Emirates REIT CEIC Ltd., the first real estate investment trust in the United Arab Emirates, surged 6 percent on its initial day of trading and said it will use cash raised in the initial public offering to buy properties.
The shares rose as high as $1.46 on Nasdaq Dubai and closed up 5.9 percent at $1.44 from its opening price of $1.36. More than 14.6 million shares changed hands. The Dubai-based company, which had a book value of $1.38 per share at the end of last year, raised $175 million in the IPO after boosting the issue size from an original $150 million on investor demand.
Real-estate prices in Dubai, which crashed during the global credit crisis, are recovering tourism and trade rebound and after the emirate won the right to host the World Expo in 2020. Home prices could jump as much as 40 percent this year, according to the emirate’s Land Department.
Emirates REIT will buy a “very significant number” of properties in 2014 after purchasing three last year, Sylvain Vieujot, executive deputy chairman, said today at a listing event in Dubai. Properties valued at over 100 million dirhams ($27 million) are “still very reasonably priced,” he said.
Emirates REIT owns 10 properties, mostly office buildings in Dubai, which provided total returns of 25 percent in 2013, according to its website. The company can still find buildings that provide a 10 percent net return today, which can be enhanced after making some improvements, Vieujot said.
Emirates REIT made a profit of $34.8 million in 2013 on net revenue of $46 million, according to the offer document.
A REIT distributes all its cash flow to shareholders, and will seek to raise more funds in the future, Vieujot said.
“We will spend what we have, continue the track record and then yes, a REIT goes back to the market for an offering,” he said.