Emaar’s announcement that it will list at least 15 per cent of its shopping mall business on the Dubai Financial Market (DFM) is a welcome development for those that want to see the UAE’s capital markets mature and diversify.

Yet, the initial public offering (IPO) has also raised concerns among analysts and creditors about how it will affect the property developer’s growth strategy.

The planned IPO sets a new benchmark for the exchange, as it is the first time institutional and retail shareholders will be included in the same offering on the DFM.

The offering will also help diversify the range of companies listed on Dubai’s main exchange, with brokers and investors tired of being limited to the offerings of construction companies or financial institutions.

There have been persistent complaints that the DFM does not effectively reflect Dubai’s real economy and needs to be more diversified.

The oversubscription of UAE-based retailer Marka’s IPO earlier this year is evidence of the thirst regional investors have for non-traditional companies.

Analysts, however, have questions about Emaar’s decision to list its mall business and use the proceeds to pay dividends to shareholders.

Emaar Malls Group, along with its hospitality business, have provided the property developer with a vital source of steadily increasing, recurring income for the company.

It has also provided a much-needed financial cushion for the firm to counter downturns in the more volatile property-related streams of revenue.  

From a creditor perspective, the IPO will not only dilute Emaar’s stake in its strategically important mall business, but, by paying out dividends, Emaar will not be able to use the cash to pay down debt or reinvest in the business.

There is also uncertainty whether Emaar will adopt a similar strategy with its hospitality business.

Emaar is currently well-positioned for growth today, supported by Dubai’s buoyant property market, but a degree of apprehension and uncertainty persists about Emaar’s long-term strategy.