Corrected: ENBD REIT secures $177mln facility from Mashreq Bank

Around $42.5 million will be made available for acquisitions

The Edge office building in Dubai Internet City is one of the assets within ENBD REIT’s portfolio Image used for illustrative purpose.

The Edge office building in Dubai Internet City is one of the assets within ENBD REIT’s portfolio Image used for illustrative purpose.


(A correction was made to the value of ENBD REIT's portfolio value in the 10th paragraph).

ENBD REIT, the real estate investment trust managed by Emirates NBD Asset Management, announced that it had raised $177 million in Shari'a-compliant financing from Mashreq Bank on Monday.

A press released issued on behalf of the REIT stated that the bulk ($134.5 million) of the new facility would be used to refinance existing debt at a lower cost than an existing facility, but that the remainder ($42.5 million) would be used for "acquisitions and corporate purposes".

"Our intention is to diversify our holdings by increasing allocation to the alternative segment, where we are seeing most growth and resilience in light of current market conditions,” said Anthony Taylor, head of real estate at Emirates NBD Asset Management.

ENBD REIT is one of two publicly-listed REITs in the United Arab Emirates, alongside Emirates REIT - both of which trade on Nasdaq Dubai. Shares in both also trade significantly below their net asset value per share as investor sentiment towards UAE real estate remains negative.

ENBD REIT's Net Asset Value (NAV) per share at March 31, 2018 (the most recent valuation available) stood at $1.08, yet despite embarking on a share buyback programme in February, its share price still trades at a discount of more than 50 percent to this value, remaining unchanged at Monday's close at $0.52 per share.

In an emailed response to a question from Zawya as to why the company is raising more debt at the same time as using capital to buyback shares, Taylor said the two moves had "different purposes".

He said the buyback programme was "designed to shore up liquidity in the stock and to protect against disproportionate movements in the share price caused by small trades".

The additional funding, he said, not only lowers the cost of existing debt but the remaining money raised would "contribute towards the acquisition pipeline, which aims to grow and diversify the property portfolio – particularly in the alternative assets space – thereby mitigating risk during soft real estate market conditions".

"We have identified certain types of alternative real estate assets that are yield enhancing to the existing portfolio (net of debt costs) and on long-term leases making them more resilient in the current market,” he added.

ENBD REIT's total portfolio value stood at $450 million at March 31, according to its latest report. Its portfolio is made up of 11 assets, including five office buildings, three residential assets and three "alternative" assets - namely the South View School in Dubailand, the Souq Extra community retail centre at Dubai Silicon Oasis and the Uninest purpose-built student accommodation block in Dubai Academic City.

The company declared a $9.3 million loss after a revaluation led to its portfolio value being marked down by $21.7 million during the course of the year. The portfolio generated income of $29.8 million during the year.

(Reporting by Michael Fahy; Editing by Mily Chakrabarty)

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