UAE IPOs resume with REIT listing: IFR
Dubai Residential REIT has reopened the post-Eid market with an IPO expected to reach up to around US$500m-equivalent.
Dubai Holding is offering nearly 1.63bn shares for a 12.5% free-float. The offer includes a 15% brownshoe with xCube as stabilisation manager.
According to a banker involved the REIT is valued at around Dh15bn (US$4.1bn) on fair value, though an IPO discount is expected to bring the dividend yield to around 8%.
Peer Emaar Properties trades around a 7% yield while other dividend stories Tecom and Salik trade around 5.3% and 4%, respectively.
An investor in the region wants to see a dividend yield of at least 6%.
The REIT expects to make its first two dividend payments in September and April, the sum of which will be the higher of either Dh1.1bn (US$299.5m) or 80% of profit for the 2025 financial year. Dividends will be based on 80% of profits for each accounting period.
While viewed as a 'safe bet', according to the banker involved, a banker away from the deal cautioned that as a buy-and-hold story it would likely see little aftermarket liquidity and would need to make a convincing case to lure investors away from listed high-yielding stocks such as Emaar.
The banker away from the deal expects demand to be largely regional, with regulatory issues meaning the offer cannot be marketed in Europe.
The offer is sharia compliant and is being marketed in the US on a Reg S basis.
A second banker on the deal reported a decent shadow book, including anchor support.
REITs are a relatively novel structure in the UAE with new regulatory guidance around their tax structure was issued last month meaning early-look work involved spending significant time educating investors on the changes and getting comfortable on the potential to list as either a company or a REIT, the banker said.
Dubai Residential will be the largest listed REIT in the GCC region with a gross asset value of Dh21.6bn managing 35,700 residential units.
For 2024, pro forma adjusted Ebitda post-management fees was Dh1.18bn off revenue of Dh1.79bn, representing a 72.7% margin.
Subscription is open from May 13–20 for pricing on May 21 ahead of trading on May 28.
Retail investors will be offered 10% of the shares.
Citigroup, Emirates NBD and Morgan Stanley are joint global coordinators, and joint bookrunners with Abu Dhabi Commercial Bank, Arqaam Capital and First Abu Dhabi Bank.
Dubai Holding is expected to follow up with a second REIT for its commercial property.
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