Damac Real Estate Development Ltd., a Dubai-based property developer, priced its London-listed global depositary receipts at $12.25 each, the bottom of its range, in an initial public offering that values the company at about $2.65 billion.
The offering in London is expected to raise as much as $348 million, the company said in a statement today. Damac had previously set a target of at least $500 million, with an indicative price range of $12.25 to $17.25 per GDR. The GDRs, equal to three ordinary Damac shares, are due to start trading on Dec. 6.
The decision to price the GDRs at the low end of the range indicated that “the interest wasn’t as good as expected and initial trading may show volatility,” said Sanyalaksna Manibhandu, a senior analyst at NBAD Securities LLC. Tracker funds seeking to increase their real estate investments in the United Arab Emirates may see better alternatives in Dubai and Abu Dhabi’s stock markets, Manibhandu said.
Al Firdous Holding and Sahira Co., controlled by Damac Properties Development Co. founder Hussain Sajwani, said they plan to sell as much as 18.8 percent of the new real estate company. The offering, the first for a Dubai-based developer since the sheikhdom’s real estate market crashed in 2008, is testing the appetite of global investors for the city’s recovering property market.
Damac may offer an additional 15 percent of the IPO by using what’s known as an over-allotment option, which could increase the proceeds to $400 million. The GDRs will be listed under the symbol DMC.
Stocks of London-listed companies that don’t do business in Europe don’t tend to perform well in the long term, according to Manibhandu, whose firm was ranked third among 48 brokerages by value traded on the Dubai Financial Market in October. As a result, Damac may seek a dual listing in the U.A.E. at some point, he said.
A Damac spokesman, who asked not to be identified in line with company policy, declined to comment.
Citigroup Inc. and Deutsche Bank AG, along with Samba Capital and Investment Management Co. and VTB Capital Plc, are managing the IPO.