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A company looking to raise an initial £1 million ($1.3 million) on the London Stock Exchange on Thursday has been created to target property deals in the United Arab Emirates with a value of up to 300 million dirhams ($81.7 million).
A prospectus document for MENA Land Plc published ahead of the shell company's planned flotation on Thursday said that once the costs of its listing is deducted, it will have £710,000 that it intends to use to target and do diligence on potential property deals worth between 30 million and 300 million dirhams.
The prospectus states that the firm is looking to “capitalise on the widespread opportunities for value creation which the directors believe currently exist in the real estate sector in the UAE".
It added that the company will target both “existing developments and bare land" in freehold areas where ownership by foreign nationals is permitted.
The prospectus adds that it will look to identify a target "within three to 12 months" of its float, which could then be subject to a reverse takeover funded by either through the issue of shares, or through a mix of shares and debt.
Mena Land Plc is being run by two directors, Philip Chamberlain and John-Paul Etheridge. Currently, 70 percent of the shell firm's shares are owned by ME Land Company, a business solely owned by Khalifa Hasan Ali Saleh Alhammadi, who is part of a UAE family with interest in real estate investments, development, and infrastructure projects, according to the prospectus.
Etheridge told Zawya that the listing was about more than buying distressed UAE real estate assets.
“At the moment, opportunities are presenting themselves in all sorts of conditions. Distressed (but) also just people looking to do genuine new developments. I think both are attractive, given the right numbers.”
He also said that a range of assets would be considered including bare land, residential, commercial and industrial assets.
"We've got our eyes open at all sorts of property opportunties," he added.
Etheridge said that there were a number of reasons for floating a cash shell on the London market as opposed to identifying a deal and then trying to fund it.
“The listing process is, I think, a little bit more straightforward when you have a cash shell and we wanted to get that presence out there and get the interest going before we found any target acquisitions,” Etheridge said.
He added that this would also allow it to quickly size up a potential target, do the necessary due diligence and then approach investors when it needs the funds.
“Sometimes, you'll find that when you find an acquisition, to go through the listing process at the same time as also trying to raise those funds, it can make it longer and more complicated.”
A Q1 report on Dubai's real estate market published by JLL MENA on Wednesday indicated that values in most sectors of the market are continuing to decline. A weak residential market plagued by supply concerns saw 9,800 new units completed during the first quarter of 2019 - the highest number in a single quarter for many years, the firm said. It added that 50,000 units are expected to be delivered bythe end of the year, but that delays are expected in some major schemes.
The firm said apartment rental prices have dropped by 10 percent year-on-year, average daily rates for hotel rooms have dropped by 12 percent (also due to increased supply), and average office rents have dropped by 9 percent.
“The overall real estate market in Dubai is maturing and looking beyond just cyclical trends," JLL MENA's head of research, Craig Plumb, said in a press release accompanying the report.
“Entities are increasingly looking at innovative ways in which to re-strategise their portfolios and assets in order to boost their businesses. The government is also actively introducing regulations, such as the one allowing 100 percent foreign ownership of companies in the UAE to stimulate demand. These developments are expected revive investor sentiment in the long-run.”
(Reporting by Michael Fahy; Editing by Mily Chakrabarty)
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