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.
The expansion plan will involve TECOM Group investing AED 966 million to acquire commercial and industrial assets from Dubai Holding Asset Management (“DHAM”) and earmarking AED 689 million for to develop grade A offices in Dubai Design District (“d3”).
The strategic acquisitions are in line with the Group’s clearly defined roadmap to achieve sustainable growth and continue delivering strong performance through strengthening its portfolio of flexible and high-quality commercial and industrial assets as a result of tapping into new sources of sustainable growth. The investment plan will enable the Group to further cement its leading position in developing integrated business ecosystems and enabling growth across key strategic sectors within Dubai. It will also seek to unlock greater returns for shareholders over the mid to long-term.
Abdulla Belhoul, Chief Executive Officer of TECOM Group, said: “As we embark on our ambitious AED 1.7 billion strategic acquisitions and development plan, TECOM Group is well equipped and poised to capitalise on the unique opportunities that Dubai’s commercial real estate market offers. This plan is not just an expansion of our asset base, it is a strategic move to harness favourable market dynamics and drive our vision forward, reinforcing our commitment to Dubai and the UAE’s growth and will unlock greater value for our shareholders and other key stakeholders.”
“This expansionary plan is perfectly aligned with a key pillar of our growth strategy which is tapping new sources of growth to expand our offerings and boost our portfolio value. Expanding through acquisitions has always been a crucial lever to help accelerate our growth ambitions and cater to evolving market dynamics.”
He added, “Thanks to our prudent financial management, optimised capital structure, and strong financial performance so far this year, we have the financial means to execute these deals while maintaining a healthy cash profile. We look forward to updating the market as we execute our growth agenda.“
The Strategic Acquisition and Development Plan includes the following assets:
The Group has adhered to all relevant regulatory and governance requirements related to the acquisitions, including following the best practices and international standards of appraisals by conducting the valuation through a credible and independent third party accredited by the regulatory authorities.
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.