UAE's first residential Reit launched

The UAE’s first residential real estate investment trust (Reit) has been established to tap improving yields after two years of price declines.

The company behind Emirates Reit has teamed up with Al Hamra Real Estate Development and National Bonds to create the investment trust that will comprise about 500 homes in Dubai and Ras Al Khaimah (RAK).

“We believe this is the right time to enter the residential market and launch The Residential Reit,” said Sylvain Vieujot, the chairman of Equitativa. “Residential yields are attractive in the current environment and are expected to provide medium term upside. There continues to be significant interest in reits across the region from both institutional and private investors.”

Equitativa floated the UAE’s first real estate investment trust, Emirates Reit, in 2014. Equitativa said a company has been incorporated in Abu Dhabi’s new financial free zone, Abu Dhabi Global Market (ADGM).

The Reit currently owns a portfolio of 371 homes for lease in Al Hamra Village in RAK, Barton House, a block of 112 apartments in Dubai’s Motor City and another property in Dubai valued at Dh99 million.

Equitativa said that in total the portfolio is worth Dh517 million, roughly half of which is in Dubai while the other half is in RAK.

The fund manager said it hopes to raise roughly another Dh500m from high-net-worth individuals and institutions before floating the reit, probably on one of the UAE markets.

“We floated Emirates Reit once it reached Dh1 billion,” Mr Vieujot said. “For an IPO, you need this size and also good market conditions.”

In October, Equitativa told The National it had established four new funds through its asset management branch in ADGM: Hospitality Property Fund, Logistics Fund, The Residential Reit and Sportativa. Equitativa said that the other new funds were in an “incubating stage”.

“I believe that there could well be an appetite for residential reits in the UAE from institutions which would like exposure to the UAE housing market but don’t want the hassle of managing the property themselves,” said Sanyalak Manibhandu, the head of research at NBAD Securities.

“However, I think potential investors will look very closely at not only the location of the properties but also the names of the master developers involved.”

Last week, Knight Frank became the latest broker to call the bottom of the Dubai market after two years of house price falls caused by the global slump in oil prices, the strong US dollar and an increase in transaction fees, saying that it expects house prices and rents in the city to start to increase from mid-2017 onwards. Core Savills and JLL also predict an upturn in 2017.

However, Cluttons does not expect a recovery in Dubai’s property market until the end of this year and Phidar Advisory predicted that prices in Dubai would continue along a trend of “further gradual softening” in 2017 as the market remains subdued by the strong US dollar, an expected increase in interest rates and slow economic growth.

lbarnard@thenational.ae

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