A debt refinance or an asset sale should be in the pipeline for Dubai-based real estate investor Emirates REIT after its recently announced one year-extension option on its $380 million sukuk.

An earnings overview by the UAE-based brokerage Al Ramz Capital described the REIT’s decision to exercise the one-year extension as ‘a rather unexpected turn of events’, adding that debt refinance or a disposal of assets should still be on the cards.

The outstanding sukuk liability was $324 million at the end of 2023, after partial redemption with an alternative facility from Ajman Bank.

Sukuk documents show that the REIT must reduce the outstanding amount to $230 million on its original maturity date of 12th December 2024.

“We continue to believe that an asset sale and a debt refinancing exercise would both make sense for REIT, and that both should be in the pipeline,” the Al Ramz update said.

The brokerage said Emirates REIT’s stock was ‘compelling’, as long as it can convincingly restructure its balance sheet, a process which has already started.

Al Ramz said it was maintaining its ‘overweight’ rating on the stock with a value of $0.69, a potential upside of 245%.

Emirates REIT refinanced the sukuk, which was first issued in December 2017 valued at $400 million, in December 2022.

The REIT reported comprehensive income for the period of $24.8 million in Q1 2024, fund expenses of $4.3 million, finance costs of $12.7 million and net unrealised asset gains of $25.9 million, with a loss before fair valuation of $1.1 million.

A previous major divestment from the trust, which is managed by Equitativa, include the sale of the plot hosting Jebel Ali School in 2022 for $63.58 million.

The REIT’s portfolio of properties includes commercial developments INDEX Tower and the European Business Centre, as well as retail property investments and schools GEMS World Academy, Lycee Francais Jean Mermoz and Durham School Dubai.

(Reporting by Imogen Lillywhite; editing by Brinda Darasha)