Deyaar announced on April 22 that the IPO had been given the go ahead from the ministry of economy. The offering, which opens on May 6 and closes ten days later, is open only to UAE and Gulf Co-operation Council nationals. It is expected to raise $866m, which Deyaar said will be used to fund new developments in the UAE, where the company presently concentrates its efforts, as well as in new markets it is seeking to expand into, such as Saudi Arabia, Qatar, Kazakhstan and India.
From a modest beginning in 2001, Deyaar has shot up as fast as some of the luxury buildings it constructs. Since 2003, when it turned a profit of $1.35m, it has progressed to the point where it reported net profits of $112m in 2006, up 192% on the previous year’s results.
In the course of 2006, Deyaar tripled its asset base to $810m and increased sales from $459m in 2005 to $840m. Just as attractive for investors was the 41% it gave as a return on capital.
With a number of new projects due for completion this year, and others being at various stages of construction this steep climb in income is set to continue as long as the property market in Dubai and the region remains hot. Deyaar currently has 17 residential and commercial projects on its books, in Lebanon and Turkey as well as spread across the UAE.
Announcing the IPO, Mohammed Khalfan bin Kharbash, the company’s chairman, said Deyaar’s growth had constantly outstripped the pace set by the region’s booming real estate market.
“Deyaar’s IPO will not only give investors an opportunity to participate in its success but also benefit from the stupendous growth in key real estate markets,” said bin Kharbash, who is also the UAE’s minister of state for finance and industry.
Makram Kubeisy, managing director of the Investment Banking Group at Shuaa Capital, told the local press, “There is ample liquidity available on the market. I do not personally believe that there is a crowding out of IPOs in the region. On the contrary, there is a healthy stream of new issues catering to the investment appetites of different classes of investors.”
Even ahead of its IPO, the company was mapping out a course of financial and project expansion. On April 15, Deyaar signed a Mudaraba transaction – a profit-sharing facility on earnings generated from the funds – with its parent company Dubai Islamic Bank, providing $162m.
“The facility will enable Deyaar to participate in initiatives that are in line with its aggressive expansion strategy,” Zack Shahin, Deyaar’s chief executive officer said on April 16. “As its first step in non-project finance, the Mudaraba facility reiterates Deyaar’s commitment to delivering high returns to shareholders, as also its preference for sharia-compliant instruments.”
In early March, Deyaar announced that one of its latest projects, the Metropolis, a 22-storey commercial tower located at Business Bay, had sold out just a week after going on the market. On April 13, it unveiled its newest development, a $162m luxury residential tower to be known as Windsor Manor, also at Business Bay.
However, there have been some suggestions the local market for IPOs may have cooled somewhat. Experts point to the property development companies already listed in regional markets, including Emaar Properties, Union Properties and Aldar Properties. Of the IPOs launched this year, none has whipped up the same frenzy as the November 2006 IPO for the Dubai stock exchange, Dubai Financial Market, which was oversubscribed 300 times.
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