Emirates Reit grows property income but revaluations hit bottom line

Fund manager Equitativa says it will focus on operational improvements and cutting costs

Occupancy in index tower has increased by 18 per cent, Emirates Reit's management said in its third quarter results statement. Antonie Robertson / The National

Equitativa (Dubai), the fund manager that runs the Nasdaq Dubai-listed Emirates Reit, said it will continue to focus on operational improvements and reducing costs as it filed a 4 per cent increase in the total income generated from its property portfolio.

Property income rose 4 per cent year-on-year to $54.1 million (Dh198.5m) in the nine months to September 30, but a fall in the value of its portfolio meant net profit dropped 81 per cent to $5.9m. The company reported a $1.3m revaluation loss, compared to a $19.5m gain in the same period last year. It said the lower valuation was “influenced by market conditions”.

“However, the profit as at Q3 2019 does mark an improvement compared to H1 this year, when Emirates REIT reported a drop in profits to $1.1m driven by revaluation losses. The current lower revaluation losses are an indication of potential market recovery,” Equitativa said.

At the end of the quarter, the value of the company’s portfolio stood at $1 billion, and its net asset per share stood at $1.67, although its shares continue to trade at a substantial discount. Its shares closed slightly higher at $0.66 per share on Wednesday.

The company pointed to increases in occupancy at Index Tower, where it owns a number of floors, and the opening of Index mall on lower floors as signs of progress, although its overall occupancy rate fell slightly to 74 per cent, from 75 per cent at the half-year period.

Both of the listed real estate investment trusts in the UAE have been trading below market value for some time as a result of negative sentiment surrounding the property market, but managers have taken different approaches to rectify this. ENBD Reit's manager, Emirates NBD Asset Management, cancelled a tranche of shares late last year and used some of the proceeds to initiate share buybacks.

Emirates Reit, on the other hand, has borrowed more heavily with a view to making acquisitions in a market where pricing remains soft. In August, Equitativa chief executive Sylvain Vieujot told The National that the Reit intends to spend Dh200m on property by early next year.