Emaar Properties Returns to International Sukuk Market with Latest Benchmark US$500m Issuance as UAE Real Estate Market Starts to Gain Momentum

Dubai-based international property developer, Emaar Properties, returned to the Sukuk market after a hiatus of two years to successfully close its latest offering, a Reg S US$500 million benchmark Sukuk issuance, in July 2021.

Emaar Properties PJSC, the largest real estate developer listed on the Dubai Financial Market and to operate in the MENA region, is 29.22 per cent 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, which is solely listed on Nasdaq Dubai.

The company had earlier mandated Standard Chartered Bank, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank and Mashreqbank to arrange a series of fixed income investor calls with accounts in Singapore, Hong Kong, the Middle East and London starting in June 2021. 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 from an initial price guidance of around 4.25%, but due to strong demand, the pricing tightened to a profit rate of 3.7% per annum at financial close. Demand for the trust certificates was strong with the transaction over-subscribed by almost seven times. The transaction received orders from various institutional accounts of around US$3.3 billion.

Emaar’s previous forays into the Sukuk market were in September 2019 with a US$500 million issuance, 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 offering, based on a Hybrid Wakalah-Ijarah-Tawarruq structure, has a 10-year tenor priced at an annual return of 3.7% which is even tighter than the 3.875% for the previous offering in September 2019 which was equivalent to Mid-swaps (MS) +235b basis points.

The company, which is also the builder of the world’s tallest building Dubai’s Burj Khalifa, last month reported an 8% rise in first quarter net profit to AED657 million (US$178.88 million). The proceeds from this latest issuance will be used to support Emaar Properties’ regional and international expansion plans.

The US$500 million Emaar Properties Sukuk was listed on Nasdaq Dubai on 6 July 2021, taking the total value of Sukuk listings on the bourse to US$78.04 billion, reinforcing its position as the one of the world’s largest Sukuk listing venues.

At the listing bell ringing ceremony, Jamal Bin Theniyah, Chairman of Emaar Properties, stressed that “the UAE, with Dubai in particular, continues to be an attractive destination for investors due to its promising growth driven largely by a number of key Government initiatives since the onset of the pandemic. The success of our latest Sukuk issuance demonstrates major investors’ confidence in both the Emaar Group and Dubai’s real estate market. This Sukuk also underscores the critical role Nasdaq Dubai plays as a well-regulated platform within both regional and global markets.”

The Emirate is keen to establish Dubai as a premier international Sukuk issuance and listing domicile. According to Hamed Ali, CEO of Nasdaq Dubai and Deputy CEO of DFM, “we are pleased to welcome the new listing from Emaar Properties, one of Dubai’s prominent companies and a recurrent issuer of fixed-income instruments on Nasdaq Dubai. This listing provides further impetus to the Exchange’s prominent status as a world-class marketplace for listing of Sukuk and bonds in the MENA region. Nasdaq Dubai is continuously enhancing its infrastructure and regulations to cater to the requirements of our prominent issuers seeking to finance their growth strategies as well as to provide investors with diversified opportunities.”

Emaar Properties in July received a major boost when S&P Global Ratings revised its outlook on the company from Negative to Stable following a pick-up in Dubai’s residential real estate market prices, in some areas for the first time since 2015. The company, like almost all major property developers the world over, was badly affected by the impact and disruption of the COVID-19 pandemic on the real estate, hospitality, tourism and travel sectors.

“We expect a rebound in the company’s earnings and credit metrics in 2021, with EBITDA likely to exceed AED8 billion and funds from operations (FFO) to debt to improve to about 30%,” added S&P. The rating agency maintained its long-term issuer credit rating of BB+ for Emaar Properties, issuer credit rating of BB+ for Emaar Malls and its BBB+ stand alone credit profile for Emaar Malls.

In June 2021 Emaar Properties reported the company’s five-month sales surged by 250% year-on-year. Total property sales stood at AED10.5 billion (US$2.9bn) compared with AED3bn (US$816.9m) a year ago. The prospect of a strategic share merger between Emaar Properties and Emaar Malls following the approval by their respective boards of directors also opens up new possibilities and cash flow stability for the merged entity.

Emaar Properties’ financial and operational performance, according to the two entities, is expected to be boosted through full consolidation of Emaar Malls’ earnings and cash flow generation and is expected to further reduce volatility through an increase in the proportion of earnings from recurring businesses.

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