Emaar Properties plans IPO for UAE real estate development business

The Dubai-based property major will offer up to 30 per cent of its real estate development business following an internal review of its assets.

Dubai's Emaar Properties logo is seen on a building in Dubai. The company is planning an IPO. Ahmed Jadallah / Reuters

Emaar Properties shares surged by their highest daily amount for more than two years yesterday after the developer announced plans to float up to 30 per cent of its UAE real estate development business on the main Dubai bourse.

Emaar shares soared by 8.57 per cent during trading – their biggest daily hike since April 2015 – to close at Dh7.60 on the Dubai Financial Market (DFM).

The flotation is the third for a business unit of Emaar, Dubai’s biggest listed developer.

In a statement to the DFM, Emaar said that the funds raised would be “primarily distributed as dividends to Emaar’s shareholders”, and that the company had made its decision as a result of an internal review of Emaar’s asset values.

“Over the years we have generated significant returns from our UAE real estate development business and it continues to be a strong driver of growth for the group,” said the Emaar chairman Mohamed Alabbar.

“As Emaar’s other businesses have grown and expanded, we wanted to ensure that investors who value the UAE Real Estate Development business the most, the foundation of Emaar’s success, can do so dir­ectly. This will ensure that the value of this business is properly recognised, thereby enhancing value for all Emaar shareholders.”

Emaar said that real estate sales at its development business in UAE more than tripled to Dh14.4 billion in 2016 from Dh4.2bn in 2012. In the first five months of this year, the business recorded sales of Dh9.7bn, up by 24 per cent on the same period in 2016.

At the end of last month, the division’s total backlog – representing the value of properties which had been sold but related revenues had not been recognised – was Dh40bn.

Emaar has been engaged in plans to spin off various parts of its business in the past five years. In 2014, the company floated its Emaar Malls business on the DFM and in 2015 its Egyptian unit debuted on the Cairo stock market.

The company had also been widely expected to spin off its hospitality business. However, with room rates across the city continuing to fall and thousands of new hotel rooms due to be built ahead of Expo 2020, the developer is thought to have postponed these plans.

The news of Emaar’s plans to float its property development arm comes amid a market slump, following two years of price declines and an economic downturn caused by lower oil prices.

However, by selling down a stake in its crown jewel unit, Emaar would be able to quickly raise money for further investment as well as boosting its own share price, according to Sanyalak Manibhandu, head of research at NBAD Securities.

“With the market already setting a price for Emaar Malls, in which Emaar Properties has an 85 per cent stake, a market determined price for the UAE property development unit would help boost the market value for Emaar Properties,” said Mr Manibhandu. “Selling down the UAE property development [unit] is equivalent to realising today the cash flow that would otherwise be realised over a number of years.”

Mr Manibhandu added that an initial public offering of Emaar’s hospitality unit would be “unlikely to generate the sort of returns Emaar management is looking for in the present market”. He said the company “might revive the hospitality unit IPO at a future date when market conditions for hotels in Dubai improve”.

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