Emaar to IPO up to 30% of UAE property business in Dubai

[DUBAI] Emaar Properties PJSC, the Dubai-based developer of the world's tallest skyscraper, plans to sell as much as 30 per cent 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 8.4 per cent, the most since January 2016, in Dubai.

"Selling down up to 30 per cent 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 UAE since Emaar Malls PJSC raised US$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 (S$5.41 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 per cent 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 UAE. In the first five months of the year, its UAE. development business had sales of 9.7 billion dirhams, a 24 per cent increase from the same period in 2016. It had a total backlog of 40 billion dirhams.

The shares climbed 7.3 per cent to 7.51 dirhams at 12:08 pm in Dubai, bringing the advance this year to 5.3 per cent. That compares with a drop of 4.3 per cent for Dubai's benchmark index.

BLOOMBERG