Emaar Properties, the UAE’s largest listed developer, has transferred a number of key assets to a new investment vehicle, which will then be taken public, company documents filed with the Dubai Financial Market (DFM) on Thursday morning revealed.
The assets, which include 49 units in the Burj Khalifa and two Address hotels still under construction, will be transferred to Emaar Development, a vehicle through which to list a number of Emaar’s projects on the stock market, experts say.
Emaar Development is expected to float parts of its business through an IPO later this year.
The existing shareholders in Emaar Properties, which was listed in 2000, will receive dividends from the funds raised from the new IPO, according to a statement from the developer in July 2017.
On the move to create a new vehicle for the IPO, analyst Tariq Qaqish, Managing Director, Asset Management, Menacorp, told Gulf News: “The bottom line is that it provides more transparency ahead of the IPO, since investors will be looking at the kinds of assets they are investing in. At the same time it provides the legal structure for the new company which will be taking on new ownership when it floats.”
As per Emaar’s filing on the DFM website, the list of assets to be transferred to the new company is divided in to five sections: Mixed use projects under construction; Villa communities under construction; Empty plots; Completed units; Joint ventures.
“Emaar Development LLC is responsible for the development of real estate assets in the UAE, and as such only undeveloped properties can be transferred to the company. Emaar has limited inventory for sales including certain strategic units in Burj Khailfa, which are being transferred to the development company. We will announce more details about the IPO in due course,” a spokesperson from Emaar said in a statement to Gulf News.
Analysts say that Emaar is undertaking this IPO in order to boost the value of its other listed businesses by selling off its property development unit, which is currently tied up with other assets and listed as a whole as Emaar Properties.
This will allow them to access a new cash flow immediately, that otherwise would’ve taken years to realise, according to experts.
The mother company, Emaar Properties, will still own 70 per cent of Emaar Development. It will only float 30 per cent of the new company.
Legal experts told Gulf News that the practice of transferring assets to a new vehicle ahead of an IPO, when a company sells its shares to the public, is commonplace.
In a practice described as “ring-fencing” or “segregating,” the company will transfer certain assets to a new company, in this case Emaar Development, that will then be floated on the stock market.
Market sources say that Emaar will announce its estimated valuation, or the price that it intends to sell its shares for, on October 1.
The majority of the assets included are mixed use projects under construction, including new hotels such as the Vida Dubai Mall and the Address Sky View.
Emaar also plans to IPO empty plots that it owns in Dubai Harbour, Emirates Hills, and Arabian Ranches.
In terms of completed assets, Emaar has included 53 units in two of its flagship developments: The Armani Residences and the Burj Khalifa, the world’s tallest tower.
It also states that the asset transfer includes all of their related liabilities and contracts.
“Ultimately, this is a necessary legal step that needs to be taken before going public,” said one legal expert who asked not to be named due to the sensitivity of the announcement.
“But it’s all about the valuation of the company. That’s all that matters in an IPO,” they added.