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Dubai’s Emaar Properties Returns to Sukuk Market After Absence of Three Years with Hybrid $500m Benchmark Issuance

Dubai-based international property developer, Emaar Properties, returned to the Sukuk market after a hiatus of three years to successfully closed its latest offering, a US$500 million benchmark Sukuk issuance in September 2019.

Emaar Properties PJSC, listed on the Dubai Financial Market, is the largest such company in the MENA region and is 29.22 % owned by the Investment Corporation of Dubai. Emaar has a significant presence in the Middle East, North Africa and Asia, and has a land bank of 1.6 billion sq. ft in the UAE and key international markets.

This latest Sukuk was issued by Emaar Sukuk Limited, which is incorporated as an exempted company in the Cayman Islands with limited liability, on behalf of the obligor, Emaar Properties, under its US$2 billion Trust Certificate Issuance Programme, established on 2 September 2019. The Programme was arranged by Dubai Islamic Bank and Standard Chartered Bank, who also acted as the dealers to the Programme. 

Emaar’s previous forays into the Sukuk market were in 2016, with a US$750 million issuance, and a US$750 million Sukuk issued by its subsidiary Emaar Malls in 2014.

This latest US$500 million Sukuk, based on a Hybrid Wakalah-Ijarah-Tawarruq structure, according to Emaar, has a 10-year tenor and is priced at an annual return rate of 3.875 %. In a statement, Mohamed Alabbar, Chairman of Emaar Properties, stressed that the proceeds raised will support Emaar Properties’ regional and international expansion plans.

The Sukuk were listed on Nasdaq Dubai on 30 September 2019. “The growth of the Sukuk market,” explained Alabbar, “has been tremendous and has helped bridge the gap in infrastructure financing particularly with projects linking to the real economy. Listing our Sukuk on Nasdaq Dubai provides our issuance with a well-regulated platform with high visibility and close links to market participants regionally and around the world.”

The company had earlier mandated Standard Chartered Bank, Dubai Islamic Bank, Deutsche Bank, Emirates NBD Capital, First Abu Dhabi Bank, Mashreqbank and Sharjah Islamic Bank to arrange a series of fixed income investor meetings in Singapore, Hong Kong and London, starting on 6 September 2019. Standard Chartered Bank was the sole coordinator to the transaction. Dubai Islamic Bank acted as Shariah advisor, and the rest of the mandated banks as joint lead managers and bookrunners. 

The indicative pricing started at around 270 basis points over mid-swaps (MS). Demand for the trust certificates was strong with the transaction over-subscribed by five times. The transaction received orders from various institutional accounts of around US$2.5 billion, including US$300 million of subscriptions from the banks arranging the transaction. The strong demand reflected the final pricing at a profit rate equivalent to MS + 235 basis points.

Emaar has been assigned a long-term credit rating of Baa3 with a “stable outlook” by Moody’s Investors Service and a BBB with a “stable outlook” by S&P Global Ratings. The Trust Certificates Programme and the Sukuk certificates have subsequently been assigned credit ratings of Baa3 by Moody’s and BBB- by S&P.

The emirate is keen to establish Dubai as a premier international Sukuk issuance and listing domicile. Essa Kazim, Governor of Dubai International Financial Centre (DIFC), Secretary General of Dubai Islamic Economy Development Centre, and Chairman of Dubai Financial Market (DFM), emphasised at the bell ringing ceremony of the listing of the Emaar Sukuk on Nasdaq Dubai that the “cooperation between Emaar Group and Nasdaq Dubai underlines Dubai’s strength and depth in the Sukuk sector as part of the Emirate’s growth as the global Capital of the Islamic Economy. Dubai will continue to develop its exchange infrastructure to serve Sukuk issuers seeking an effective listing environment.”

This US$500 million listing by Emaar Properties, according to Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, underlined the strong activity in the Sukuk sector, with listings so far this year on Nasdaq Dubai from UAE and overseas issuers valued at a total of US$8.85 billion.

“The Exchange will maintain its strong support for Sukuk issuances for the benefit of issuers and investors and to promote successful economic development. As one of the world’s largest exchanges for Sukuk listings with a total nominal value of US$58.7 billion, with 55 % of that value coming from non-UAE issuers, we are preparing for further listings from a range of regional and international public and private sector issuers,” he added.

Emaar Properties reported total assets at end 2018 of AED111,419 million, slightly lower than the AED113,637 million at end 2017. Total assets increased sharply in H1 2019 amounting to AED116,276 million, albeit unaudited. Similarly, net profit for the year 2018 totalled AED9,020 million compared with AED6,548 million for the previous year. Net profit for H1 2019 totalled AED4,086 million compared with AED4,703 million for the same period in 2018.

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