Five years after the Dubai home market crashed in spectacular fashion, Dubai developer Damac Properties is preparing an initial public offering which will gauge investor's belief in the Dubai recovery story.
Damac was hard hit by the downturn, along with most Dubai developers, but is once again proposing an array of dramatic projects for the emirate.
The initial public offering on the London Stock Exchange will be the first IPO for a Dubai developer since the market collapsed.
"There will definitely be appetite because Damac is a proxy to Dubai's real estate, which is recovering at the moment," Taher Safieddine, an analyst at Shuaa Capital PSC. (SHUAA) "They have witnessed the boom and bust and managed to come out of the crisis relatively in a good shape."
Prices in Dubai have risen by as much as 30 percent in the last year, leading to fears of a new bubble forming.
For Damac's IPO, two subsidiaries controlled by Damac founder and chairman Hussain Sajwani will offer Global Depositary Receipts, priced between $12.25 and $17.25, according to a filing. Damac will offer up to 18.8 percent of the company, raising at least $500 million.
Damac has assets valued at $2.3 billion and it generated a first-half profit of $332 million, up from $212.1 million in all of 2012, according to a Nov. 4 filing. Gross profit margins averaged 44 percent in the three years through 2012 and 64 percent in the first half of this year, the filing said.
Damac has announced several ambitious projects in the last year, including Damac Towers, a four-tower development with Paramount Pictures, the Hollywood studio, as a partner, and Akoya, a 28 million-square-foot project built around a Donald Trump-branded golf course.
"Our biggest operations will continue to be in Dubai," Mr. Sajwani told Bloomberg. "The Middle East as a territory, especially Saudi Arabia where we have already developments and operations, will continue to grow for us."
Citigroup and Deutsche Bank are the managing DAMAC's offer, with the investment banking arm of Saudi Arabia's Samba Financial Group and VTB Capital acting as co-lead managers, Reuters reports.
The decision to list in the U.K. instead of the UAE raised eyebrows,
"I'm disappointed that a company from the United Arab Emirates chooses to have London for its main listing," Sanyalaksna Manibhandu, senior analyst at NBAD Securities LLC, told Bloomberg. "It doesn't make sense to me."
But a London offering will attract a wider range of investors, who may be interested in a stake in the Dubai recovery, analysts say.