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Dubai Property Developer Sobha Plans IPO Even as Prices Decline

Sobha founder P.N.C. Menon

(Bloomberg) — Property developer Sobha LLC is planning an initial public offering of its United Arab Emirates business in 2022 even as a slump in prices weighs on developers in its Dubai base.

The company will wait to meet profitability projections before making a final decision on the IPO, founder P.N.C. Menon said in an interview. It hasn’t decided where to list the shares.

Sobha expects sales revenue to jump to about 2 billion dirhams ($545 million) this year from 620 million dirhams in 2018 as it hands over more homes in its Sobha Hartland development, Menon said. About 6,000 homes will be delivered at the $4 billion project over the next six years.

Property prices in the U.A.E., the second-biggest Arab economy, have dropped about 27% since October 2014 amid excess supply and sluggish economic growth. Emaar Properties, the biggest developer in Dubai, this month posted a 4% decline in first-half revenue.

Sobha is targeting annual sales of 2,000 housing units in Dubai that will result in revenue of 2.5 billion dirhams and profit of about 400 million dirhams by 2022, Menon said.

Prices in Dubai have stabilized and will “stay like this for the next three to five years,” he said. The market is crowded with developers and only the best will survive over the next five years, Menon said.

The Dubai Financial Market Real Estate Index has gained about 6% this year after tumbling 39% in 2018.

Menon and his family also own Sobha Ltd., a real estate, design, and construction company in India that’s listed in Mumbai.

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