|21 April, 2019

Dubai's Emirates REIT sees 57% profit fall in 2018

Company's net property income falls as finance costs increase

People attending a ceremony for the listing of Nasdaq Dubai at Dubai Financial Market (DFM) in Dubai, UAE September 5, 2016. Image used for illustrative purpose.

People attending a ceremony for the listing of Nasdaq Dubai at Dubai Financial Market (DFM) in Dubai, UAE September 5, 2016. Image used for illustrative purpose.

REUTERS/Celine Aswad

Emirates REIT, the shariah-compliant real estate investment trust listed on Nasdaq Dubai, reported a 57 percent decline in profit for 2018 as it suffered a decline in net property income and faced higher financing costs.

Accounts filed on the exchange show the company's profit fell to $22.3 million in 2018, compared to $52.2 million in the prior year. Net property income fell to $64.3 million - down from $84.8 million in the previous year, due to lower unrealised gains on the value of its portfolio.

Net profit was also weakened by higher finance costs, which increased to $21.5 million, up from $16.5 million in the prior year. Emirates REIT was unavailable for comment when contacted by Zawya, but in a presentation to investors, the company highlighted higher rental of $61.3 million, a 13.6 percent increase on 2017. The gross value of its assets reached $1.01 billion, following the acquisition of three further floors in Index Tower at Dubai International Financial Centre in the fourth quarter of last year, and the purchase of a French school, Lycée Français Jean Mermoz, in the second quarter, the presentation document added.

However, it also said it had to make a "significant one-off provision accounting for the default of a school operator".

The REIT had 11 mainly commercial properties in its fund at the end of last year, and an overall occupancy rate of 75.4 percent.

Emirates REIT's share price has been languishing below its net asset value due to negative sentiment around the Dubai real estate and a lack of liquidity in its shares.

Emirates REIT's presentation showed it had a net asset value per share of $1.74 as of December 31, 2018, but the company's share price ended last year at $0.93, and it has declined a further 16.1 percent since the start of the year, closing at $0.78 per share on Thursday.

Emirates REIT has sought to address the lack of liquidity by appointing broker Al Ramz Capital as a liquidity provider in January this year, but market conditions remain difficult.

A Q1 report into Dubai's real estate market issued by JLL MENA stated that the market for office rents remained soft, with average rents facing downward pressure.

Average Grade A rents dropped 9 percent year-on-year to 1,543 UAE dirhams ($420) per square metre, per annum.

"With ample choices available for tenants, landlords continue to offer attractive terms and the market is expected to move further in favour of tenants over the next 12 months," the report said.

(Reporting by Michael Fahy; Editing by Mily Chakrabarty)

(michael.fahy@refinitiv.com)

© ZAWYA 2019

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