x Abu Dhabi, UAEThursday 14 December 2017

Emirates REIT closes $400m inaugural sukuk

Order book peaked at $1.1 billion and was 2.5 times oversubscribed by 90 global investors, says Emirates REIT

Emirates REIT closed $400 million sukuk which was 2.5 times oversubscribed and attracted participation from global investors. Antonie Robertson / The National
Emirates REIT closed $400 million sukuk which was 2.5 times oversubscribed and attracted participation from global investors. Antonie Robertson / The National

Emirates REIT, the world’s largest listed Sharia-compliant real estate investment trust, successfully closed a US$400 million five-year sukuk, which was 2.5 times over subscribed and with its orderbook peaking at $1.1 billion.

“The successful placement of our inaugural sukuk is a strategic milestone for the next growth-phase of Emirates REIT," said Sylvain Vieujot, the chief executive of Equitativa, the Reit manager. "The sukuk enables us to reach our immediate goal of replacing amortising loans with fixed-rate bullet funding, removes variable interest rate risk and materially increases the Reit’s free cash flow."

The sukuk has a profit rate of 5.125 per cent per annum, equivalent to a credit spread of 291 bps over the mid-swap rate, said Emirates REIT, which is rated BB+ and "stable" by the rating agency Fitch.

The issue recorded strong participation from 90 global investors including international accounts. Fifty one per cent of the issuance was allocated to international investors and 49 per cent to UAE accounts. In terms of investor type, 48 per cent were banks, 35 per cent were fund managers, 11 per cent were private banks, 3 per cent hedge funds and 2 per cent insurance companies and pension funds.

The proceeds will be used to refinance Emirates REIT’s existing debt and replace amortising loans with bullet funding, resulting in an increase of free cash flows by approximately $30m per year, according the company.

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The transaction marks the first Reit from the Mena region to access the international sukuk market and obtain a credit rating. The sukuk represents the tightest credit spread of any debut issue by a Dubai real estate entity, Emirates REIT said.

Standard Chartered Bank acted as global coordinator and ratings advisor. The joint lead managers and bookrunners were Dubai Islamic Bank, Emirates NBD Capital, Standard Chartered Bank and Warba Bank. Clifford Chance acted as counsel to Emirates REIT and Dentons acted as counsel to the managers.

Emirates REIT is a Dubai-based real estate investment trust established to invest in principally income-producing real estate in line with Sharia principles. It currently owns freehold or leasehold properties comprising commercial, retail and education assets.

Emirates REIT has invested in education, commercial mix and retail sectors. The portfolio consists of 10 properties including GEMS World Academy Dubai, an education facility located in Al Barsha South and the 80-storey mixed-use Index Tower.