What's Up: More investors are favouring bonds from Emaar Properties over its rival Aldar Properties, amid increased activity in Dubai's property and tourism sector.
Emaar bonds find favour over Aldar's
More investors are favouring bonds from the property companies Emaar and Aldar amid increased activity in Dubai's property and tourism sectors.
"Emaar has a positive cash flow from its core businesses, especially from hospitality and retail," said Tariq Qaqish, a senior fund manager at Al Mal Capital in Dubai.
"The relaunch of real estate sales have been very successful, which shows there is stability in the market in Dubai. It's definitely an achievement given the environment."
The premium on Emaar's share price in the equity market is a further confirmation of that. Emaar is trading at Dh1.11, while Aldar is trading at Dh3.15.
Aldar obtained a Dh4 billion revolving facility on Monday, after the developer, based in Abu Dhabi, received a series of cash cushions through the sale of assets to the Government last year to cover accumulated debt. Aldar will use the financing for "general purposes" and it "will allow the company to optimally manage its working capital and liquidity requirements over the next three years," the company said in a statement on the Abu Dhabi Securities Exchange. S&P upgraded its long-term rating for Aldar to B+ from B following the announcement of the credit facility.
The facility has a tenure of three years. The spread between Emaar's 7.5 per cent convertible dollar- denominated bond and Aldar's 10.75 per cent dollar notes narrowed 344 basis points this year to 24 on April 4, the lowest since September 22. The spread between debt of the two biggest UAE property companies by market value was 50 basis points yesterday, down from 367 basis points on December 30.
The yield on Aldar's 10.75 per cent notes maturing in May 2014 has risen three basis points, or 0.3 of a percentage point, this year to 5.84 per cent on Monday, versus a 306 basis-point plunge in the yield on Emaar's 7.5 per cent bond due in December 2015 to 6.3 per cent.
Dubai's local economy grew by 3 per cent in real terms last year, driven by increased trade, tourism, retail and hospitality, according to data published by the Dubai Department of Economic Development.
"Signs of investor confidence have returned and the Dubai investment market continues to witness strong interest for high quality, well located, income producing assets," said Jones Lang LaSalle in a report yesterday.
* with Bloomberg