The Board of Directors at TECOM Group PJSC (DFM: TECOM), (the “Company” or the “Group”), the creator of strategic, sector-focused business districts across Dubai and a major contributor to the rapid growth of Dubai’s knowledge and innovation-based economy, has approved a Strategic Acquisition and Development Plan following a board meeting held earlier today.
TECOM Group is set to invest AED 966 million in acquiring commercial and industrial assets from Dubai Holding Asset Management (DHAM), with an additional AED 689 million earmarked for developing grade A offices in Dubai Design District (d3). This strategic move aligns with the group's roadmap for sustainable growth, aiming to strengthen its portfolio and position in Dubai's commercial real estate market.
Abdulla Belhoul, CEO of TECOM Group, emphasized that the plan reflects their commitment to capitalizing on market opportunities and driving vision forward, ultimately unlocking greater value for shareholders and stakeholders. With a solid financial foundation, TECOM Group aims to execute these acquisitions while maintaining financial health and looks forward to updating the market on their growth agenda.
The Strategic Acquisition and Development Plan includes the following assets:
1. Operational Grade A office space buildings in Dubai Internet City: TECOM Investment FZ LLC, a TECOM Group subsidiary, will acquire two grade A office buildings from DHAM with a combined value of AED 420 million. Over the past years, Dubai Internet City has sustained high occupancy levels, driven by strong demand for premium office spaces in central business districts (“CBD”).The office buildings have a gross leasable area (“GLA”) of 334k sq. ft with high occupancy level consisting of a loyal and quality customer base that includes leading regional and international tech companies. The acquisition will have an immediate positive impact on the Group’s financial performance while also supporting the commercial assets portfolio.
2. Industrial land located in Dubai Industrial City: The Group’s subsidiary, Dubai Industrial City LLC, will acquire several plots with total area 13.9 million sq. ft of strategically located, well-connected land plots allocated for industrial leasing from DHAM for a combined value of AED 410 million to enhance the Group’s land bank and satisfy robust and sustained demand for this asset type.Dubai Industrial City witnessed exceptional performance in 2023, driven in large part by the government’s pro-growth strategy and initiatives such as mixed-use development, “Operation 300 Billion” and “Make it in Emirates”. The acquisition of the target land plots is expected to have a positive impact on the Group’s financial performance over the short and medium term, along with further enhancing revenue predictability, given the long-term nature of the lease contracts.
3. Future Grade A office spaces in d3: Dubai Design District FZ LLC, one of TECOM Group’s subsidiaries, will acquire 629K sq. ft gross floor area (“GFA’) from DHAM for AED 136 million within “Design Quarter”, a mixed-use development located in phase 2 of the creative district. The Group intends to earmark AED 689 million to develop 6 grade A office buildings with an expected total GLA of 503k sq. ft. d3 has been one of the Group’s most sought-after specialised districts with high occupancy rates and existing offices nearing full capacity.
The decision to invest in developing grade A offices in Dubai Design District (d3) is driven by strong customer demand from the design, fashion, and creative industries, as well as the district's growing reputation as a global hub for creative minds. Anticipating continued demand, TECOM Group is aligning with Dubai's economic goals to solidify its status as a global destination for culture and creativity. The project, slated for completion by 2028, is expected to have a positive long-term impact.
Conducive market conditions
According to recent industry reports, Dubai’s office market continues to see strong occupier demand, driving average occupancy levels to 93% in Q4 2023 compared to 88% in Q4 2022. The average occupancy level across TECOM Group’s business districts was 91% (as of 31 March 2024), with d3 occupancy rates reaching 98% for the same period. The industrial segment is also continuing to demonstrate robust growth, which is driving occupancy rates higher and leading to a notable increase in rental rates.
Positive impact on the Group’s financial performance
The planned value-accretive asset acquisitions are expected to yield a significant positive impact on the Group’s financial performance. The acquisition of the two fully leased operating assets in Dubai Internet City, will have an immediate impact on the Group’s top-line. The remaining acquisitions will further enhance TECOM Group’s revenue visibility by attracting new customers, further diversifying its customer base while maintaining its current healthy EBITDA margins. Furthermore, the strategic acquisitions will support portfolio value appreciation.
Well-funded for the planned expansion plan
The Group is well funded for the planned transactions from existing sources, driven by its solid financial performance, underpinned by a healthy leverage position and ample liquidity, with the option to tap into up to AED 3.2 billion from its existing revolving credit facility, which was refinanced in 2023 at more competitive financing terms.
News Source: Dubai Media Office
