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Dubai Investments may exit assets; mulls sukuk issuance

(Bloomberg) / 12 March 2012

DUBAI ó Dubai Investments, the owner of stakes in more than 40 companies, plans to exit some of its businesses as Dubaiís economy shows signs of a recovery, chief executive officer Khalid bin Kalban said.

“We have three companies under evaluation or due diligence for private placements and by summer we can decide on exits,” Kalban said an interview.

“The economy is improving and the whole dust surrounding the financial situation is settling. It’s a good opportunity to look again at divesting some of the assets.”

Dubai Investments, which operates in businesses including real estate, financial services and investments, slowed its divestment plan after the global financial crisis hit Dubai late 2008. The company sold 40 per cent of its private equity unit Masharie for Dh400 million ($109 million), it said in 2008. One of the companies it will divest this year is part of Masharie, Kalban said.

Growth is returning to Dubai as property developers announce new projects and the number of tourists traveling to the Middle East’s trade hub increases.

Dubai’s economy may expand as much as five per cent this year after growing more than three per cent in 2011, Shaikh Ahmed bin Saeed Al Maktoum, the head of Dubai’s Supreme Fiscal Policy Committee, said last month.

Passenger traffic at the emirates’ airport jumped 14 per cent in January from a year earlier to 4.85 million. Dubai Investments shares rallied 5.8 per cent to 92 fils at 1:19pm in the emirate. The stock has surged 52 per cent this year after losing 22 per cent in 2011.

Sukuk option

Dubai Investments may opt to issue a sukuk, or Islamic bonds, to finance the expansion of the second production line at its Emirates Float Glass Factory in Abu Dhabi, Kalban said. The second phase of the facility, to be the largest in the UAE upon completion, will add another 600 tons a day of capacity, bringing the total to 1,200 tons per day, he said.

The company was in talks with SACE, an Italian credit agency, for a Dh600 million loan to finance the expansion before Europe’s debt crisis delayed it, Kalban said. Regional investors have shown interest in financing the project, he said. “If this does not work, we could issue a sukuk — that is an option and could be an attractive one,” said Kalban. “It would be in the region of $200 million. We are looking at the terms and we will decide in a few months.”

Dubai Investments Park, a subsidiary that oversees a 2,400- hectare complex of housing units, hotels, industrial outlets and offices, recently raised Dh600 million loan from Dubai Islamic Bank PJSC and Emirates Islamic Bank PJSC, Kalban said. This is being used for expansions within the park.

Real Estate Recovery

Dubai’s property market had one of the world’s biggest reversals following the credit crisis three years ago, with home prices slumping 64 per cent since they peaked in mid-2008, according to Deutsche Bank AG estimates.

Rental prices started to recover at the end of 2011, with an upward trend continuing in the first-quarter, said Kalban, who estimated an increase of five per cent. Kalban is also the chairman of Dubai-based developer Union Properties. “The private sector is going into buildings and real- estate projects especially hotels because of the boom,” he said. “Everybody is thinking we’ll build hotels as occupancy is high.”

Activity is “fuelled by the lower cost of borrowing and the lower interest rate on deposits and the semi-liquidity available in the financial institutions,” Kalban said.

Fujairah Projects

Among companies launching projects are Al Habtoor Group, an owner of hotels in Dubai and Lebanon. Habtoor said January it will spend $1.33 billion to build a hospitality complex in Dubai, where hotel rooms may increase 36 per cent in four years.

The developer will also open a 330-room hotel on the Palm Jumeirah artificial island in about 20 months.

Nakheel plans to spend Dh1.4 billion in 2012 to complete nine projects that had been suspended after the crash, according to an Islamic bond prospectus in August.

In Fujairah, Dubai Investments is planning two projects.

With Al Taif Investment, a joint venture between the company and Fujairah Investment Establishment, a Dh400 million mixed-use development is in the works. It will include a four-star hotel, an office tower, a retail podium and conference hall.

Three banks “indicated their willingness to fund the construction activity,” which should be completed in 2014, Kalban said.

Al Taif may invest about 30 per cent, while the rest will be bank financing, he added.

Fujairah Investments Park is also planned with work to start “soon,” he said. The project will be done in phases to test demand, with an initial investment of up to 20 million dirhams on infrastructure.


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