(Bloomberg) -- Dubai Holding, a sprawling investment conglomerate owned by the emirate’s ruler, is considering setting up a real estate investment trust to capitalize on the city’s property boom, according to people familiar with the matter.
The firm has lined up banks including Citigroup Inc., HSBC Holdings Plc and Emirates NBD Capital for the property trust offering, the people said, asking not to be named because the information is private. Deliberations are still at an early stage and decisions on the vehicle’s size haven’t been finalized, the people said.
Representatives for Dubai Holding, HSBC and Citi declined to comment. An Emirates NBD spokesperson didn’t respond to a request for comment.
Dubai Holding is one of the city’s principal investment vehicles with assets of 265 billion dirhams ($72 billion), ranging from luxury hotel chain Jumeirah to theme parks and the world’s tallest but non-functioning Ferris Wheel.
Setting up a REIT would allow investors to gain exposure to a number of prime income-generating assets overseen by one of the city’s biggest developers. The REIT would include some community developments that were recently transferred to Dubai Holding, the people said.
The deliberations come as Dubai experiences a relentless rise in demand for its property, with thousands of millionaires, financial professionals and businessmen flocking to the emirate in recent years to take advantage of its low-tax regime. Home values in the city have risen for 16 straight quarters and office leasing activity continues to surge.
One of Dubai’s main goals is to deepen its capital market and offering a REIT would present another channel to funnel financial flows into the emirate. Attempts to bolster the domestic stock market have already resulted in a slew of initial public offerings in the past two years.
Still, local REITs have faced challenges. Emirates REIT’s manager was probed four years ago by the Dubai Financial Services Authority over its corporate governance and later fined by the government agency. The Shariah-compliant real estate investment trust also faced opposition from bondholders over a proposed debt restructuring some years ago. Earlier this month, however, it sold another major asset to pare down debt.
Nakheel, Meydan
Earlier this year, Dubai Holding took control of two state-backed developers: Nakheel and Meydan.
While Nakheel is best known as the developer of Dubai’s artificial palm-shaped islands, it also teetered on the brink of default during the property crash in 2009 that nearly bankrupted Dubai. It has since consolidated operations and cut costs.
Meydan, for its part, owns one of the world’s most opulent horse racecourses. In 2021, its total debt amounted to about $4 billion, of which $2.6 billion required restructuring.
By bringing them “under the umbrella” of Dubai Holding, the emirate’s ruler Sheikh Mohammed bin Rashid Al Maktoum is hoping to create a “more financially efficient entity,” he said earlier this year.
Both companies have benefited from Dubai’s status as one of the world’s best performing property markets. Last year, for instance, hundreds of brokers and investors queued in the summer heat for a chance to buy property on the undeveloped Palm Jebel Ali island, where homes started at 18.7 million dirhams.
Dubai Holding this year refinanced a 30 billion dirham loan to replace older facilities held by Nakheel and Meydan. That move, led by Dubai Holding Chief Executive Officer Amit Kaushal, was seen as a potential precursor to an eventual listing of some of the conglomerate’s units over the next few years, people familiar with the matter said at the time.
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