The property arm of GFH Financial Group is considering using real estate investment trusts (Reits) to pump funds into its projects in Bahrain and Dubai, as the Islamic investment group forays into the emirate’s property sector for the first time.
The Bahrain-listed firm, which launched its property division this year, is working on developing three projects in its home base and one in Dubai, with a combined value of about US$380 million.
GFH Real Estate is trying to come up with creative ways to fund its projects. It will consider other financing options that include partnerships, tapping the parent company’s capital and investor base, and loans, said Majed Al Khan, the chief executive of the property arm.
“We are even considering issuing financial instruments backed by real estate, or securitising some of the assets that we have,” Mr Al Khan said. “Reits are an option for GFH Real Estate.”
Reits are entities that own and manage income-producing property and are later publicly listed.
The Reits could be listed in Dubai or Bahrain, which said in March it was establishing a market for them. Reits licensed by Bahrain’s central bank can be listed on the stock exchange and traded by investors in the secondary market, Bahrain’s stock exchange said in March. Emirates Reit is the first in the region and is listed on Nasdaq Dubai.
“Dubai continues to be a good option [for Reits], given the liquidity in the market and the flexibility of creating certain instruments,” Mr Al Khan said.
The GFH Financial Group has assets worth about $5 billion under management, out of which $3bn worth is in the form of property assets, which could be used to help launch Reits, Mr Al Khan said.
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In Dubai, where the company plans to develop a residential project on land it owns in Dubailand, the company is banking on partnerships to chip in with finance. The $180 million project, which includes 254 villas and 150 apartments, is GFH Real Estate’s first project outside Bahrain.
“In Dubai, we are in talks with strategic partners and strategic alliances to come with us,” Mr Al Khan said. “Of course it will help us in a lot of things, not just with the financial element. It will help us with the know-how, and with the market access.”
GFH Real Estate, which is mainly seeking developers as partners, expects to conclude talks soon to start the project.
It is not discouraged by the softening property market in Dubai, which is being battered by an overall economic slowdown in the country and region, the strength of the US dollar to which the dirham is pegged, and other factors.
The region still has liquidity and wealth to help finance projects, Mr Al Khan said.
“Dubai has demonstrated to us that it always comes back stronger at the end of the day,” he said. “We believe in the security that the regional markets give. With all these challenges – commercially, financially and politically – we believe the market is very promising in the GCC.”
The company is targeting families for its Dubai project because it believes the high-end market is the first segment to suffer during a slowdown.
GFH Real Estate’s current projects in Bahrain include the $150m Harbour Row, a mixed-use project at Bahrain Financial Harbour that features 450 high-end apartments, a retail area and 4,000 square metres of commercial space.
The second project is a $50m island within Bahrain Financial Harbour that has leisure and food and beverage retail areas comparable to The Walk in Dubai.
A third project is in the planning stages.
dalsaadi@thenational.ae
