ENBD REIT, the real estate investment trust managed by the asset management arm of Emirates NBD, Dubai’s largest bank, is "actively pursuing options to mitigate downward pressure on the REIT's share price" after witnessing an 18.8 percent decline since the start of the year.

The REIT's management said in a statement to Nasdaq Dubai on Monday that it was "working on a strategy to add value to shareholders" following the decline, which it will soon announce to the market once it has gained board and regulatory approval.

REITs are meant to be fairly stable investments containing mainly mature properties where the bulk of rental income is distributed to shareholders through dividend payments, but the REIT's management said in its statement that a soft local real estate and equity markets, coupled with low levels of liquidity, had contributed to its year-to-date price decline.

In the statement, it said that "ENBD REIT’s management and directors believe the stock is undervalued, with considerable upside potential".

Its share price of $0.78 at market close on Monday meant that the REIT's current market cap of $198.43 million, which is markedly below the net asset value of its portfolio, which stood at $289 million at June 30, according to a company statement issued last month.

Anthony Taylor, head of real estate at Emirates NBD Asset Management said in the statement that the discount at which the REIT's shares were trading was "attractive and is expected to narrow as local real estate and equity markets improve in the future".

"We look forward to soon sharing our intended initiative, which we believe will even further enhance the attractiveness of the stock, given its strong growth potential,” Taylor said.

ENBD REIT is only the second publicly-listed REIT to trade on UAE stockmarkets, having been listed on Nasdaq Dubai in March last year.

The REIT has invested in a number of commercial and residential assets, buying The Edge office building from developer Sweid & Sweid in Dubai Internet City for $76.2 million in October last year and the Souq Extra Retail Centre at Dubai Silicon Oasis, which opened last month.

It also owns the Uninest purpose-built student accommodation building at Dubai Academic City and it has completed a $15 million purchase of the South View school, an under-construction school within Dubai's Remraam community which is due to open next month for the start of the new academic year.

Raya Majdalani, research manager at real estate consultancy firm Knight Frank, said in an emailed response to questions from Zawya that although the REIT has "witnessed some pressures on their net income" this year, as it has booked a net unrealised loss on the value of its portfolio and faced higher operating and financing costs, this doesn't fully explain the demise in its value.

"All in all, the issue doesn’t seem to be related to the assets of ENBD REIT specifically," she said.

Majdalani said that the performance of the REIT's assets so far "looks pretty healthy" given that occupancy rates for its portfolio in the first six months of the year increased to 90 percent (up from 86 percent a year earlier) and gross yields stood at 8.4 percent, which was only a marginal decline to the 8.7 percent achieved a year earlier.

She added that the 22 percent year-on-year (YoY) decline in ENBD REIT's share price "doesn’t look surprising when taking into consideration the fact that Dubai’s broad (DFM) index is down 20 percent YoY and Dubai’s Real Estate index is down 33 percent YoY".

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ENBD REIT’s year-to-date share price to Aug 13, 2018. 

Source: Thomson Reuters Eikon

(Reporting by Michael Fahy; Editing by Shane McGinley)

(michael.fahy@thomsonreuters.com)

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