Dubai luxury housing developer DAMAC Properties said it plans to raise as much as $500 million from an initial public share offer in London, betting on a recovery in a property market that crashed four years ago.
If successful, DAMAC would be the first Dubai real estate firm to go public since then.
DAMAC, which is building golf courses in the emirate with American real-estate mogul Donald Trump as well as a Hollywood-themed residential and retail complex, was one of the firms hit by a collapse that saw Dubai real estate prices slump by over 50 percent from their 2008 peak.
The developer, founded in 2002, famously gave away luxury yachts and Lamborghini cars to customers during the downturn to stimulate sales, but it has now revived stalled projects and announced new ones as prices rebound.
Residential house prices and rents have risen by more than 20 percent in the last 12 months, boosted by confidence in the wider economy, growth in the trade and tourism sectors and Dubai’s safe-haven status in a region beset by political unrest.
Some, including the International Monetary Fund, have warned about a new bubble forming in the market.
But the Dubai government has brought in new regulations to deter speculators, and DAMAC’s founder believes the market is primed for sustainable growth, supported by a strong rental market.
“We think Dubai is in the beginning of a growth cycle. Demand is now (exceeding) supply, which is why rents are going up,” chairman Hussain Sajwani - who will provide all the shares to be sold to investors - said in a call with Reuters.
About 85 percent of DAMAC’s current portfolio is in Dubai, with total assets of $2.3 billion, it said in a stock exchange filing that was the first public disclosure of its earnings.
Its profit in the first half of 2013 was $332 million, up 40 percent on the whole of 2012, while revenue was $631.9 million.
DAMAC expects to list its shares following marketing and a two-week roadshow, chief financial officer Adil Taqi said on the call, putting it in or around the first week of December.
Roadshows will take place in London, the Gulf and the United States, with meetings also possible in mainland Europe, a banker with knowledge of the deal said, adding the company was targeting emerging market funds and regional investors.
DAMAC’s IPO has been timed to take advantage of bullish equity markets, Sajwani said, and is the latest Gulf firm to look to London instead of its home market for a listing.
Gulf share markets have performed strongly in 2013 – Dubai’s bourse is up 80 percent year-to-date – but are regarded as lacking liquidity and interest from institutional investors.
“Our investor base is diversified for (property) buyers so the investor base will be large for the offering,” Sajwani said when asked why he was choosing London over Dubai.
DAMAC will be hoping to emulate other real estate firms which have listed in London in 2013 – estate agents Foxtons and Countrywide and housebuilder Crest Nicholson, all U.K.-focused companies, are up 35.7, 57.4 and 75 percent respectively on their offer prices.
Investors will look to compare DAMAC to state-owned Dubai developer Emaar Properties. Its stock is up 62 percent year-to-date and has a trailing price-to-earnings ratio of 15.9 times against 14.3 times for the wider bourse.
Citigroup and Deutsche Bank are joint bookrunners for DAMAC’s offering, with the investment banking arm of Saudi Arabia’s Samba Financial Group and VTB Capital acting as co-lead managers.