Emirates Reit, the country’s first real estate investment trust, has said it will increase the number of shares it is offering to investors when it floats on Tuesday after meeting better than expected demand.
The Sharia-compliant trust said yesterday that its initial public offering had been 3.5 times oversubscribed, raising US$175 million, rather than the $150m it had been anticipating.
Emirates Reit, which had been planning to create more than 128.6 million shares, said the move meant it had increased the number of new shares by another 19.3 million.
However, the company also said it was pricing its offer at $1.36 per share – the lower end of the price range it had initially set on March 23 of between $1.36 and $1.56.
This means the company will have a market capitalisation of $381.2 million when its shares start trading on Nasdaq Dubai next week.
Only institutional investors were eligible to participate in the initial sale, which will be opened to other buyers after it starts trading.
The firm, which is owned by companies including Dubai Islamic Bank, Vintage Bullion and Dubai Properties, said 46 per cent of its share capital would be floated freely.
“We believe the pricing of our IPO should encourage a healthy secondary market, while the demand we have seen will serve to underpin the next phase of our growth,” said Abdulla Al Hamli, the chairman of Emirates Reit. “This is an exciting time in the development of the reit and we look forward to opportunities presented to us as a listed company.”
Analysts greeted the IPO as a success despite the lower share pricing.
“It’s at the lower end of the price range but I think it’s correct for the market,” said Sebastien Henin, the head of asset management at The National Investor. “Before the global financial downturn, IPOs were oversubscribed by 20 or 50 times so we are not back to this land but I would still say it is a success.”
The proceeds of the share sale will be used to fund future acquisition opportunities of which the Reit’s management has already short listed a number of properties it may acquire with the cash, it said.
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. Many are publicly traded.
Emirates Reit was created in the 2010 trough of the Dubai property market and became the first Sharia-compliant reit to be incorporated at the Dubai International Financial Centre. Its first purchase was Building 24 in Dubai Internet City.
Since then it has acquired a portfolio of 10 properties in Dubai, comprising a total 1.2 million square feet and valued at more than $323.1m. It includes Loft Offices (Loft 1, Loft 2 and Loft 3) in Dubai Media City, Office Park in Knowledge Village and the Gems World Academy Dubai building in Al Barsha South.
But despite a strong appetite from investors to put cash into Dubai’s property market, the reit sector in Dubai has struggled to take off, held back by a shortage of investment grade office space attractive to such institutional investors.
lbarnard@thenational.ae
