Binghatti’s Debut Sukuk Issuance Garners $621M Subscriptions

Binghatti has found another factor that adds to its appeal among investors. The Dubai-based real estate giant has successfully entered the sukuk market with its debut issuance, surpassing the $300 million benchmark. The Binghatti Sukuk experienced a tightening of around 30 basis points, driven by high demand from local and global investors. Learn everything about the Shariah-complaint bond and Binghatti’s offering.

What is Sukuk in Dubai and How Does it Work?

Sukuk are financial products designed to comply with Sharia laws. They aim to generate profits similar to conventional fixed-income instruments like bonds. When a government or corporation seeks to raise funds through Sukuk, it establishes a Special Purpose Vehicle (SPV) with tangible assets or services.

The returns to investors come from the profits generated by these assets or activities. Upon the maturity of sukuk, investors receive their principal based on the agreed-upon terms, often involving the sale of assets.

Note that when a party opts for a US-dominated Sukuk issuance, the Sukuk is valued and paid in U.S. dollars.

A New Phase of Growth - Binghatti Sukuk Market

On February 22, 2024, Binghatti launched a three-year sukuk offering, competitively priced at 9.625%. Subscriptions for the sukuk exceeded expectations, reaching $621 million, which significantly surpassed the initially targeted issue size of $300 million, as an official statement indicates. The deal marks the first US dollar-denominated sukuk from the real estate sector within the MENA region for 2024.

Binghatti decided to invest in the US dollar-denominated sukuk market to diversify its funding base. Emirates NBD, Dubai Islamic Bank, Abu Dhabi Islamic Bank, HSBC, Mashreq, Sharjah Islamic Bank, and RAK Bank served as the joint lead managers and bookrunners for the debt transaction with a 3-year maturity.

Binghatti Holding recently concluded a successful non-deal roadshow, networking with fixed-income investors in Hong Kong and London. Also, the Fitch Ratings assigned Binghatti Holding a B+ credit rating with a positive outlook. The developer stated that Binghatti Sukuk further solidifies its commitment to exploring innovative avenues for raising capital.

Property Developers’ Growing Interest in Bond and Sukuk Market

The UAE's real estate and financial sector and government entities increasingly rely on the debt capital market to expand their funding base, with Sukuk being the most favorable option.

In October 2023, Damac Properties secured $300 million through a sukuk sale. Earlier in May 2023, Aldar Investment Properties, the real estate management arm of Aldar Properties, successfully raised $500 million in its inaugural green sukuk issuance. This indicates that the demand for sukuk in UAE's real estate sector is growing rapidly and is expected to continue.

In the first quarter of 2024, the UAE intends to issue bonds and sukuk valued at $1.4 billion (AED 5 billion), according to Younis Haji Al Khoori, the Undersecretary of the Ministry of Finance.

Binghatti’s Third Venture into Branded Projects in Dubai

Binghatti Properties' newest branded residences venture, Mercedes-Benz Places, located in Downtown Dubai, has achieved remarkable success, with half of its units sold within a single day of its launch. This rapid sales momentum reflects the robust demand from buyers in the dynamic real estate market of the UAE, as highlighted by Muhammad BinGhatti, the CEO of the Dubai-based development company.

Unveiled in early December 2023 and officially launched in January 2024, the 65-story residential project represents Binghatti Properties' third foray into branded projects in Dubai, following the successful launch of Bugatti Residences in Business Bay and Burj Binghatti Jacob & Co Residences.

The total project value of the branded developments of Binghatti is approximately AED 16 billion ($4.4 billion), whereas projects catering to other market segments contribute an extra value of $2.1 billion (AED 7.6 billion).

Noteworthy Growth in the UAE Property Market

The UAE property market set new sales volume and value records in 2023. According to the Provident Market Report 2023, a significant increase of 37% is observed in sales transactions, reaching a total of 118,645 residential property transfers. The transaction breakdown includes 92,469 apartments, with an average sales price of AED 1,983,848 per unit, 16,750 townhouses averaging AED 2,662,245 per unit, and 9,426 villas sold at an average price of AED 9,382,275.

Moreover, the Dubai Land Department (DLD) officially registered 57,337 properties for off-plan purchases. This represents a significant increase of 74% in off-plan sales compared to the numbers recorded in 2022.