Abu Dhabi real estate firm, owned by ruling family, in dollar sukuk sale

By Yousef Saba

DUBAI (Reuters) -The Private Department of Sheikh Mohamed Bin Khalid Al Nahyan LLC (PD), a relatively small real estate player in Abu Dhabi owned by members of its ruling family, has hired banks for a debut sale of U.S. dollar-denominated sukuk, or Islamic bonds, a document showed on Monday.

The company, which owns a portfolio that is focused 90% in the United Arab Emirates capital with the rest in neighbouring Dubai, hired Emirates NBD Capital and First Abu Dhabi Bank as global coordinators.

Abu Dhabi Commercial Bank, Dubai Islamic Bank and Mashreq will join them in arranging investor calls starting on Monday, the document from one of the banks showed.

A five-year sukuk sale will follow, subject to market conditions. Proceeds will fund capital expenditure and acquisitions, S&P Global Ratings said in a report.

The agency has assigned PD a sub-investment grade 'BB' long-term issuer rating, constrained by its "limited portfolio size in a fragmented and weak Abu Dhabi real estate market and its high leverage," but "supported by good asset quality, locational advantage, and strong shareholders."

The bond sale would largely refinance existing loans, two sources with knowledge of the matter said, one of them adding it was likely to be around $500 million.

The Gulf rarely sees private companies tap the international debt markets, and one of the sources said the deal would pave the way for new issuers.

"They will come back to the market. This is the first transaction," the source said, adding the goal was to follow this debut five-year deal with medium- to long-term funding in the future.

"Enough of the same," the source said, referring to a region where sovereigns made up roughly half the volume of issuance in the past two years, though they are expected to represent a smaller slice of the market this year.

The company said in an investor presentation reviewed by Reuters that its "strong relationship with the Abu Dhabi government" gave it priority assistance in receiving re-zoning and planning approvals, as well as demonstrated support and financial and in-kind contributions, as well as other benefits.

PD's properties in development are expected to result in revenue growth of between 4% and 5% this year and 25% to 30% in 2022. Its portfolio "will remain small in a regional context" despite the additions and potential acquisitions, S&P said.

The properties market in the United Arab Emirates - a significant component of the country's gross domestic product - suffered last year amid the coronavirus crisis, with prices in Abu Dhabi and Dubai falling sharply.

"The Abu Dhabi real estate market is at a low point in the cycle, which could dampen the company's growth," S&P said.

The company's total debt was 2.17 billion dirhams ($590.86 million) at end-2020, the investor presentation showed.

($1 = 3.6728 UAE dirham)

(Reporting by Yousef Saba; Additional reporting by Hadeel Al Sayegh; Editing by Himani Sarkar and David Evans)