14 July 2015
MUSCAT: Eskan Bank has appointed Securities & Investment Company (SICO) as lead arranger for the first real estate investment trust (REIT) on the Bahrain Bourse, and only the second Sharia-compliant listed REIT in the Gulf region.

A listed REIT is a regulated investment vehicle that invests directly in real estate with its units traded like a stock on exchanges. REITs generally provide investors with access to real estate, a regular and stable income stream, diversification, and enhance the liquidity of their portfolios.

Eskan Bank's REIT will consist of two income-generating and unleveraged properties currently owned by Bahrain Property Musharaka Trust (BPMT) which was formed in May 2011, in collaboration with reputable institutional investors and high net worth individuals.

Commenting on this pioneering development, Khalid Abdulla, general manager of Eskan Bank said, "The initiative of listing the REIT will be the first in Bahrain by Eskan Bank, where we offer a financial instrument that will add to the breadth of investment opportunities and position the institution as an innovative bank spearheading financial sophistication and depth."

"In line with our social mandate, this new REIT gives Bahrainis the opportunity to share in Eskan Bank's significant property development activities, and benefit from commercial and residential rental income across diversified assets. This has been made possible by the proactive roles of the Central Bank of Bahrain (CBB) and the Bahrain Bourse. Both are further developing the regulations concerning investing activities that will lead to capital market growth," he added.

As arranger, SICO is responsible for managing the entire process, which includes internal property valuations along with independent real estate valuers, legal structure, regulatory submissions, and the initial public offering. The Sharia-compliant REIT is expected to have a total value of BD20 million, with a tranche that will be offered to the public through the initial public offering (IPO) that is planned to take place later this year.

Najla M. Al Shirawi, chief executive officer of SICO, said, "We are pleased to work with Eskan Bank to lead and manage this historic REIT listing in Bahrain. The introduction of this new alternative investment asset class will contribute in adding depth to the Kingdom's real estate sector, while helping to improve liquidity on the Bahrain Bourse.

"Our involvement illustrates our commitment to broaden the investment products offered to investors interested in the GCC markets, and reinforce SICO's status as a leading provider of corporate finance services in the GCC since 1997," Najla added.

The chief executive of the Bahrain Bourse, Shaikh Khalifa bin Ebrahim Al Khalifa, welcomed the planned listing of Eskan Bank's REIT.

"This underlines the keen interest we have witnessed from property developers and managers in REIT as an alternative investment option, and also among investors who would benefit from investing in property as an asset without directly owning and managing the property. The introduction of the REIT listing rules will facilitate investment in productive assets and benefit all involved stakeholders," he noted.

New listing rules for REITs issued by the Bahrain Bourse came into effect on May 17, with requirements including a minimum of two properties with a combined asset value of no less than $20 million.

REITs are regulated by the Central Bank of Bahrain, and must be authorised by the CBB before they can be listed. According to CBB regulations, the dividend pay-out ratio of a REIT has to be at least 90 per cent of its net realised income.

Eskan Bank REIT properties consist of Segaya Plaza and Danaat Al Madina. Segaya is a mixed retail and residential property located in Segaya which is currently 100 per cent occupied. Daanat Al Madina, located in Isa Town, is a mixed use development inclusive of residential, retail and commercial office elements.

The commercial components of Danaat Al Madina shall be transferred to the REIT. Eskan Bank jointly with Cluttons is currently in the process of leasing the asset which has received strong interest since being offered to the market.

© Times of Oman 2015