Dubai real estate fund ENBD REIT faces 'significant pressure'; asset value falls

Net asset value lowered by $32mln in September due to COVID-19 slowdown

  
Image used for illustrative purpose. Skyscrapers along Sheikh Zayed Road, Dubai, UAE.

Image used for illustrative purpose. Skyscrapers along Sheikh Zayed Road, Dubai, UAE.

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Dubai’s ENBD REIT, a Shariah-compliant real estate investment trust, managed by the asset-management arm of Emirates NBD, has seen a further deterioration in the value of its portfolio due to the slowdown triggered by the coronavirus.

Its net asset value (NAV) as of September 30, 2020 stood at $198 million, down by $32 million from the $230 million recorded in March 31. The fund’s property portfolio was also lowered from $410 million to $377 million due to the slowdown in the property market.

ENBD REIT has a diversified portfolio of residential, office and alternative assets in the UAE.

The property market in the UAE has been impacted by the coronavirus pandemic, with rental values, sale prices and occupancy levels posting monthly declines amid a slump in demand.

The latest data showed that occupancy levels in ENBD REIT’s portfolio have indeed softened in recent months, averaging at 76 percent in September 2020, down from 82 percent in March 2020. Lower uptake has been observed in residential properties like the Binghatti Terraces and Arabian Oryx House.

Significant pressure

Anthony Taylor, head of real estate at Emirates NBD Asset Management, said they do face “significant pressure” on valuations and rental income as a result of the impact of the health outbreak on the business environment.

“[But] we remain focused on managing down operating costs while at the same time upgrading our assets to enhance leasability, especially in the office portfolio,” Taylor said.

He said they are doing cost-efficient upgrades on some properties, including the Al Thuraya Tower 1 and Burj Daman, while the management continues to provide relief to tenants impacted by the pandemic, with the objective of safeguarding both the weighted average unexpired lease term (WAULT) and occupancy.

“The strategy has so far proved effective, and we are pleased to be in a position to pay an interim dividend of 80 percent of net rental income, subject to approval of a capital reduction by the relevant authorities,” he added.

(Writing by Cleofe Maceda; editing by Seban Scaria)

Cleofe.maceda@refinitiv.com

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2020

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