The partnership between private education and healthcare providers and property funds and investors is good for the development of the country.
Property deal points the way forward
News that a private school group in Dubai has entered into a sale and leaseback agreement with a private equity firm for one of its campuses might not, at first blush, set one’s pulse racing.
But the significance is that the agreement between Gems Education, the world’s biggest privately-owned operator of schools, and PineBridge Investments, a global asset-management company, is the first of its kind in this sector and reflects the increasing maturity of the UAE investment environment.
This kind of arrangement is commonplace in some markets overseas, where companies free up capital that would otherwise be stuck in facilities like schools, hotels and hospitals.
The facilities are sold to investment companies but leased back by the original operator. The Gems deal is said to have involved a lease of more than 20 years.
For rapidly growing sectors, such as the education and health sectors in the UAE, this is a deal in which everyone benefits.
Gems Education, which operates many schools in the UAE, will be able to use the freed capital to open more schools to meet rising demand. It has said it intends over the next three years to open another 21 schools worldwide and to increase capacity in 10 existing campuses.
PineBridge Investments will be able to use the long-term lease to show its investors, which include sovereign wealth funds and high net worth individuals, a steady and reliable source of income well into the future.
In its way, this kind of investment is a demonstration of trust in the stability and reliability of the market, which is why it is a welcome development for the UAE. Other sectors could also benefit from this kind of arrangement.