ENBD REIT maintains cashflow; to focus on flexible solutions amid COVID-19

The REIT will be exploiting lower interest rates to bring down cost of funding

  
Image used for illustrative purpose. Low Angle view of Apartment houses in Dubai city.

Image used for illustrative purpose. Low Angle view of Apartment houses in Dubai city.

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ENBD REIT announced its strategic priorities for 2020 and 2021 to combat market challenges arising from the coronavirus outbreak and lower oil prices.

“No-one in any sector is in any doubt that 2020 is going to be a challenging year. Our portfolio came under pressure during 2019 as a result of soft real estate market conditions, and in the short-term these conditions have been exaggerated by the Covid-19 pandemic and a return to low and volatile oil prices,” Anthony Taylor, Head of Real Estate at Emirates NBD Asset Management said.

“We recognise that a gradual uptick in the real estate market cycle is probably delayed, but we have the diversity and the resilience in our portfolio to maintain occupancy and rental income, with sufficient cashflow to maintain dividend payments to shareholders,” Taylor said.

The Shariah-compliant real estate investment trust managed by Emirates NBD Asset Management will focus this year on flexible solutions for combating the market challenges.

The REIT said in a statement that it is already rolling out a series of flexible initiatives that will help tenants facing genuine financial difficulty, as well as bolster occupancy and encourage longer-term lease agreements.

Another short-term priority for the management will be to explore low interest rates via Shariah compliant hedging arrangements to fix financing covenants at the lowest possible cost for the future.

“Our priorities this year and next year will be to continue to build on diversity in the portfolio – thereby de-risking our position in the context of the market – while taking advantage of lower interest rates to bring down costs,” Taylor said.

As a medium-term objective, ENBD REIT intends to reposition its property portfolio with increased weighting for ‘alternative’ asset class (which currently accounts for 19 percent of the portfolio’s total value).

View on disposals, acquisitions

“Looking ahead, we believe an opportunistic view on disposals and acquisitions will deliver healthy returns, and we are looking forward to executing on this strategy in the months and years ahead,” Taylor said.

According to the statement, preferred asset classes for potential acquisitions include industrial facilities, logistics/warehousing, and healthcare, with longer lease terms a common feature of such properties, making them attractive for achieving stable rental income, extended unexpired lease terms and resilient long-term valuations in a challenging macroeconomic environment.

The REIT’s management will also look at potential disposals from the portfolio.

Proceeds from asset disposals may be partially utilised to settle current debt obligations, in order to maintain an appropriate Loan-to-Value (LTV) ratio, with balances either returned directly to shareholders or redeployed towards new acquisitions.

In December 2019, ENBD REIT announced that it is formalising a restructuring, which could see the trust delisting from Nasdaq Dubai and become a privately held REIT, subject to shareholders’ approval.

In March 2020, shareholders disapproved removing the shares from trading and voted in favour of maintaining the current structure of the fund, which will remain as a listed real estate investment trust on Nasdaq Dubai.

(Writing by Gerard Aoun; editing by Seban Scaria)

( gerard.aoun@refinitiv.com )

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