Emirati property company Damac Real Estate Development sold its first benchmark issuance in 18 months on Wednesday, with the US$750m 3.5-year sukuk coming well inside fair value. 

Investors were keen to get exposure to Dubai's soaring property market, where transaction records were set in 2024. According to the company, property prices in Dubai are forecast to rise by 5%–8% annually in 2025, with luxury hotspots like Palm Jumeirah and Downtown Dubai seeing even higher spikes.

While investors in Dubai real estate have been burned before, the market is becoming a hotspot for the rich and famous and Damac's business is at the high end.

The other factor in the issuer's favour was the yield on offer. Damac (Ba2 positive/BB stable) began marketing the August 2028 notes at 7.5% area. While high-yield issuance from the Gulf region has begun to creep up, it's still a relatively niche market. And given how much liquidity there is in the sukuk market and the number of sukuk transactions that offer little relative value, Damac gave investors the opportunity to diversify and lock in an attractive profit rate.

Peak books of more than US$2.3bn enabled the leads to revise pricing to 7% for an expected US$600m trade. But with only a small number of orders falling away – to a final book of over US$2.1bn – the size was increased by US$150m. It was Damac's largest ever issuance.

"We like the pricing on Damac, especially given that company has strong metrics for the rating. It is well known even among global EM investors, and as a result Damac issues get decent demand especially at a time when the fundamentals of the Dubai property sector are so strong," said Faisal Ali, senior portfolio manager at Azimut.

"Moreover, we are likely to see limited high-yield issuance out of UAE this year, which should support the new Damac bonds once the new issuance market quietens down, likely after Ramadan begins."

Ramadan is due to begin on February 28.

Leads said the deal priced 12.5bp inside fair value. The best reference point was Damac's US$600m 8.375% April 2027 sukuk, which were at a bid yield of 6.80%, according to LSEG data. Those sukuk were tapped twice last year. Other comparables used included sukuk from Arada Developments and Dar Al Arkan. They were all in the high 6s to low 7s range.

The leads also said there was strong international investor participation, including key high-quality accounts from Europe and Asia after a well-attended roadshow.

Emirates NBD Capital, HSBC and JP Morgan were the global coordinators. They were also bookrunners alongside Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank, Goldman Sachs, Mashreq and Warba Bank.

Source: IFR