Abu Dhabi Financial Group plans flotation of Dh3 billion Reit this year

Abu Dhabi Financial Group (ADFG), an alternative investment company with US$5 billion in assets, plans to float a real estate investment trust (Reit) by the end of the year.

In a statement the company said that it had set up its own Reit comprising 10 properties.

ADFG, which has made headlines over the past couple of years with high-profile purchases of New Scotland Yard and No 1 Palace Street in London, said that its new Reit, to be known as Etihad Reit, would be worth Dh3bn.

The company said it would kick off with owning a portfolio of 10 income-producing properties located in four emirates across the UAE.

The Sharia-compliant Reit said that Abu Dhabi-based property developer Eshraq Properties would be one of the founding shareholders and had contributed property to the Reit.

ADFG is Eshraq’s second largest shareholder and ADFG chief executive Jassim Alseddiqi last year became Eshraq chairman.

ADFG declined to say how many other shareholders had transferred property to the Reit.

The company said that the portfolio, which will be managed by an ADFG company, was made up of housing, shops, warehousing and staff accommodation with an overall occupancy level of 90 per cent.

ADFG said that it had appointed Dubai-based investment bank Shuaa Capital and National Bank of Abu Dhabi, now known as First Abu Dhabi Bank, as lead financial advisers, global coordinators, and joint bookrunners.

“With the UAE real estate sector maturing while maintaining strong investor appetite, we believe that now is the perfect time to enter the market with Etihad Reit,” said Fawad Tariq-Khan, director of investments at ADFG. “We are actively seeking to acquire further assets across a range of sectors to continue to diversify the portfolio.”

The news comes less than a month after Emirates NBD Asset Management floated the UAE’s second listed Reit, ENBD Reit, on Nasdaq Dubai, raising $105m.

And in February the fund manager behind Emirates Reit, the UAE’s first listed Reit, said it had teamed up with Al Hamra Real Estate Development and National Bonds to create the UAE’s first residential real estate trust, which is expected to float on one of the UAE markets at a later date. The fund manager is also looking to set up Reits based around hotels, logistics and sporting assets.

Despite generating attractive yields, many Reits in the GCC have struggled to acquire the sort of big-ticket blocks of apartments and offices in which Reits traditionally invest. Saudi Arabia approved Reit listing rules last year to bolster its housing market.

Fund managers say that for large assets worth more than Dh1bn, yields have shrunk to between 5.5 and 6 per cent as trusts compete with sovereign wealth funds, private family groups and Asian pension funds.

But with more investment grade stock competing in the UAE and an economic slowdown making it harder for companies to get their hands on cash for expansion, analysts predict that more Reits are likely to list.

“Reits are attractive to investors because they offer a better distribution than buying shares in a listed property company,” said Craig Plumb, the head of research at property broker JLL’s Dubai office.

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