Emaar Properties: Building an IPO boom

Dubai - The Dubai-based developer plans to sell 20 per cent of its real-estate development business in an initial public offering

Emaar Properties, the Dubai-based developer instrumental in setting off a free hold property boom, said on Sunday it would sell 20 per cent of its real-estate development business in an initial public offering.

The move comes after Emaar announced it had obtained shareholder approval for the sale of up to 30 per cent of the unit in a public offering in Dubai.

In a meeting on Saturday, shareholders approved the conversion of Emaar Development into a public joint stock company to list on the Dubai Financial Market by offering up to 30 per cent of its shares, Emaar said in a bourse statement.

Emaar Development's retail offering subscription period will be open for 11 days starting November 2. Retail investors can subscribe to the offering between November 2 and 13, while offers from qualified investors can be made from November 2 to 15, Emaar said.

The company, which is behind iconic freehold master-planned communities in Dubai including Emirates Living, Downtown Dubai, Burj Khalifa, Dubai Marina and Arabian Ranches, said it is targeting the distribution of aggregate dividends of some $1.7 billion, to be paid over the next three financial years ending December 2020.

Emaar shares jumped more than 25 per cent since the plan was first announced in June.

The IPO, the largest since the Emaar Malls IPO that raised $1.58 billion in 2014, will be listed on the Dubai Financial Market.

Mohamed Alabbar, chairman, Emaar Properties, said the IPO would allow potential investors an opportunity to participate "in a pure play UAE developer" offering strong and stable cash flows and an attractive dividend yield.

"Additionally, it offers the opportunity for Emaar Properties' shareholders - including the UAE Government - to unlock the true value of our UAE development business," said Alabbar.

Chris O'Donnell, chief executive officer, Emaar Development, said Emaar Development has a clear strategy to continue delivering high-quality integrated lifestyle communities, which offer an exceptional customer experience.

"Our strong sales backlog and access to significant premium land banks in prime locations - together with a growing real estate market in an enhanced regulatory and stabilised pricing environment - positions the business well for the benefit of future shareholders," O'Donnell said.

Emaar said in June that the decision to go for the new IPO was a result of an internal review of its asset values.

The real estate business's IPO will be the fourth of Emaar's units to break away from the mother company, including one in Egypt and another in Saudi Arabia, but the second in the UAE. The first, Emaar Malls, is one of eight companies to have sold shares in an IPO since the start of 2010.

The UAE real-estate arm contributed 40 per cent of Emaar's revenue and 31 per cent of its gross profit in the first half, while the malls business provided 20 per cent of income and 34 per cent of profit, according to its results presentation. The hotels business contributed 10 per cent of revenue.

According to international real estate professional services firm Jones Lang LaSalle, as of September 30, 2017, approximately 22 per cent of all freehold units in Dubai are located in the company's integrated lifestyle masterplan communities.

"Emaar has traded at a persistent discount to consensus fair net asset value, but spinning off its subsidiaries has helped reduce that discount," said Mohammad Kamal, an analyst at Dubai-based Arqaam Capital Ltd.

"The plan to sell the domestic development arm has already helped unlock value," he added.

Emaar, which has spearheaded the development of freehold master-planned lifestyle communities in Dubai, developed over 34,500 residential units since 2002, with over 24,000 residential units under development as on September 30, across eight master-planned communities in prime locations.

Emaar Development has sold 80 per cent of its units under development as of September 30, with an average gross profit margin of 41 per cent for units sold, and an associated sales backlog of Dh41 billion.

The statement said expected cash flow from sales backlog would be approximately Dh18 billion over the next four years as projects complete. Emaar Development currently has 4,800 units available for sale over the next 2-3 years in its projects under construction, with an aggregate estimated

sales value of Dh15 billion.

Over the next five years, Emaar Development plans to launch approximately 50,400 units with an average annual unit sales target of 10,000 units and a targeted overall gross profit margin of 40 per cent, it said.

- issacjohn@khaleejtimes.com

Emaar said it is targeting the distribution of aggregate dividends of some $1.7 billion, to be paid over the next three financial years ending December 2020.