Dubai developer Binghatti in talks on multibillion-dollar pact: chairman

[DUBAI] Binghatti Holding is in talks with a major entity on potential partnerships worth billions of dollars and has suspended plans for an initial public offering, according to a top official at the Dubai-based developer.

“There are discussions on a very high level with very reputable master developers,” the firm’s chairman Muhammad Binghatti told Bloomberg News in an interview. The conversations have centered around strategic partnerships including joint ventures, rather than a stake sale in Binghatti, he added.

Asked whether the talks involved a government-related entity, the chairman said “perhaps”, declining to name the parties. The partnership under consideration would enable the developer to work on “very strategic projects in good locations” across Dubai, he added. The talks may conclude either later this year or early next, he shared.

Such a move could help bolster the company that was placed on review for a downgrade last month by Moody’s Ratings, which cited a deterioration in the firm’s liquidity profile. “We view the company’s liquidity profile is weaker than we had anticipated amid continued uncertainty related to the unresolved regional conflict,” Moody’s said at the time.

Binghatti’s bond prices remain sharply below pre-war levels. The firm’s five-year sukuk is currently indicated at nearly 83 cents on the US dollar for a yield of 12.91 per cent; the security traded around par to yield 8.36 per cent a day before the conflict began, according to CBBT pricing.

Its chairman insisted that the firm, which tends to build some ultra-luxury developments while focusing on more affordable products, will be able to repay its bonds on time. Default among customers is below 1 per cent and very few had asked for payments to be restructured, he added. 

Many of Dubai’s biggest development firms are state-backed, and any formal tie-up could signal the city’s willingness to support what has for years been one of the world’s best-performing property markets. The Dubai media office didn’t immediately respond to a request for comment. 

Further details on the Binghatti deal were not available, though state-backed firms have previously partnered with private developers. A prominent example featured an entity controlled by Dubai’s ruler and Emaar Properties PJSC.

That deal happened in 2022, at the start of a property boom in Dubai. In the five years leading up to the regional war, the city had become one of the hottest real estate markets globally as buyers from India, the UK and Russia helped drive prices almost 70 per cent higher. 

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Some have started to recalibrate in recent months.

The United Arab Emirates (UAE) faced thousands of missiles and drones in the early weeks of the conflict, though the vast majority were intercepted. Around the same time, a number of private developers, including Binghatti, held calls with investors to allay concerns over the state of the market after their bonds slipped into distressed territory. 

“I can confidently say that we are in a very good position to pay back all our dues,” Binghatti told Bloomberg TV in a separate interview on Monday. The firm has reported 10.6 billion dirhams (US$2.9 billion) in escrow, he said.

The comments came as the city’s residential property market recorded a modest improvement in July, with overall sales transactions rising 2 per cent, according to Dubai broker Betterhomes, which analysed data from the Land Department. 

That followed a softer period earlier in the year, when heightened regional uncertainty weighed on market activity, Betterhomes said. Overall transaction volumes were 32 per cent lower than last July, with total transaction values falling by about half, year on year.

Still, developers in the UAE have pushed ahead with projects even as hopes for a quick resolution to the war ebb. Military tensions appeared to cool in recent weeks, but the country’s defence ministry said on Monday that the air force had responded to an Iranian drone over territorial waters. 

Binghatti, for its part, has handed over three projects worth 1.8 billion dirhams and is committed to completing 10 projects this year collectively worth 7.5 billion dirhams, its chairman said. These are 94 per cent sold, and on average about 80 per cent collected, he added. The developer is also poised to kick off sales on a new two billion dirham residential development. 

Dubai developers such as Binghatti rely heavily on sales in the so-called off-plan market where homes are sold ahead of construction. Yet that slice of the industry also tends to be more volatile because it relies on investors making long-term bets on homes that are yet to be built. 

In 2009, a boom in the emirate was eventually upended by a sharp downturn in off-plan sales. The sector went through another downturn from 2014 to 2020, before rebounding to begin the city’s longest real estate boom in years.

That prompted many developers to raise billions through a range of funding tools, from Islamic bonds to private credit, while others considered new share sales. Binghatti started preparations for an IPO last year, Bloomberg News reported, though those plans are now suspended. BLOOMBERG