payment.
“Historically, previous special dividend payments have exceeded 100 percent. of ‘carve out’ (IPO) proceeds, as was the case with the Emaar Malls IPO,” he said.


Abraaj gets $50m Abu Dhabi bid for investment management business

Updated 45 min 49 sec ago
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Abraaj gets $50m Abu Dhabi bid for investment management business

  • Abu Dhabi Capital Management's (ADCM) bid is well below the $125 million
  • Abraaj, which declined to comment on ADCM's offer, has debt estimated at more than $1 billion

ABU DHABI: An Abu Dhabi Financial Group company has made a conditional $50 million offer to buy private equity firm Abraaj's investment management business, a document reviewed by Reuters shows.
Abu Dhabi Capital Management's (ADCM) bid is well below the $125 million offered by New York-based Cerberus Capital Management before Dubai-based Abraaj filed for provisional liquidation in the Cayman Islands last week.
It was unclear whether the terms of the offer that Cerberus made were different from the one made by ADCM.
ADCM stated its terms in a letter to Abraaj's financial adviser Houlihan Lokey dated June 17, which said it will not buy any companies owned by Abraaj and its affiliates and will not assuume any liabilities.
Abraaj has been bruised by a row with four of its investors, including the Bill & Melinda Gates Foundation and International Finance Corp (IFC), in a $1 billion healthcare fund.
It has denied it misused the funds.
Abraaj Holdings said on Tuesday a court in the Cayman Islands ordered the appointment of PwC as provisional liquidators of Abraaj Holdings and Deloitte as provisional liquidators of Abraaj Investment Management Ltd., Abraaj's fund management business.
ADCM, an ADFG entity based in Cayman Islands, wants to become the General Partner of the limited partnerships, which have committed money to Abraaj's various private equity funds.
Abraaj acts as the general partner for these limited partnerships.
Some Gulf limited partners - ranging from financial institutions to pension funds and family businesses - in funds of Abraaj had asked ADFG to explore a buyout of Abraaj's investments business as they were concerned about their holdings, two sources familiar with the talks told Reuters.
Abraaj, which declined to comment on ADCM's offer, has debt estimated at more than $1 billion, sources have told Reuters.
Since the dispute went public early this year, Abraaj has split its investment management business and holding company, while its founder Arif Naqvi stepped aside from the day-to-day running of its private equity fund unit and the firm halted its investment activities.