Equitativa, the company that manages the Nasdaq Dubai-listed Emirates REIT (real estate investment trust), is planning to launch a series of new investment vehicles in South Asia and Africa, the group's chief distribution and development officer, Racha Alkhawaja, has said.

Speaking to Zawya on the sidelines of the Fund Forum Middle East event in Dubai on Monday, Alkhawaja said that alongside a 'Belt & Road' REIT which plans to invest in Eurasian property assets along global trade corridors forming part of China's Belt & Road Initiative, the fund manager is currently developing a REIT for the Indian market.

"They are in construction phase, which means we've set up the vehicle, we're now buying the assets to bring the assets into the SPV (special purpose vehicles), and then once we have enough assets and the size is big enough, then we list them," Alkhawaja said.

She added that she could not say when these are likely to be brought to market.

"We'd never have a timeframe on that. You can find assets quickly and sometimes it takes years, so it really does depend," she added.

Alongside the two REITs currently under development, Alkhawaja said Equitativa was investigating the possibility of setting up REITs in other markets in South Asia and in Africa.

"We're looking at central Africa, we're looking at Egypt, we're looking at Morocco," she said. "We're looking at other emerging markets where there we feel there are no REITs, there's a need for one and the real estate market can benefit from having an active asset manager like us."

Equitativa manages both Emirates REIT - a Sharia-compliant vehicle listed on Nasdaq Dubai with a portfolio value of $914 million as of June 30, 2018 - and an unlisted Residential REIT that owns properties in Ras Al Khaimah.

The company agreed to collaborate with Hong Kong-based Affluent Partners Holdings to set up "one or more REITs along Eurasia" late last month, according to a Hong Kong Stock Exchange filing.

Bargain hunt

Alkhawaja also told a panel debate at the Fund Forum event that "here in the UAE at the moment we're in acquisition mode because the property market is reasonably slow".

She said that although U.S. interest rates were being hiked because employment rates were strengthening, "we have the opposite situation here where white collar job creation is down but we are in an interest rate environment that is increasing because we're pegged" to the U.S. dollar.

"That does affect the property market in both ways - in terms of your ability to borrow at a decent rate and the number of investors that are able to invest in those properties".

Speaking on the same panel, Sherif Eid, a fixed income portfolio manager for Franklin Templeton Investments, predicted that next year "you are going to be looking, in my opinion, at one of the first times where you have a synchronised deceleration in developed market economies".

"The U.S. economy for the large part has run this year on a sugar high which is already fading away," he said.

"The argument of 2019 is not whether or not it will fade, but the degree it will fade to," Eid said, adding that European and Japanese markets are also likely to contend with central banks tightening liquidity.

"You're certainly getting one more rate hike this year, the question will just be how many you get next year and where the fed will take a pause."

Karl Tonna, chief investment officer of emerging markets equities specialist FMG Group, said that he hoped to at least see stabilisation in emerging market equities, which have suffered a decline in 2018 as interest rates in the United States have risen. Data from Eikon shows that MSCI's Emerging Markets equities index has dropped in value by 13.4 percent so far this year.

"We have been good enough to anticipate that and we have raised cash levels to approximately 40-50 percent on all of the funds. We have been very defensive back in February/March. That has enabled us to cushion some of the hits," he said.

Tonna said the decline in emerging markets this year followed three consecutive years of double-digit returns between 2015 and 17.

"Over the next 12 months, it will be interesting to see the outcome of the U.S.-China trade war. I think that is one thing that keeps me a bit awake at night."

(Reporting by Michael Fahy; Editing by Shane McGinley)
(michael.fahy@refinitiv.com)

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