Dubai is prepping to launch its latest initial public offering (IPO) with UAE construction giant ALEC Engineering & Contracting as the centerpiece. According to sources familiar with the plans, Dubai has chosen Emirates NBD Capital and JPMorgan Chase & Co. to shepherd the share offering process. Investment advisory firm Moelis & Co. will also be on board to assist the state-backed Investment Corporation of Dubai (ICD) with the share sale.
Discussions are still underway regarding the final details of the IPO, including the offering's size and exact launch date. However, sources suggest a potential launch sometime in the latter half of 2024. This move aligns with Dubai's ongoing strategy to bolster its capital markets by selling stakes in government-controlled companies.
ALEC's IPO would mark another significant achievement for Dubai's recent string of successful public offerings. Notably, Dubai's public parking company witnessed a stellar IPO in the first quarter of this year, raising an impressive $428. 7 million and experiencing a subsequent 26% surge in share price since its offering. ALEC, currently under the portfolio of ICD after its 2017 acquisition from Al Jaber Group, has played a significant role in shaping Dubai's landscape. The construction firm boasts a diverse portfolio encompassing leisure, airport, and commercial projects alongside residential and commercial developments across the UAE.
Dubai's decision to launch ALEC's IPO comes amidst a positive upswing in the emirate's property market. Housing prices are nearing record highs, and rental rates have reached unprecedented levels. This turnaround follows a period of stagnation, and analysts attribute the resurgence to an influx of wealthy investors, relaxed visa regulations, and streamlined job permit processes. The commercial real estate sector has also witnessed a boom, with occupancy rates hitting record highs in stark contrast to the slumping demand experienced in other global commercial hubs like London and New York.
While Dubai's construction sector is currently enjoying a growth spurt, the industry does have a history of boom-and-bust cycles. A cautionary tale is UAE-based Arabtec Holding PJSC, which dissolved in 2020 under the weight of accumulated debts stemming from government spending cutbacks. Several construction companies established during the earlier construction frenzy in Dubai and the surrounding Persian Gulf region have similarly faced challenges, including project delays and dwindling profit margins.
Despite these historical considerations, Dubai's planned IPO for ALEC signifies confidence in the current market conditions and the construction firm's ability to navigate the industry. The success of the offering will likely be contingent on maintaining the emirate's property market momentum and ALEC's ability to capitalize on the ongoing construction boom.