Dubai: The Board of Directors at the DFM-listed Tecom Group announced Wednesday the company has approved a strategic acquisition and development plan that includes investing Dh966 million to acquire commercial and industrial assets from Dubai Holding Asset Management. The company also earmarked Dh689 million to develop offices in Dubai Design District (d3).
The plan was approved following a board meeting on Wednesday. The strategic acquisitions are in line with the group’s roadmap to achieve sustainable growth and continue delivering strong performance through strengthening its portfolio of flexible and high-quality commercial and industrial assets.
Abdulla Belhoul, CEO of Tecom Group, said, “As we embark on our ambitious Dh1.7 billion strategic acquisitions and development plan, Tecom Group is well equipped and poised to capitalise on the unique opportunities that Dubai’s commercial real estate market offers.”
Belhoul said, “This plan is not just an expansion of our asset base; it is a strategic move to harness favourable market dynamics and drive our vision forward. It will reinforce our commitment to Dubai and the UAE’s growth and unlock greater value for our shareholders and other key stakeholders.”
The group’s subsidiaries will execute investments: Tecom Investment FZ LLC, Dubai Design District FZ LLC and Dubai Industrial City LLC. The company said it is well funded to acquire the strategic assets, underpinned by resilient financial performance and ample liquidity, including existing credit facilities.
“Thanks to our prudent financial management, optimised capital structure, and strong financial performance so far this year, we have the financial means to execute these deals while maintaining a healthy cash profile. We look forward to updating the market as we execute our growth agenda.”
The group also said it is well-funded for the planned transactions from existing sources, driven by its solid financial performance, underpinned by a healthy leverage position and ample liquidity, with the option to tap into up to Dh3.2 billion from its existing revolving credit facility, which was refinanced in 2023 at more competitive financing terms.
Investment plan
Tecom’s strategic acquisition and development plan includes purchasing assets in Dubai Internet City, Dubai Industrial City, and Dubai Design District. In Dubai Internet City, Tecom Investment FZ will acquire two office buildings from Dubai Holding Asset Management with a combined value of Dh420 million.
The company said its subsidiary, Dubai Industrial City LLC, will acquire several strategically located, well-connected land plots allocated for industrial leasing from Dubai Holding Asset Management for a total area of 13.9 million sq. ft. for a combined value of Dh410 million to enhance the group’s land bank and satisfy robust and sustained demand for this asset type.
Dubai Design District, another one of Tecom Group’s subsidiaries, will acquire 629K sq. ft gross floor area from Dubai Holding Asset Management for Dh136 million within ‘Design Quarter’, a mixed-use development located in phase 2 of the creative district. The company said it intends to earmark Dh689 million to develop six office buildings with an expected total gross leasable area of 503k sq. ft. The project is expected to be completed by 2028. All regulatory norms have been followed, said a statement.
Conducive market conditions
According to recent industry reports, Dubai’s office market continues to see strong occupier demand, driving average occupancy levels to 93 per cent in Q4 2023 compared to 88 per cent in Q4 2022. The average occupancy level across Tecom Group’s business districts was 91 per cent (as of March 31 this year), with d3 occupancy rates reaching 98 per cent for the same period.
The industrial segment is also continuing to demonstrate robust growth, which is driving occupancy rates higher and leading to a notable increase in rental rates.
The planned value-accretive asset acquisitions are expected to yield a significant positive impact on the group’s financial performance as well. The acquisition of the two fully leased operating assets in Dubai Internet City will have an immediate effect on its top line, the company said. The remaining acquisitions will further enhance Tecom Group’s revenue visibility by attracting new customers and further diversifying its customer base while maintaining its current healthy EBITDA margins.
