Dubai’s biggest developer to take over mall unit

Buying out: The logo of Emaar Properties PJSC on a building in morning fog in Dubai. The developer, which already owns 85% of Emaar Malls, proposed to pay 0.51 share for every Emaar Malls share, valuing the business at 24 billion dirhams (US$6.5bil). — Bloomberg

DUBAI: Emaar Properties PJSC, the Dubai-based developer of the world’s tallest tower, plans to take over its malls unit as the coronavirus pandemic exacerbates a property downturn in the Middle East business and tourism hub.

The developer, which already owns 85% of Emaar Malls, proposed to pay 0.51 share for every Emaar Malls share, valuing the business at 24 billion dirhams (US$6.5bil). According to Bloomberg calculations, the offer values Emaar Malls’ at 1.85 dirhams per share and it’s a premium of about 10% to its last closing price.

A property glut and faltering demand in Dubai have driven prices down by more than a third since the market peaked some seven years ago. The decline has been made worse by the coronavirus pandemic, and Emaar last year temporarily halted new projects.

“Even though we think the offer will be accepted by the minority shareholders of Emaar Malls, the low premium offered and the discount to the initial public offer (IPO) price may not be welcomed by investors, ” Arqaam Capital said in a research note. It set a new target price for Emaar Properties at 5.26 dirhams.

Emaar Properties sold its share in Emaar Malls, which operates one of the world’s biggest shopping centres in Dubai, in 2014. The order book was more than 30 times oversubscribed for the institutional segment, and more than 20 times for the individual part at the top of the price range at 2.9 dirhams.

Restrictions to check the spread of the coronavirus pandemic weighed on the business for most of last year, though visitor numbers started to pick up when curbs were eased. Still, Emaar Malls posted a wider-than-expected loss for the year.

Property broker JLL said in January that Dubai developers are likely to continue a high supply momentum this year, while S&P Global Ratings analyst Sapna Jagtiani told Bloomberg TV on Tuesday that the property market in Dubai may “bottom out” next year after a tough 2020.

The chief of Damac Properties PJSC, one of Dubai’s largest developers, said last month it will take at least one to two years for the real estate market to get out of its downturn.

The shares of Emaar Properties, the biggest listed developer in Dubai, last closed at 3.63 dirhams, while Emaar Malls ended at 1.69 dirhams.

Emaar Malls shares lost 42% of their value since they started trading in October 2014, versus a 69% drop for the parent company. Dubai’s main equities gauge slumped 49% in the same period.

“Merger increases Emaar Properties weight in MSCI & FTSE but with very limited flows impact as both stocks are currently index members, ” Arqaam said. — Bloomberg

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