Investors clamour for Dubai Investment Park $300m sukuk

Dubai Investment Park's US$300 million Islamic bond was more than 12 times oversubscribed yesterday in a closely watched test of sukuk investor demand in the emirate.

Investors placed US$4 billion in orders for the sukuk.

That comes amid a recent spike in demand by cash-rich regional banks seeking higher yields as concerns about emerging markets begin to wane.

DIP, a subsidiary of Dubai Investments, the biggest listed firm of its kind on the emirate’s stock exchange, sold the five-year sukuk at a profit rate of 4.3 per cent, marking the first Islamic issue out of Dubai this year.

The firm will use $218m of the proceeds for refinancing older debt. No one was immediately available to comment at DIP.

“DIP is an attractive sukuk,” said Ali Soner Guney, a fixed income fund manager at National Bank of Abu Dhabi. “Firstly, there have not been many sukuk issues in the market lately to cater to abundance of liquidity in the Islamic domain.

“What is more, the issue came at a very good time, just when concerns surrounding emerging market countries started to diminish. Fundamentally, DIP is also a strong credit with visible cash flow streams benefiting from UAE’s positive momentum.”

Mr Guney said typical sukuk issues of $500m size are often eight times oversubscribed, but because of the smaller size of the DIP sukuk, it attracted more attention from banks and asset managers in the region flush with cash amid an economic boom.

Other fixed income specialists, including Jason Kabel at Bank of London and the Middle East agreed, saying that they anticipated a positive market reaction for the issue.

Islamic bond sales fell 9.5 per cent in 2013 to $42bn after reaching a record $46.4bn the previous year, according to data compiled by Bloomberg.

About $60bn of sukuk will be sold in 2014, primarily by Malaysia and the Gulf countries, Moody’s Investors Service said in a November report.

Standard & Poor’s gave DIP a BB rating, two levels below investment grade, in July, positioning the firm to tap debt at cheaper rates.

Separately, DIP said yesterday that it was planning to become more active in the country’s real estate sector amid a boom in property prices.

It said it would soon unveil a number of “iconic” projects across the UAE that would include developments in Meydan, Mirdif and Jumeirah Village Circle in Dubai as well as other ventures in Fujairah and Abu Dhabi.

The real estate assets of DIP cover 30 million square feet and are worth more than Dh8.3bn, representing 67 per cent of the firm’s total assets, the firm said.

“The UAE real estate industry is in the midst of a robust growth – which is a reflection on its sound fundamentals and overall business and investor confidence across sectors, be it retail, tourism, aviation, hospitality or trade,” said Khalid bin Kalban, the managing director and chief executive of DIP.

“As one of the leading companies, we feel the time is right to move forward with developing our land banks. Average property prices in Dubai have risen by more than 20 per cent in the last 12 months and we are confident that 2014 will mark a major step-change in the growth of the UAE real estate sector.”

Shares of Dubai Investments jumped 7.1 per cent in trading yesterday.

mkassem@thenational.ae