High Dubai office rents lead to 39% rise in profit for Emirates Reit

Emirates Reit has reported a 39 per cent net profits rise for 2014 as it benefited from higher office rents and values in Dubai.

Emirates Reit yesterday reported a 39 per cent rise in net profit for 2014 as it benefited from higher office rents and values in Dubai.

The UAE’s first Sharia-compliant regulated real estate investment trust reported net profit of US$48.56 million, up from $34.85m the previous year.

The company, which floated on Nasdaq Dubai in April, said that excluding revaluation gains and IPO costs, net profit rose 43.9 per cent to $11.89m from US$8.26m in 2013.

The Reit reported that total assets increased by 78.3 per cent to $594.15m from $333.21m a year ago.

It benefited from increasing its ownership of Index Tower in DIFC.

Over the year, the Dubai-based Reit acquired chunks of office space at the previously strata title office block which had been sold off to a number of different investors during the Dubai property boom.

It invested Dh613.5m and Dh17.9m on two different occasions in 2014 so that it now owns 67 per cent of the office tower.

It also acquired Le Grande Community Mall in Dubai Marina for $32.1m.

Emirates Reit said that occupancy rates at its six properties excluding Index Tower, remained stable at 94.1 per cent.

The company added that it had managed to reduce borrowing costs during the year by 42 per cent with overall debt levels at the end of December standing at 25.8 per cent of total assets. However, the average lease term of companies occupying Emirates Reit buildings declined slightly to 8.4 years, down from 9.8 years a year earlier, which it attributed to “reflecting the increased size of the portfolio and increasingly diverse tenant mix”.

“Looking ahead we remain optimistic about commercial real estate investment in the UAE,” said Sylvain Vieujot, the executive deputy chairman of Emirates Reit.

“We take a long-term view on acquisitions and continue to look for assets across all areas of the commercial sector.”

The news comes as property brokers are reporting increases in rents and occupancy levels for some parts of the Dubai office market, which was hit hard during the global financial crisis.

CBRE reported that rents for prime CBD locations in Dubai increased by 6 per cent during 2014 and rents for secondary offices in the city rose by 12 per cent year-on-year.

It said that occupancy levels for CBD offices stood at 85 per cent at the end of the year, while the average for all Dubai office stock stood at 61 per cent.

“Despite a rise in new stock and prevailing high vacancy rates, office rents have risen across both prime and secondary locations,” said Matthew Green, the head of research at CBRE’s Dubai office.

“No one in their right mind would develop a strata office product building now, the market is not there” he added.

“But where buildings can be brought back and turned into a product that is useful again then that is fine and they are going to have a proper purpose in this market.”

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