Damac testing the Dubai market with share offer
Damac Properties Development Co, the Dubai-based housing developer and one of the most popular sources of overseas property for Irish buyers during the boom years, is planning to raise as much as $500m (€372m) in a UK initial public offering that will test appetite for the emirate's recovering property market.
Al Firdous Holding and Sahira Co, controlled by Damac founder and chairman Hussain Sajwani, will offer global depository receipts in a new company called Damac Real Estate Development Ltd in the IPO.
Each GDR will be worth three ordinary shares of the company.
"There will definitely be appetite because Damac is a proxy to Dubai's real estate, which is recovering at the moment," Taher Safieddine, an analyst at Shuaa Capital PSC, said.
"They have witnessed the boom and bust and managed to come out of the crisis relatively in a good shape."
Irish demand for apartments in Dubai doubled each year from 2004 to 2007 causing Damac to open plush offices in Dublin amid claims that it would sell €100m units here in its first year.
However, the company withdrew following the Dubai crash of 2008 and there were subsequent complaints of two-year delays in completing apartments and also rows over the developer's threats not to go ahead with at least one promised scheme.
However, the Dubai market has been recovering fast and this year there have been reports that some Dubai properties have already increased by 20pc – good news for Irish buyers stuck with investments there in negative equity after the emirate's 2008 crash, but also stoking up fears of a new bubble in the region.
Damac has started projects including Hollywood-themed apartment towers and a Trump International golf course this year as Dubai's property market recovers from a 2008 real estate crash.
Damac Real Estate is valued by analysts at $3.9bn (€2.9bn) to $5.4bn (€4bn) in the IPO, according to three people briefed on the process.
Analysts at banks managing the IPO published research with their estimated equity-valuation range for Damac, said the people, who declined to be named as the information is private.
The range is an average of the published research. Damac has assets valued at $2.3b and it made a first-half profit of $332m, up from $212.1m in all of 2012, according to the filing.
Gross profit margins averaged 44pc in the three years through 2012 and 64pc in the first half of this year, the filing said.
"Our biggest operations will continue to be in Dubai," Mr Sajwani said in an interview.
"The Middle East as a territory, especially Saudi Arabia where we already have operations, will continue to grow for us."
While Damac tends to be focused on building and selling homes, investors will compare the company's valuation to Emaar Properties PJSC, Shuaa's Mr Safieddine said.
Emaar, Dubai's biggest publicly traded developer, generates much of its income from leasing malls and operating hotels, providing a cushion in downturns, Mr Safieddine said.
Emaar's shares surged 63pc this year. Citigroup Inc and Deutsche Bank AG along with Samba Capital and Investment Management Co and VTB Capital Plc are managing the IPO, according to the statement.
Mr Sajwani will remain Damac's chairman and chief operating officer, according to the filing.
Dubai's decision to increase property-sale fees to 4pc will have little effect on sales because the rate is still below countries in Europe and Asia, Mr Sajwani said.
Damac, which partnered with Italian fashion house Fendi SpA and Paramount Pictures Corp is expanding outside its home market with towers in cities across the region including Abu Dhabi, Riyadh, Jeddah, Beirut, Amman and Baghdad. (Bloomberg)