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ENBD REIT (CEIC) plc, the real estate trust managed by Emirates NBD Asset Management, on Tuesday announced proposals to buy back up to 4.4 million shares as part of its strategy “to add value to shareholders holding equity at the current discounted share price”.
In an announcement following the market's close on Tuesday, the Nasdaq Dubai-listed company said it had allocated up to $3.5 million worth of funding allowing it to buy 4.4 million shares at a price no higher than yesterday's volume-weighted average price. The buyback programme will last until the end of September, but will be put on hold during a close period in the run-up to its annual results announcement, the firm said. Any shares bought through the programme will be cancelled at the end of each month, it added. Independent Securities has been appointed as the broker to run the programme.
The move follows a decision approved by shareholders in November to cancel $84.5 million worth of shares and create a "distributable reserve" aimed at supporting its share price.
Anthony Taylor, head of real estate at Emirates NBD Asset Management, said in the statement: “The purpose of the buy-back programme is to realise value for all shareholders by repurchasing shares currently trading at a significant discount to current market valuations of the underlying assets.”
Both ENBD REIT and its competitor Emirates REIT, have seen their share values slip considerably below their portfolio's net asset values. ENBD Reit announced on January 29th that it had a net asset value of $284 million, or $1.11 per share, but it's shares closed on Nasdaq on Tuesday at a price of $0.60. Emirates REIT, which announced the appointment of Al Ramz Capital as a liquidity provider for its shares last month, had a net asset value of $531 million, or $1.77 as at November 30, 2018, but it closed on Nasdai Dubai on Tuesday at $0.81 per share.
‘Unfavourable market conditions’
“The two REITs in the UAE have been experiencing significant downward pressures on their share prices as a result of unfavourable market conditions on both the operational and the stock market sides," Raya Majdalani, research manager at Knight Frank told Zawya via email on Tuesday.
"The slowdown in real estate activity and the corrections in prices which we have been witnessing locally have directly impacted the performance of the real estate index in the past year, as the latter has underperformed the all-shares index performance. Certain major developers in Dubai have recently posted better-than-expected results, which could potentially boost investors’ optimism and reflect positively on real estate stocks, including REITs.”
A factsheet on ENBD REIT's website shows that the company's portfolio, which has an overall value of $456 million, is 88 percent occupied. Some 64 percent of the REIT's assets by value are held in commercial buildings, 18 percent are residential and 18 percent are classified as 'alternative assets' (these include a school, a student accommodation building and a retail centre).
A note published ratings agency S&P Global on Monday had a pessimistic outlook on the commercial real estate sector, stating that although there is a 'limited' amount of new supply coming to market, “We don't believe that office rents have bottomed out yet”.
The rise of coworking spaces has disrupted the demand for traditional office space, the report said, and although changes to regulations allowing foreigners to own 100 percent of onshore companies (allowing companies to hold dual licensing) is likely to boost demand for office space in the long term by improving the business environment, it could lead to short-term pressures as businesses consolidate existing locations to save on space, it added.
(Reporting by Michael Fahy; Editing by Mily Chakrabarty)
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