Emirates NBD has become the latest UAE company to announce plans to set up a real estate investment trust (Reit) in the country.
Emirates NBD Asset Management announced yesterday that it plans to transfer a US$314 million portfolio of seven Dubai properties into a Sharia-compliant real estate trust which will be floated on Nasdaq Dubai.
Emirates NBD said that it hoped to raise between $100m and $125m from the offer, which it planned to use to invest in further real estate purchases and to improve its existing portfolio.
The company said it would disclose further details at a later date, with the listing expected to be completed by the end of this month.
The bank-owned asset manager said that the 872,518 square feet income-producing portfolio will be transferred to the new ENBD Reit from a Jersey-based open-ended real estate fund which was originally established in 2005.
It said that the fund raised $35.6m in rent for the 15-month period to the end of March 2016 and $13.8m for the six-month period to the end of September 2016. At the moment the Jersey fund is owned by 332 shareholders from across the Middle East, including high net worth individuals, government related entities and family offices.
The asset manager said that the portfolio currently includes the 28-storey Al Thuraya Tower in Dubai Media City, the 10-storey Binghatti Terraces housing complex in Dubai Silicon Oasis and the 13-storey Arabian Orxy House complex in Barsha Heights, which together make up nearly two-thirds of the fund’s rental income.
The portfolio also comprises the mixed-use Burj Daman tower in DIFC, two commercial buildings in Dubai Healthcare City, and two residential towers in the Remraam housing district in Dubailand leased as staff housing to the Media Rotana hotel.
Emirates NBD Asset Management said that it floated its real estate fund on Nasdaq Dubai because the rules for UAE-based Reits meant that the company did not have to retain as much cash as it did as an open-ended Jersey fund and so could use the money to invest in more property.
“The improved capital structure of ENBD Reit will mean there is less of a requirement to retain cash for the purposes of managing liquidity in the event of investor withdrawals, which are not permitted in a closed-ended vehicle of this type, but were a requirement in the open-ended structure,” said Anthony Taylor, the fund manager for real estate at Emirates NBD Asset Management. “In the long-term, this should help ENBD Reit to achieve its objective of remaining more fully invested.”
Emirates NBD said that it was looking to invest in further properties in Dubai or Abu Dhabi with lot sizes of at least $30m and which could offer target yields of 7.5 to 9 per cent.
Reits are common in other parts of the world, where they are often sold to investors as a way of putting money into the property market without the difficulties of direct investment. Reits buy properties such as large office buildings and shopping centres, manage them and distribute the rental yield to investors.
In 2014 the UAE’s first Reit, known as Emirates Reit was floated on Nasdaq Dubai by fund manager Equitativa.
In February Equitativa announced plans to create the country’s first residential real estate fund. The company is also looking to establish Reits specialising in hotels, logistics and sporting assets.
lbarnard@thenational.ae
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