Dubai: Damac Properties, which has been launching new projects and reviving stalled ones, might be eyeing an IPO as well. If it does so — and the company declined to give any confirmation when contacted yesterday — the intention would be to leverage the upturn in Dubai real estate’s status as an asset class, especially in capturing overseas high networth fund flows.
Damac had in the past flirted with an IPO plan but one issue or the other, including the recent financial crisis, had pushed these to the backburner.
News of a possible revival of the IPO plan was reported late Tuesday by Reuters, which quoted unnamed banking sources as saying that Damac might have approached banks with proposals for advisory roles ahead of a stock float. A timeframe of when – or if - this could happen was not provided.
Jon Barber, corporate communications manager at Damac would not comment on the IPO report, but said the focus was “on the three projects launched by the company in the first quarter including the $1 billion Damac Towers by Paramount.”
In fact, investor response to the Paramount association for the launch of the mixed-use development in Downtown Burj had led to speculation in local financial sector circles that Damac might tap equity or the debt route to part-fund its roster of developments. In fact, existing real estate has been seeing increased activity on the local bourse.
“During the last three months, we have witnessed a strong bull run in UAE stock markets, especially driven by real estate and banking sectors,” said Krishna Murthy, CEO of Dubai International Securities. “The price-to-earnings of all real estate stocks have jumped to double-digit (between 10 and 15).
“With the increased market price of shares, the price-to-book value of shares has also registered improvement. This reflects good investor sentiment — therefore, Damac may be considering an IPO at this time to fetch a better valuation.”
In the recent past Emaar has tapped the debt market and has consistently been part of speculation that it would float the hugely profitable retail part of its operations.
“From the perspective of timing of Damac’s proposed IPO, one can look at the increase in demand for properties, both ownership and leasing, from international investors,” said Krishnamurthy. “Demand will be sustained mainly on two accounts - firstly, the unstable political and economic situation in Mena region is driving high networth investors (HNI) to safe places like Dubai to base their business and investment activities.
“Secondly, the shock loss of up to 60 per cent of savings with Cyprus banks for HNIs, especially from Russia, has forced investors to look for alternative. As the confidence in Dubai real estate is building up, one would not expect losses of such magnitude by investing in real estate here.”