DIFC to issue $700 million sukuk
The Dubai International Financial Centre will issue a US$700 million sukuk next month to refinance its current bank borrowings and fund growth at the financial hub.
The move was announced by Essa Kazim, governor and executive chairman of the DIFC, alongside its half -year operating review, which showed continuing growth in terms of member firms and employees at the centre.
Mr Kazim said the DIFC – which celebrates its 10th anniversary in December – is on track to hit its target of doubling in size by 2018. “As we move into our next decade of operations, we will continue to strengthen our offer, which is helping to transform Dubai into a global hub for business and finance,” he said, especially in the Islamic finance sector identified by Dubai as a growth priority.
The number of active companies operating in DIFC grew by 7 per cent from the end of last year, reaching 1,113, with the number of registered financial services firms growing from 327 to 350. Non-financial services businesses rose from 565 to 600, and the overall workforce increased 6 per cent to 16,560.
The trend towards internationalisation of the centre continued, with non western (American and European) institutions outweighed by those from the rest of the world. The four biggest banks in China have offices in the DIFC.
“If you annualise that rate of growth, we will be able to meet the strategy of doubling in size in four years’ time,” Mr Kazim said.
The sukuk will be in the form of ijara, an Islamic financial structure that replaces interest with rent on an asset. The proceeds will be used mainly to pay down existing bank debt of about $650m, which has been reduced from a $1 billion syndicated loan taken out in 2012.
It is believed DIFC has been profitable in recent years with earnings of around $100m before interest, tax, depreciation and amortization.
The $50m surplus from the sukuk will be invested in DIFC’s ongoing business development plan. Brett Schafer, the chief executive of DIFC’s property division, said the property development priorities are the “spine” – a development of retail and office facilities running the length of the DIFC precinct – which would be finished in two to three years.
DIFC is also planning to build Gate Village 10, a new office block on the mixed-use edge of the centre. A hotel is also being planned for the village, although there were no further details of the hotel brand that would open there.
Mr Kazim said he was conducting a search to find a replacement for Jeff Singer, who recently quit as chief executive of the authority that runs the DIFC. “The search is still in process. It’s possible some jobs could be merged, and it’s possible somebody could be hired for that role. I am full-time executive here,” he said.
He added there would be no change in DIFC strategy as a result of Mr Singer’s departure.
On Nasdaq Dubai, the equity and bond market within the DIFC jurisdiction, Mr Kazim said: “It is better for local business to go to Dubai Financial Market. Nasdaq Dubai is more niche, it was never meant for local IPOs, but for international listings as well as sukuk and murabaha (a Sharia-compliant investment instrument). Regional [non-UAE] companies could also list be interested in Nasdaq Dubai,” he said.
In the half-year, DIFC introduced new structures – qualified investor funds (QFI) – to attract fund business into the centre.
DIFC itself owns 1.6 million square feet of the 5 million sq ft under its jurisdiction. Mr Kazim said that there was 100 per cent occupancy at its properties in the Gate district, and 98 per cent occupancy of DIFC-owned retail space.
On rents, Mr Kazim said: “We are 100 per cent full, but we intend to remain competitive.” The centre raised the freehold transfer fee – a tax on transactions within the centre – from 3.5 to 5 per cent in March.
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Updated: September 21, 2014 04:00 AM