The developer behind two Viceroy hotels in Dubai has said that it is launching a Dh2.1 billion real estate investment trust (Reit).
Five Holdings, the company previously known as Skai Holdings, has said that the trust will be the first hospitality-focused Reit to launch in the region, and the biggest to date.
It will initially be an unlisted Reit, regulated by the Financial Services Regulatory Authority, the regulatory body of Abu Dhabi Global Market.
The company said that the Five Reit would contain part of its investment in the recently-completed Viceroy Dubai Palm Jumeirah hotel, which opened in March, plus several other future projects. These include the under-construction Viceroy Jumeirah Village — a Dh1.28bn project set to open in the third quarter of next year.
The company’s chairman, Kabir Mulchandani, said that the developer eventually aims to list the Reit via an IPO, but that this may not take place for some time.
"We have a potential target date of 2019," he told The National.
Mr Mulchandani said that the company has been the biggest contributor to theReit, but there are 60 co-investors into it. The vehicle will pay out 100 per cent of the income generated from properties placed within it, he added.
“There is a regulation (for Reits) that 80 per cent of the income has to be paid out. We are putting a target of 100 per cent. Because we have a large number of outside investors, we would like to have the investors receive a 100 per cent share of the income, including ourselves. It will be a lot more attractive and it will build comfort.
“Reits are new and I think being at the forefront of it we have to be that much more investor-friendly.”
He said that he expects “hundreds of billions” worth of assets to be placed into Reits in the UAE over the next decade, because there are a lot of built assets in the country that are “not monetised”. Mr Mulchandani also said that Reits offer institutional investors the chance to participate in both income and capital growth from property while retaining a liquid asset.
“We’ve only started with Dh2bn, but we want to add zeros to that number just ourselves in the next few years.”
There are currently two listed Reits in the UAE — Emirates Reit, which was incorporated in 2010, and the ENBD Reit which floated on Nasdaq back in March.
Equitavia, the firm which manages Emirates Reit, also launched the country’s first residential property Reit alongside Al Hamra Real Estate and National Bonds in February.
Craig Plumb, the head of research for JLL Mena, said that there “has been something of a rush in this area” both in the UAE and in Saudi Arabia in recent months.
“The main attraction for owners is that it provides an alternative means of raising capital, without having to sell the entire asset.
He said that most of the early Reits created were in Singapore and Hong Kong by building developers, offering partial ownership of assets to small investors as well as providing a ready-made vehicle into which they could sell completed schemes.
“We would expect this model to be increasingly utilised in the UAE and KSA, as other options for selling assets remain thin over the next few years,” said Mr Plumb.
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