Emirates Reit reports lower profit as value of portfolio matures

Reit manager cites increased lettings at Index Tower and a new school deal at Dubai Investments Park as factors in growth of rental income.

Gains in Emirates Reit's rental income were mainly from increased lettings at its flagship Index Tower. Antonie Robertson / The National

Emirates Reit has reported a 22 per cent drop in profit for 2016 to US$47.8 million compared with $61.5m a year earlier, mainly because gains in the value of its property portfolio were not as high in 2015.

Overall, the company recorded a 22 per cent increase in total income from its property portfolio to $50.7m versus $41.5m in 2015, with rental income up by 23 per cent to $45.3m.

It also recorded an unrealised gain following a revaluation of its portfolio of $36.5m, although a $53.2m gain last year meant that both its net property income and its net profit levels were both lower. Operating expenses for properties also increased by 17 per cent to $15.1m compared with $12.9m.

The Reit manager, Equit­ativa Dubai, said that it achieved a total return for investors of 10.2 per cent during the year, with the net asset value of its trust increasing by 5 per cent to $493.4m. Net assets per share grew to $1.65 from $1.57.

Gains in rental income were mainly due to increased lettings at Index Tower (its flagship asset in the Dubai International Financial Centre) and the rent of the new British Columbia Canadian School – a new-build it is developing at Dubai Investments Park at a cost of around Dh88m.

It attributed the $36.5m revaluation gain on a post-completion increase in value of the new Jebel Ali School it has built within the Damac Hills community off Al Qudra Road, and a gain in the value of Index Tower as more floors have been let. It said the fact that the gain was not as high as last year was due to the “maturing of the portfolio over time and the slowdown in the broader commercial real estate sector”.

Equitativa Dubai also said that it had made progress in agreeing deals for a retail podium area at Index Tower, with 50 per cent of the space pre-let. Remodelling work for the podium and a fit-out of the retail units is set to take place over the next three months.

The firm also said that it expects to benefit from the fact that its parent company, Equitativa Real Estate, was granted a decree in October allowing it to acquire onshore properties in Ras Al Khaimah. It said the decree would benefit Emirates Reit "by enlarging its acquisition pool".

Sylvain Vieujot, the chief executive of Equitativa Dubai, said: “Emirates Reit continues to offer strong total returns despite the slower market for commercial property.

“Our funds from operations has grown by 38 per cent, demonstrating a conversion from valuation gains into actual cash flow,” he added.

The firm is also continuing to look at acquisition opportunities. It finished the year with total debt of $315m and a loan-to-value ratio of 38 per cent, which is below the regulatory maximum of 50 per cent.

“Our experience in developing schools has been very successful and we expect the Reit to continue investing in the education sector,” Mr Vieujot said.

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