Five months after the first real estate investment trust (REIT) was introduced in Dubai, local investors are showing little enthusiasm for the product.
There are no new property REITs scheduled to launch, Simon Gray, the director of supervision at the Dubai Financial Services Authority (DFSA), said this week. There is interest from financial institutions, but "it may take some time" for REITs to gain traction in the UAE, Mr Gray said.
The potential for REITs created a stir last year when the DFSA implemented a framework for creating the trusts. REITs were expected to add much-needed liquidity to the market, giving investors a low-cost vehicle to invest in property.
REITs in the US control US$353 billion (Dh1.29 trillion) in property, according to the ratings agency Standard & Poor's.
But the tax advantages found in REITs were not applicable in the UAE, where there are no corporate taxes, said Jonathan Herps, an Abu Dhabi investment adviser, during this week's Cityscape property conference in the capital. Many property investors are not interested in the relatively low yields offered by REITs, he said.
"I think you have a real problem trying to attract investors with a 5, 6, 7 per cent payout," said Mr Herps.
Dubai's first REIT, Emirates REIT, was established last November by a partnership of the Dubai Islamic Bank and Eiffel Management, a French company.
The Emirates REIT is Sharia-compliant and focuses on commercial and residential property. Eighty per cent of the fund's net income is returned to investors. It may list on the Nasdaq Dubai by the end of the year, Marwan Ahmad Lutfi, the deputy chief executive of the Dubai International Financial Centre said this month.
The National Bank of Abu Dhabi is also planning a REIT, its general manager of corporate and institutional coverage Sameh al Qubaisi confirmed yesterday, without providing details.
Banks are expected to lead the development of REITs, in some cases pooling their own assets for investors, analysts say.
"It is effectively another means of selling interest" in property, said David Quinn, the head of agency services in the Middle East and North Africa for Cushman & Wakefield, the property firm. "But it is a costly and bureaucratic process that takes time."
It is also difficult to find properties in the UAE suitable for funds, industry executives say.
In Dubai the majority of office buildings are classified as strata buildings, with multiple owners, bringing an unwanted layer of complexity to any transaction.
"It's hard to get quality assets in Dubai," Mr Herps said. "You don't want to negotiate with 40 owners."
Investors in the region are also wary of funds focused on UAE property, industry analysts say.
"Pooled funds are not so much flavour of the month," said Mohamad el Hage, the director of investment banking for Unifund Capital. "Investors want to see and feel the assets they are investing in."
With share prices for property companies low, investors already have avenues to participate in the property market, analysts say.
"There is nothing compelling about a REIT in this environment," said Chet Riley, an analyst with Nomura Securities.
However, REITs will eventually grow in the region, Mr Gray said. The downturn in the market has investors looking for less risky ways to invest in property, he said.
"There is a huge amount of interest," Mr Gray said. "REITs effectively collectivise the risks."
Several Sharia-compliant REITs have launched in Asia in the past two years.
kbrass@thenational.ae
UAE currency: the story behind the money in your pockets
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MATCH INFO
Uefa Champions League, Group B
Barcelona v Inter Milan
Camp Nou, Barcelona
Wednesday, 11pm (UAE)
Killing of Qassem Suleimani
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Killing of Qassem Suleimani
Mia Man’s tips for fermentation
- Start with a simple recipe such as yogurt or sauerkraut
- Keep your hands and kitchen tools clean. Sanitize knives, cutting boards, tongs and storage jars with boiling water before you start.
- Mold is bad: the colour pink is a sign of mold. If yogurt turns pink as it ferments, you need to discard it and start again. For kraut, if you remove the top leaves and see any sign of mold, you should discard the batch.
- Always use clean, closed, airtight lids and containers such as mason jars when fermenting yogurt and kraut. Keep the lid closed to prevent insects and contaminants from getting in.
Spec%20sheet
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MATCH INFO
Championship play-offs, second legs:
Aston Villa 0
Middlesbrough 0
(Aston Villa advance 1-0 on aggregate)
Fulham 2
Sessegnon (47'), Odoi (66')
Derby County 0
(Fulham advance 2-1 on aggregate)
Final
Saturday, May 26, Wembley. Kick off 8pm (UAE)
UAE currency: the story behind the money in your pockets
The Perfect Couple
Starring: Nicole Kidman, Liev Schreiber, Jack Reynor
Creator: Jenna Lamia
Rating: 3/5
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
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Ahmed Raza
UAE cricket captain
Age: 31
Born: Sharjah
Role: Left-arm spinner
One-day internationals: 31 matches, 35 wickets, average 31.4, economy rate 3.95
T20 internationals: 41 matches, 29 wickets, average 30.3, economy rate 6.28
Killing of Qassem Suleimani
The years Ramadan fell in May
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Traits of Chinese zodiac animals
Tiger:independent, successful, volatile
Rat:witty, creative, charming
Ox:diligent, perseverent, conservative
Rabbit:gracious, considerate, sensitive
Dragon:prosperous, brave, rash
Snake:calm, thoughtful, stubborn
Horse:faithful, energetic, carefree
Sheep:easy-going, peacemaker, curious
Monkey:family-orientated, clever, playful
Rooster:honest, confident, pompous
Dog:loyal, kind, perfectionist
Boar:loving, tolerant, indulgent
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Match info:
Real Betis v Sevilla, 10.45pm (UAE)
Manchester City transfers:
OUTS
Pablo Zabaleta, Bacary Sagna, Gael Clichy, Willy Caballero and Jesus Navas (all released)
INS
Ederson (Benfica) £34.7m, Bernardo Silva (Monaco) £43m
ON THEIR WAY OUT?
Joe Hart, Eliaquim Mangala, Samir Nasri, Wilfried Bony, Fabian Delph, Nolito and Kelechi Iheanacho
ON THEIR WAY IN?
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