Emirates Reit is investing Dh208.3 million to develop an education complex at the Akoya by Damac development in Dubai.
The company has bought a freehold plot on the site, off Umm Suqeim Road, from Damac Crescent Properties for Dh98.5m. It will spend a further Dh109.8m to develop the 20,800 square metre complex.
It has been leased to Jebel Ali School, which has signed a 26-year tenancy agreement.
Upon its completion, the development will account for 9.2 per cent of Emirates Reit’s Dh2.25 billion portfolio, and the lease will generate an internal rate of return of 11 per cent on its investment.
The development will house primary and secondary schools, a sports centre and an auditorium. It will draw pupils from Akoya by Damac and nearby residential developments such as Arabian Ranches, Motor City, Sports City, and the Green Community.
Emirates Reit’s latest investment is the second education development in its portfolio, following a sale-and-leaseback deal with education provider Gems in November 2013 for its World Academy building in the Al Barsha South area.
The rationale for the deal is “quite easy”, according to Sylvain Vieujot, Emirate Reit’s executive deputy chairman.
“Our main goal is to develop a good portfolio of properties and distribute dividends to our investors. Schools provide us with an opportunity to do this.
“We think education is a safe business, as they are not going to go broke.”
The education business offers a way to fund expansion without having to tie up lots of funding, said Mr Vieujot.
All education providers have to build their own schools but have to use a lot of capital to do so, he said. That acts as a brake on growth because schools have to find more money to recruit staff and spend on marketing to attract students.
“If we provide that capital, we are helping to develop your business, which is to be an education provider, so it works for both,” said Mr Vieujot.
The plot on the Akoya by Damac site – the first of only two potential school sites on the master plan – was "a unique opportunity in an exciting and upcoming area of the city", he said.
Over the next four years, an extra 52 schools are expected to be needed to meet demand, according to Dubai’s Knowledge and Human Development Authority.
At Index Tower, Emirates Reit recently said it had completed the fit-out and furnishing of a second office floor at the building, which has been pre-leased.
The floor houses 22 office units that range between 48 square metres to 79 square metres in size.
Three further floors are being fitted out and will be ready for leasing by the fourth quarter.
For the first half of the year, Emirates Reit delivered an annualised total return of 16.39 per cent to investors, and its net asset value stood at $1.5 a share.
The company has eight buildings in its portfolio with about 176,000 square metres of space, of which 71 per cent is occupied.
mfahy@thenational.ae
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