ENBD Reit, the Sharia-compliant real estate investment trust managed by Emirates NBD Asset Management, has earmarked $65 million for acquisitions this year as it seeks to diversify its $456m property portfolio amid soft market conditions, an executive said.
The Nasdaq Dubai-listed Reit will expand its remit to outside Dubai, targeting Abu Dhabi and the northern emirates, but not necessarily this year, Anthony Taylor, the head of real estate at Emirates NBD Asset Management. It will also target acquisitions in the industrial and healthcare space because of their structure, he added.
“The assets we are looking to invest in now are industrial such as distribution warehouses and logistics and when we talk about medical and health care we are looking at clinics and hospitals with single operators signing up on long-term leases,” said Mr Taylor
Reits have been gaining traction in Saudi Arabia and the UAE, the two biggest Arabian Gulf economies, as investors hunt for safe exposure to the property market. Trading in Reits is similar to stocks and bonds on an exchange, paying out dividends from rent to investors.
ENBD Reit’s current portfolio will expand in the alternative space, which includes education, health care and industrial assets.
As of end of September, 63 per cent of the portfolio was in offices, 19 in residential property and 18 in alternative assets.
The future composition of the portfolio is expected to include 50 to 60 per cent offices, 20 to 25 per cent residential property and 25 to 35 per cent alternative investments.
The Reit, which was listed in 2017, is still targeting nearly doubling its portfolio size to $1 billion over the next three to five years despite the soft market conditions.
“We had a difficult 2018. I think 2019 is still going to be a challenge but the expectation is that the movements we saw in 2018 will hopefully not be as high in 2019. It does affect our strategy where we invest and the timing of investments,” he said.
“It is important for us to keep buildings fully occupied and in some cases it means we do have to lower our rentals to accommodate tenants.”
The soft market conditions, however, are presenting opportunities to buy at good prices, particularly since ENBD Reit didn’t make any acquisitions last year because it focused on refinancing debt and managing existing assets.
“It is very difficult to time the absolute bottom of any market cycle, but valuations do appear to be cheap in comparison to the last 3 to 4 years,” he said.
The Reit in the future could also expand outside the UAE, but this is unlikely to happen soon, said Mr Taylor.
“Our mandate is within the UAE. There is the ability to look at the wider Middle East region but that will be a small percentage of the portfolio,” he said.
“Saudi Arabia obviously offers an attractive market. But I don’t see that happening in the next couple of years.”