Al Mazaya Holding, a Kuwaiti property developer, hopes to tap the markets for capital as it tries to increase its investments in Dubai. But should markets take this as a warning sign?
Until December 6, Mazaya will offer additional shares to existing shareholders to increase its capital by 30 per cent to 64.9 million Kuwaiti dinars. It has begun by offering equity to shareholders of First Dubai Real Estate and Waterfront Real Estate Development, two groups in which it currently holds majority stakes.
Mazaya said it would offer the new shares at a price of 127 fils each.
The quest for capital comes as Mazaya targets the remaining shares it does not already own in the two companies. Mazaya currently owns 64 per cent of First Dubai and 92 per cent of Waterfront.
Mazaya hopes to use the takeover to reduce overall operating expenses. But Toby Carroll, a property analyst at HSBC Middle East, said investors should consider why the group was seeking to increase its property holdings in the UAE.
He said increasing exposure to property made sense only "if you're picking it up at a steal".
"Everyone knows real estate prices are coming down, but to what extent, is the question."
However, Venkateshwaran Ramadoss, a senior research analyst at the Kuwait Financial Centre, said that prices for Kuwaiti residential and investment properties were rebounding from their lows of last year, although commercial properties were still sagging.
That could be of benefit to Mazaya, which also has exposure to the currently booming property markets of Lebanon.
However, the capital-raising follows a poor third quarter for the company, which on Sunday reported a net loss of 1.19 million dinars.The loss was attributable to a plunge in property sales. Transactions fell 48.8 per cent to 1.22m dinars compared with same quarter last year.
The company suffered a blow in July when its chief executive, Khaled Said Esbaitah, resigned unexpectedly. Furthermore, the company's subsidiaries have been rocked by the property market downturn.