Eshraq share offering fully taken up in positive sign for property

Abu Dhabi's latest IPO has received full bids despite a property slowdown says the receiving bank.

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The share sale for the Abu Dhabi developer Eshraq has been fully subscribed, the head of the lead receiving bank said yesterday.

But investors can buy the stock with just a 25 per cent down payment, and a commitment to pay the rest within two years.

The developer's Dh825 million (US$224.6m) sale is scheduled to close tomorrow. Eshraq is selling 55 per cent of the company in the offering, with shares initially priced at Dh1. There is a minimum subscription of 10,000 shares and the offer is limited to GCC nationals because of restrictions on foreign ownership of land in the UAE.

"As of today, the IPO has already has been covered," said Majd Maaiteh, the head of securities at National Bank of Abu Dhabi.

"We are seeing newcomers coming to the market and investing, with good demand coming from retail investors, but also from a mix of institutions based in the UAE and the GCC."

Eshraq hired Royal Capital as the manager of the initial public offering (IPO), and Abu Dhabi Commercial Bank, Dubai Islamic Bank, First Gulf Bank and Emirates Islamic Bank as receiving banks.

Total subscription figures would be tallied and published tomorrow, Mr Maaiteh said.

Eshraq is taking the unusual approach of allowing investors to buy shares for a 25 per cent down payment, plus a fee of 0.02 fils a share, with the balance due within two years. Shares will start trading at 25 fils.

The cooling company Tabreed pursued a similar path when it went public in 1998. Money raised in the IPO will be used to start construction in the next few weeks on the Marina Rise, two towers on Reem Island in Abu Dhabi.

Eshraq has two other projects in preliminary stages of development: the Gateway development on Zayed Bay in Abu Dhabi and Jumeirah Rise in Dubai.

UAE property prices have declined more than 60 per cent from their 2008 peak. The global economic crisis caused lending to stall and ended speculative demand.

The Dubai investment bank Rasmala said in March that house prices in the Emirates would decline a further 25 to 30 per cent in the next two years because of a rising oversupply of property.

Eshraq's IPO is the third in Abu Dhabi this year after those of the insurance companies Wataniya and Insurance House. All three IPOs have been relatively small.

"For a company involved in real estate to get covered is a great success, given current market conditions," said Mohammed Ali Yasin, the chief investment officer at CAPM Investment in Dubai.

"There is going to be pressure from companies in other sectors who want to offer capital. This shows that with the right pricing and the right amount, there will be investor appetite for IPOs."

Eshraq's prospectus shows profits of Dh349.5m in 2009 and Dh109.6m last year.

The developer was formed in 2006 by investors from Saudi Arabia and the UAE.