Damac’s executive chairman to join region’s richest from share sale

Hussain Sajwani, Damac Properties’ founder and executive chairman, stands to make a personal windfall of at least US$500 million from the luxury property developer’s London share offer this week. That would propel Mr Sajwani into the ranks of the region’s richest billionaires.

The total value of Damac is estimated between US$2.7 billion and $3.7bn, according to an investment adviser. Paulo Vecina / The National

Hussain Sajwani, Damac Properties’ founder and executive chairman, stands to make a personal windfall of hundreds of millions of dollars from the luxury property developer’s London share offer this week.

The planned US$500 million offering would propel Mr Sajwani into the ranks of the region’s richest billionaires. The long-awaited debut of Damac shares, in the form of global depositary receipts (GDRs), will take place on Wednesday following a global roadshow by investment bank advisers.

GDRs are a form of quasi-equity occasionally used by emerging market companies in listings on western exchanges.

A Damac GDR is equal to three shares in a holding company controlled by Mr Sajwani’s private companies. The pricing of the offering will be decided on Tuesday, and it is believed that some 18.8 per cent of Damac’s value will be made tradeable in the form of GDRs, raising at least $500m of new money based on the indicative price range.

The prospectus for the offering – the largest by a UAE company since DP World in 2007 – makes it clear that Mr Sajwani will be the main beneficiary of the fund-raising exercise.

“The offer will provide Mr Sajwani with a partial realisation of his investment in the company … No proceeds will be received by the company pursuant to the offer,” said the prospectus, which The National has seen.

The total value of Damac is estimated at $2.7 billion to $3.7bn, according to an investment adviser involved in the offering.

As Mr Sajwani owns or controls the balance of the shares not subject to the GDR offering, that would benchmark his wealth from Damac and other interests at a conservative $3.5bn, propelling him into the top 10 of the richest private businessmen in the Arab world, as defined by Forbes magazine. The adviser said: “Damac is throwing off huge amounts of cash and doesn’t need cash for investment. It will also be paying out a large dividend.”

Sanyalaksna Manibhandu, a senior analyst at National Bank of Abu Dhabi, said: “Offerings have more than one purpose. One is to allow the founders to exit in part and there is nothing unusual in this. But as an investor, you might want to see some of the money going into future plans.”

The roadshows have marketed the offering in three continents, with most interest coming from the United States, according to the adviser.

European and Asian investors have also shown an appetite for the GDRs, followed by those in the Middle East. “The Americans understand the fundamentals. There has been some interest in the UAE,” the adviser said. There is no special arrangement for retail investors in the offer. US institutions are thought to have been impressed by the strength of the Dubai property market’s recovery from the crash of 2009, and by Damac’s position as one of the best-known brands in the Middle East’s property sector.

Analysts say that Dubai property prices are still some 45 per cent off their 2008 peaks, but with rental yields at about 6 per cent they offer better revenue potential than markets such as Singapore or Hong Kong.

An analyst said: “The Americans are convinced of Dubai’s benefits as a safe haven in what they regard as a troubled region.”

The detailed trading figures in Damac’s prospectus show the extent of its recovery from the crisis, when projects were mothballed and some disgruntled customers resorted to legal action. Provisions made against profits during the downturn have been reversed, according to the prospectus.

After a loss of $96m in 2010, Damac revenues and profits have recovered sharply. In the six months to the end of June, profits leapt to $332m on revenue of $632m, a margin of 64 per cent. Damac intends to pay out between 30 and 50 per cent of profits in dividends next year, according to the prospectus.

New projects this year have included Hollywood-themed apartments and a Trump International golf course.

The document identifies several potential risk factors in the offering, including its reliance on “key personnel”, especially Mr Sajwani, a business model that makes it dependent on off-plan or pre-construction sales to fund future development, and volatility in the global and regional property markets.

The timing of the offer could be fortuitous, coinciding with decision day on Dubai’s bid for Expo 2020, which could give the GDRs a boost in early trading. The adviser said it had also been timed to set a price level before US investors take time off for their Thanksgiving holidays.

There has been a debate among advisers as to the pricing of the offer, after one analyst put a total value of more than $5bn on the business.

Other advisers wanted a lower market valuation to ensure a healthy aftermarket to the offering. There is a provision to release extra shares – up to 15 per cent of the offering value – if there is sufficient demand for the GDRs.

One analyst said that at the bottom of the flotation range, Damac is valued at only four times current earnings, compared with a price-earnings ratio of 15 times for Emaar, its nearest comparison in the regional property market.

Mr Sajwani first made his name in business as a caterer to military forces during the first Iraq war in 1991, before investing in mid-range hotels and apartments in Dubai in the following decade. Damac was launched as an upmarket developer in 2002.