Emaar is selling assets to raise $1.4bn. Why?
Since its September 2014 peak, Emaar’s share price has more than halved, and this year, it is down approximately 20%, a report by Financial Times said.
In a statement, the developer, Emaar, of Burj Khalifa, the world’s tallest tower, said it regularly considered various financing options to streamline its business.
But, in the midst of a property slump in the emirate, Dubai’s leading developer Emaar is now planning to sell hotels, clinics, and schools.
Time to sell
However, currently, it seeks to raise funds worth $1.4 billion by disposing of non-core assets, reports the Financial Times (FT).
The company said it was looking to raise approximately $700 million through these initial sales of its hotel portfolio, except for two prime properties.
Emaar is also selling the clinics and schools across its communities at a prospective value of $700 million, FT adds.
What led to this?
In an interview with CNBC Arabia on July 17, 2018, Mohamed Alabbar, one of the most influential businessmen, founder, and chairman of Emaar acknowledged that Emaar Hospitality Group would sell part of its portfolio to focus on hotel management and that the unit was still looking to list its own shares.
“It is the start of expanding into the hospitality sector,” Alabbar said during the interview. “We have to focus on the issue of management and hotel management contracts like other global brands such as Hilton and Marriot.”
Mohamed Alabbar, was closing in on a deal with several interested parties, stated the ME construction news, a construction news outlet.
“This is not the market environment you would want to sell assets”
While market struggles were never mentioned by Alabbar as the reason behind the sales, the properties market, one of Dubai’s main economic drivers, has been hit hard by a slump in regional demand since the oil price collapsed in 2014.
An example of this slowdown is apparent when looking at 5,181 brokers in the Dubai properties sector who have suffered a 30% drop in commissions, this year.
Commissions totaled $155 million in the first half of 2018, according to statistics released by Dubai Land Department (DLD), $68 million less compared to last year’s $223 million.
These came to a result of 27,600 transactions during H1 2018 compared to last year’s H1 sales totaling 35,600.
Standard Chartered Bank had been hired to carry out the sale process, reported Financial Times.
“This has to be about raising capital to strengthen the balance sheet,” said one banker.
“This is not the market environment you would want to sell assets in if you were being opportunistic.”