Abu Dhabi, UAESaturday 6 June 2020

Saudi Arabia's Bonyan Reit raises 1.2bn riyals through Sharia-compliant loans

The real estate investment trust is looking to expand its portfolio of assets in the kingdom

Residential transactions in Riyadh and Jeddah rose substantially during the third quarter of 2019. Reuters.
Residential transactions in Riyadh and Jeddah rose substantially during the third quarter of 2019. Reuters.

Bonyan Reit, a real estate investment trust managed by Riyadh-based Saudi Fransi Capital, raised 1.2 billion Saudi riyals (Dh1.18bn) as it looks to expand its property portfolio in the kingdom.

Bonyan has already signed two separate agreements with Riyad Bank and Arab National Bank for the Shariah-compliant loan facilities, Saudi Fransi Capital said in a bourse filing to the Tadawul stock exchange, where Bonyan is listed.

“The facilities will be used to finance [the] fund’s acquisition of new income-generating properties located within the kingdom," Saudi Fransi said, without identifying the assets or when it plans to buy them. “As a security for these facilities, promissory notes and pledge[s] on [the] Fund’s properties will be provided to both banks upon withdrawal of loan proceeds.”

Bonyan has raised 700 million riyals from Riyad Bank through a seven-year loan facility for which it will pay profit on quarterly basis, it said. The Reit has also secured 500m riyals through a five-year agreement with Arab National Bank whereby profit will be paid on a semi-annual basis, it said.

Reits are listed funds that own income-producing commercial real estate and are legally obliged to distribute most of their income, usually at least 80 per cent, as dividends to shareholders. The investment vehicles are becoming increasingly popular in the Gulf as investors seek a basket of liquid real estate assets as opposed to standalone buildings.

Like other corporate borrowers, Reit managers are looking to take advantage of lower interest rates by borrowing more. The additional capital can be used to expand portfolios as the price of commercial properties remain low on the back of a softer global economy, regional economic headwinds and volatility in oil prices.

UAE-based Emirates Reit plans to spend up to Dh200m on buying properties by early next year, Sylvain Vieujot, the chief executive of the Reit's manager, Equitativa, told The National in August. The fund is looking to expand its portfolio of education and office buildings in Dubai, and is “fairly close" to completing deals, he added.

Updated: October 13, 2019 06:50 PM



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