Dubai ruler gets chunk of developer Emaar in 7.5 billion dirham deal

DUBAI’S ruler is set to become the second-largest shareholder in Emaar Properties as part of a 7.5 billion dirham (S$2.8 billion) deal that will hand the real estate firm full control of a key development in the city. 

Emaar will buy Dubai Holding’s 50 per cent stake in the Dubai Creek Harbour project and finance the deal equally in cash and shares, Sheikh Mohammed bin Rashid Al Maktoum’s holding firm said in a statement late last Thursday (Aug 11). 

The deal will make Sheikh Mohammed Emaar’s second-biggest investor, according to the statement, though it wasn’t immediately clear how many shares will be issued or the total stake that Dubai Holding will hold. Dubai Holding already owns a 24 per cent stake in Emaar — which is the developer of the world’s tallest tower, Burj Khalifa. 

Shares in Emaar closed down 1.6 per cent on Friday. The stock has almost tripled from a March 2020 low and is up about 15 per cent so far this year.

Dubai is getting its financial house in order with a string of asset sales and initial public offerings of state-owned companies that aim to raise funds just as borrowing costs surge across the world. Authorities are also seeking to stem a glut of properties that’s plagued the emirate’s real estate market for years.

The Dubai Creek Harbor deal is the latest in a series of asset sales by the state-backed conglomerate. In 2019, Dubai Holding unit Meraas set up a US$1.4 billion joint venture with Brookfield Asset Management, giving the Canadian firm a degree of control of some of the city’s most prized retail assets. Dubai Holding is also behind Tecom Group, which in June raised US$454 million in an initial public offering.

Emaar had suspended construction of parts of the Dubai Creek Harbour project when the coronavirus outbreak dampened demand. In recent months, the city’s property market has rebounded strongly, helped by factors including an increase in Russian buyers looking to safeguard their wealth and Dubai’s nimble handling of the pandemic.

Raj Purswani, a senior research analyst at International Securities, said that some investors may view the deal negatively due to concerns about dilution and the developer’s commitment to dividends. 

“Cash, which could have been used to repay debt, considering the rising interest cost, will now be used to buy the project,” he said. It “will also reduce available free-float in the market, which will reduce Emaar’s weight in the future calculation of MSCI and FTSE indices”. 

SEE ALSO

Dubai real estate sales surge 60% as investors, Russians snap up property

Others say the acquisition will benefit Emaar in the long term. It will give the developer a large land bank to build on in its strongest market along with full control of the project and its profit, according to Mohammed Ali Yasin, an Abu Dhabi-based, independent capital markets adviser and investor. “In the future, that should help lift Emaar’s share price,” he said. 

Rothschild & Co acted as sole financial adviser to Dubai Holding on the transaction. BLOOMBERG