x Abu Dhabi, UAESunday 21 January 2018

Eshraq plans first non-insurance IPO in UAE for two years

Property developer Eshraq is planning the UAE's first IPO in two years.

Visitors look at an Eshraq model on display yesterday Cityscape in Abu Dhabi.
Visitors look at an Eshraq model on display yesterday Cityscape in Abu Dhabi.

The Abu Dhabi developer Eshraq plans to raise Dh825 million (US$224.6m) in an initial public offering (IPO) that has been scheduled for May 1.

Eshraq will sell 55 per cent of the company in the offering, with shares initially priced at Dh1, said Dr Sulaiman al Dhalaan, the managing director of the company.

The listing, which is scheduled for the Abu Dhabi Securities Exchange, would be the first IPO in the Emirates outside of the insurance sector in two years.

The company is likely to face scepticism from the investment community. Property prices have slid in the capital by as much as half in the past three years and an additional 16,000 units are scheduled for completion this year, according to Jones Lang LaSalle, a property consultancy.

In December, the mobile phone retailer Axiom Telecom cancelled an announced IPO, citing "market conditions and liquidity" concerns.

But Dr al Dhalaan said the timing was right for Eshraq's offering as the company was debt-free and owned all the land for its Abu Dhabi projects. He described the company as "asset based".

"We are confident the market will recover," Dr al Dhalaan said.

Eshraq lists three projects in development: Marina Rise, a cluster of residential and office towers on Reem Island, first announced in 2007; a mixed-use project called Gateway between Maqta and Sheikh Zayed bridges in Abu Dhabi; and Jumeirah Rise in Dubai. Eshraq plans to start construction of two towers in the Marina Rise project in six weeks, Dr al Dhalaan said.

Construction costs have also come down in the wake of the global property crisis, making it more attractive to build, he said.

"This is the best time for construction," he said at the Cityscape exhibition in Abu Dhabi yesterday. National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, Emirates Islamic Bank and First Gulf Bank are involved in the offering, he said.

Investors will be allowed to pay only 25 per cent for the shares and the balance when construction benchmarks are met, Dr al Dhalaan said.

"Market sentiment has picked up for real estate stocks," said Chet Riley, an analyst with Nomura Securities. "But I still think the market for a real estate IPO is still challenging."

Eshraq is a joint venture between private investor groups in Saudi Arabia and the UAE, Dr al Dhalaan said.

Eshraq has been discussing a potential IPO since 2009, when Dr al Dhalaan said the company had a "strong desire" to go public.

"We were about to do it last year and almost finalised the shift procedures, but circumstances of the global financial crisis affected us," he said at the time. "Now circumstances are improving, and we might shift into a public joint stock company next year."

In a January interview with the Arabic newspaper Al Bayan, the Eshraq chairman, Saleh bin Nasrah, said the company was planning an IPO for February.

The company's first project, Marina Rise on Reem Island, was described in 2007 as Dh7.5 billion mixed-use development covering more than 10 million square feet. The project was scheduled to include three 24-storey waterfront towers with apartments for sale, as well as four office towers.

In 2007, the company announced a Dh1bn private stock placement managed by Abu Dhabi Islamic Bank.