Gems sells long lease of Dubai school to fund global expansion plan

Above, the Gems World Academy in Al Barsha. Jeffrey Biteng / The National

Gems Education has sold the long lease of one of its biggest schools in Dubai to Emirates Reit, its second sale-and-leaseback deal in as many weeks.

It comes as the world’s biggest private school operator prepares to raise as much as US$500 million to fund a global school-building programme.

The UAE real estate investment trust will own the facilities and related assets of Gems World Academy in Dubai.

Abdulla Ali Al Hamli, Emirates Reits’ chairman, said: “We set out to grow our assets under management to over Dh1 billion this year and this acquisition continues our strong momentum, following quickly after the purchase of the Index Tower Retail in the DIFC.”

Gems said it would continue to operate and manage the property and there would be no impact on school operations.

Earlier this month, Gems Education entered into an agreement with PineBridge Investments to sell its first Dubai property, an undisclosed school campus, and to lease and manage it.

PineBridge is a global asset manager that was spun off from the United States insurer AIG in 2010.

The values of the two transactions were not disclosed.

In the past decade, sale-and-leaseback deals became popular as companies sought to realise value from their property assets to reinvest in their businesses.

But the funding model came in for criticism following the Southern Cross Healthcare crisis in Britain in 2011.

At the time, thousands of elderly Britons were facing eviction after the country’s biggest nursing homes operator undertook a sale-and-leaseback of hundreds of its care homes but became unable to pay its rental obligations.

In the Arabian Gulf, sale and leaseback deals have been rare, as businesses have typically preferred to retain ownership of their buildings.

Gems Education last month announced a $500m debut bond sale to fund plans to build 21 schools around the world over the next three years and to expand capacity at another 10 existing institutions.

Nick Guest, the company’s chief financial officer, said that it was a continuation of its growth strategy.

“We continue to invest in high-quality new schools,” he said. “However, a natural solution to allow further growth is to partner with property funds and investors such as PineBridge Investments Middle East, who recognise the importance and stable nature of the education sector within the UAE.”

Gems World Academy was founded in 2008 and has 1,800 students.