Construction Week Newsletter 25th June 2005

As a spectator of the bull-run being experienced by the Middle East’s quoted property sector, I can't help looking back on those heady days when mobile phones were the size of toasters, lunch was for wimps and greed was good.

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By  Sean Cronin Published  June 26, 2005

Feeding region’s appetite for IPOs and rights issues|~||~||~|‘It’s like buying money, mate’ was a catchphrase often used by the City traders of Margaret Thatcher’s Britain. Investing in the equity markets of the late 1980s was indeed like buying money, or at least it was up until the afternoon of 19th October 1987 (Black Monday) when to borrow another enduring catchphrase of the era, ‘it all went pear-shaped’. As a spectator of the bull-run being experienced by the Middle East’s quoted property sector, I can't help looking back on those heady days, when mobile phones were the size of toasters, lunch was for wimps and greed was good. Of course Margaret Thatcher’s Britain should not be compared to modern-day Dubai, where mobile phones are much smaller. But that said, the investor feeding frenzy we’re currently witnessing around quoted property company IPOs and rights issues in the Gulf, indicates that most investors in the region are inclined towards the ‘buying money’ school of thought. Take the RAK Properties’ IPO in April that was a record 57 times oversubscribed. A flotation that hoped to raise US $300 million, in fact raised around US $17 billion — that’s the equivalent of the GDP of the Dominican Republic. So instead of going to all that bother of planning multi billion-dollar tourism developments in the desert which aim to recreate the unique appeal of a Caribbean getaway, they could have just bought the Dominican Republic and renamed it RAK, where presumably the locals would henceforth be known as Rakafarians. RAK Properties was not the only massively oversubscribed real estate IPO to come to the market over the last 12 months. There was Addar Properties, which was oversubscribed by a whopping 48 times and managed to break the US $100 billion barrier; and Sorouh Real Estate, which was 175 times oversubscribed and raised in the region of US $66 billion. With this seemingly insatiable appetite in the market for property company share certificates, it’s understandable that so many private developers want to go public, while those that have already done this want to raise even more cash by splitting their shares. Emaar has become the latest developer to announce a two for one share split and it will take the proposal to its shareholders next month at an extraordinary general meeting. For contractors, it is of course ‘happy days’. They don’t need to gaze into the crystal ball of property cycle prediction; they can just carry on making hay while the sun shines. They know that several cents in every dollar raised in an IPO or rights issue will eventually go on to their bottom line. For the time being at least, investing in the bricks and mortar of the Gulf’s property boom is like buying money. So let’s just hope it doesn’t all ‘go pear’. ||**||

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