Meraas Holding, a state-owned property firm that is developing some of Dubai’s most ambitious real estate projects, is in talks with banks to raise up to $4 billion, sources aware of the matter said on Monday.
Dubai has bounced back rapidly from a debt crisis in 2008, when property prices fell by more than half, and state-linked property companies have started work on several major projects in the last two years.
But the International Monetary Fund has already warned that Dubai may be at risk of allowing another speculative property bubble to form.
Meraas, owned by Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum, has launched a number of projects in recent months, including a complex that will house five theme parks, including the first outside North America by Six Flags Entertainment Corp and an island featuring a giant Ferris wheel.
“Meraas is looking for funds to build these mega-projects. Several banks were approached but they have not secured anything yet,” said a industry source with knowledge of the matter, who wished to remain anonymous as the discussions were private.
Meraas declined to comment.
A banking source aware of the talks said that Meraas was looking to ‘front-load’ its debt plans so that it raised as much cash before construction began on the projects.
But with no cash flows to show to justify borrowing such large sums, banks are reluctant to lend to the firm, the source said.
Meraas has already completed a number of retail developments including a commercial scheme in the up-market Jumeirah area.
Dubai has been able to attract investors back to its property market partly because of its relatively advanced infrastructure and safe-haven status within the politically-turbulent Middle East.
House prices in Dubai have risen sharply this year. They rose 27.7 per cent in January-March, the fastest year-on-year rise of any of the world’s major markets, according to property company Knight Frank. Rents rose about 30 per cent on average in the same period.