Emaar to IPO Up to 30% of U.A.E. Property Business in Dubai

Updated on
  • Money raised to be primarily distributed as dividend
  • Shares of Emaar rise as much as 10.3 percent in Dubai

Emaar Properties PJSC, the Dubai-based developer of the world’s tallest skyscraper, plans to sell as much as 30 percent of its real estate development business in the United Arab Emirates in an initial public offering.

The funds raised will primarily be distributed as dividend to Emaar’s shareholders, the company said in a statement on Wednesday. Emaar shares jumped as much as 10.3 percent, the most since December 2014, in Dubai.

“Selling down up to 30 percent of a key asset enables the company to reward shareholders now for cash flow that would be realized at the net level over years into the future,” said Sanyalak Manibhandu, head of research at NBAD Securities LLC. “Emaar spoke about paying some sort of a special dividend at the AGM. So this is a way for the management to realize the expectation the management raised at the AGM."

The shares of the unit will also be listed on the Dubai Financial Market and the sale is subject to market conditions. The IPO would be the largest in the U.A.E. since Emaar Malls PJSC raised $1.58 billion in an offering in 2014.

Emaar, which itself is listed on the DFM, has spearhead a building boom in Dubai after the emirate allowed foreigners to own property in some parts of the city about 15 years ago as part of a plan to transform into the Middle East’s tourism and trading hub. Revenue from the company’s property development business in the U.A.E. more than tripled to 14.4 billion dirhams ($3.9 billion) in 2016 from 4.2 billion dirhams in 2012, according to the statement.

The decision to IPO followed an internal review of the company’s asset values. “This indicated the importance of highlighting the value of this business as a major contributor to the overall profitability of Emaar through an independent listing," according to the statement. “Investors who value the proven development track record of Emaar can invest directly in this business," enhancing Emaar’s overall valuation, it said.

Emaar also has development businesses in several other countries, including Saudi Arabia, Egypt, India and Pakistan. The Dubai government owns 29.2 percent of the company, according to data compiled by Bloomberg.

After developing the Burj Khalifa, the world’s tallest skyscraper, Emaar is now working on The Tower in Dubai Creek Harbour with Dubai Holding LLC that will feature a dedicated retail district for high-end brands. It is also developing the 11 million square-meter Dubai Hills Estate in a joint venture with Meraas Holding, which will feature a retail hub and an 18-hole golf course.

Emaar has handed over around 34,000 units in Dubai since 2001 and currently has a land bank of 24 million square meters in the U.A.E. In the first five months of the year, its U.A.E. development business had sales of 9.7 billion dirhams, a 24 percent increase from the same period in 2016. It had a total backlog of 40 billion dirhams.

The shares closed 8.6 percent higher at 7.60 dirhams in Dubai, bringing the advance this year to 6.6 percent. That compares with a drop of 3.5 percent for Dubai’s benchmark index.

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