Dubai Investments, the owner of stakes in more than 40 companies, plans to exit some of its businesses as Dubai's economy shows signs of recovery, Chief Executive Officer Khalid Bin Kalban said.
"We have three companies under evaluation or due diligence for private placements and by summer we can decide on exits," Bin Kalban said in an interview on March 7.
"The economy is improving and the whole dust surrounding the financial situation is settling. It's a good opportunity to look again at divesting some of the assets."
Dubai Investments, which operates in businesses including real estate, financial services and investments, slowed its divestment plan after the financial crisis hit in late 2008. The company sold 40 per cent of its private equity unit Masharie LLC for Dh400 million, it said in 2008. One of the companies it will seek to divest this year is part of Masharie, Bin Kalban said.
Growth is returning to Dubai as property developers announce new projects and the number of tourists travelling to the Middle East's trade hub increases. Dubai's economy may expand by as much as 5 per cent this year after growing more than 3 per cent in 2011, Shaikh Ahmad Bin Saeed Al Maktoum, chairman of Dubai's Supreme Fiscal Committee, said last month. Passenger traffic at the emirate's airport jumped 14 per cent in January from a year earlier to 4.85 million.
Dubai Investments shares rallied 5.8 per cent to 92 fils at 1:19pm in the emirate. The stock has surged 52 per cent this year after losing 22 per cent in 2011. That compares with a 23 per cent gain for the benchmark DFM General Index this year.
Dubai Investments may opt to issue a sukuk, or Islamic bonds, to finance the expansion of the second production line at its Emirates Float Glass Factory in Abu Dhabi, Bin Kalban said. The second phase of the facility, to be the largest in the UAE on completion, will add another 600 tonnes a day of capacity, bringing the total to 1,200 tonnes per day, he said.
The company was in talks with SACE, an Italian credit agency, for a Dh600-million loan to finance the expansion before Europe's debt crisis delayed it, Bin Kalban said. Regional investors have shown interest in financing the project, he said.
"If this does not work, we could issue a sukuk — that is an option and could be an attractive one," said Bin Kalban. "It would be in the region of $200 million [Dh734 million]. We are looking at the terms and we will decide in a few months."
Dubai Investments Park, a subsidiary that oversees a 2,400-hectare complex of housing units, hotels, industrial outlets and offices, recently raised Dh600-million loan from Dubai Islamic Bank and Emirates Islamic Bank, Bin Kalban said. This is being used for expansions within the park.
Dubai's property market had a reversal following the credit crunch three years ago, with home prices slumping 64 per cent since they peaked in mid-2008, according to Deutsche Bank estimates. Since then, about $500 billion of projects were delayed or cancelled in the UAE.
Rents started to recover by the end of 2011, with the upward trend continuing into the first quarter, said Bin Kalban, who estimated an increase of 5 per cent. Bin Kalban is also the chairman of Dubai-based developer Union Properties.
"The private sector is going into buildings and real estate projects, especially hotels because of the boom," he said. "Everybody is thinking we'll build hotels as occupancy is high."
New projects in works
Among companies launching new projects are Al Habtoor Group, an owner of hotels in Dubai and Lebanon. Al Habtoor said in January it will spend $1.33 billion (Dh4.88 billion) to build a hospitality complex in Dubai, where hotel rooms may increase 36 per cent in four years. The developer will also open a 330-room hotel on Palm Jumeirah in about 20 months.
Dubai developer Nakheel plans to spend Dh1.4 billion in 2012 to complete nine projects that had been suspended after the economic slowdown, according to an Islamic bond prospectus in August.
In Fujairah, Dubai Investments is planning two projects. With Al Taif Investment, a joint venture between the company and Fujairah Investment Establishment, a Dh400-million mixed-use development, is in the works.
It will include a four-star hotel, an office tower, a retail podium and a conference hall. Three banks "indicated their willingness to fund the construction activity", which should be completed in 2014, Dubai Investments chief executive officer Khalid Bin Kalban said. Al Taif may invest about 30 per cent, while the rest will be bank financing, he added.
Fujairah Investments Park is also planned with work to start "soon", he said. The project will be done in phases to test demand, with an initial investment of up to Dh20 million on infrastructure.