Founder Of Dubai’s Damac Offers $255 Million To Take Property Firm Private

Is Dubai’s real estate market about to see a significant shift? The founder of DAMAC Properties believes that this is right. He proposed a $255 million deal to buy out minority shareholders and take the company private.

This circulation through his investment vehicle, aims to acquire at least ninety percent of DAMAC shares. This article provides the information, motivations, and implications of this offering and an overall view of this incredible improvement in Dubai real estate.

Founder Of Dubai’s Damac Offers $255 Million To Take Property Firm Private

The founder’s offer to take DAMAC private is valued at approximately 935.4 million dirhams, or $254.70 million. The price per share is set at 1.30 dirhams. By acquiring at least 90% of the shares, the company can be delisted from the Dubai Financial Market.

This move is being facilitated through an investment vehicle that controls 88.106% of DAMAC. Achieving the 90% threshold will enable a complete buyout of the remaining minority shareholders.

The Real Estate Market In Dubai

Dubai’s real estate market has faced significant challenges in recent years. The market has been in a downturn, exacerbated by the economic impact of the COVID-19 pandemic. Despite some recovery in transaction volumes and residential property prices, the market continues to struggle with an oversupply of properties. 

This oversupply has put downward pressure on prices, making it difficult for property developers to achieve profitability. In 2019 and 2020, DAMAC posted financial losses, reflecting the broader challenges in the market.

While other developers have seen share prices rise by 16%, DAMAC’s shares have remained flat. This contrast highlights the difficulties DAMAC has faced in navigating the current market conditions.

The global pandemic significantly disrupted economic activities worldwide, and Dubai’s real estate sector was no exception. Travel restrictions, reduced investor confidence, and economic uncertainty led to a decline in demand for properties.

Despite government initiatives to stimulate the economy and the real estate sector, including visa reforms and incentives for foreign investors, the market remains under pressure.

The Founder’s Vision For Damac

The decision to privatize DAMAC is part of a broader strategy to manage the company more effectively. By taking the company private, the founder aims to streamline operations and respond more quickly to market changes.

This move is seen as a way to position DAMAC to better navigate the current economic climate and address the issue of oversupply more efficiently.

The founder believes that privatizing DAMAC will allow for more agile decision-making and a focus on long-term strategies without the pressures of public market expectations. This approach is intended to help the company adapt to the changing market conditions and emerge stronger in the long run.

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History And Achievements Of DAMAC

DAMAC Properties was established in 2002 and has since become one of the leading real estate developers in the Middle East. The company is renowned for its luxury properties and high-profile projects. One of its most notable developments is the Trump International Golf Club, Dubai, which opened in 2017.

This project marked the launch of the only Trump-branded golf course in the Middle East, reflecting DAMAC’s commitment to high-end, prestigious real estate ventures.

Over the past two decades, DAMAC has built over 33,000 homes, contributing significantly to the region’s residential landscape. In addition, the company has another 33,000 homes currently under construction, demonstrating its ongoing growth and expansion.

While DAMAC’s core business remains in Dubai, it has successfully extended its reach to other parts of the Middle East and Europe. One of its prominent international projects is the Nine Elms Tower in London, a testament to its ability to operate and thrive in diverse markets.

Maple Invest Co: The Investment Vehicle

The offer to take DAMAC private is being made through Maple Invest Co, an investment vehicle that currently controls 88.106% of DAMAC. By increasing this holding to at least 90%, Maple can exercise its right to buy out the remaining minority shareholders and delist the company from the stock exchange.

The market’s reaction to the offer has been mixed. DAMAC’s shares were down 2.3% at 1.27 dirhams on the day after the offer was made, below the buyout offer price of 1.30 dirhams per share. 

This dip suggests some uncertainty among investors about the future of the company and the broader real estate market in Dubai.

Despite these concerns, some market observers see the offer as a potential turning point for DAMAC. By taking the company private, the founder will have more control over its operations and strategy. This could allow DAMAC to adapt more quickly to market conditions and potentially return to profitability.

Arshad Darbar Thought

Arshad Darbar, a seasoned real estate expert, views the founder’s move to take DAMAC Properties private as a pivotal moment for Dubai’s real estate sector.

He acknowledges the strategic foresight behind this decision, recognizing that delisting DAMAC from the Dubai Financial Market could potentially streamline operations and enhance responsiveness to market fluctuations. 

Given the prolonged downturn and oversupply issues plaguing Dubai’s real estate market, Darbar sees this privatization as a calculated risk aimed at better positioning DAMAC to navigate current economic challenges. 

By removing the pressures of public market expectations, he believes DAMAC can focus on long-term growth and strategic adaptation, ultimately fostering a more robust and agile enterprise capable of weathering the sector’s ongoing uncertainties.

Conclusion

The offer to take DAMAC private represents a significant development in the Dubai real estate market. With a $255 million deal on the table, the founder aims to buy out minority shareholders. 

This move comes amid challenging market conditions, with DAMAC facing financial losses and a sluggish share price.

By taking DAMAC private, the founder hopes to create a more efficient and responsive company that can better navigate the current economic climate. While there are significant challenges ahead, this bold move could potentially set DAMAC on a path to future success.