DUBAI- A group of creditors plans to oppose the terms of an offer by Dubai-listed Emirates REIT to exchange $400 million in Islamic bonds for new instruments, four sources told Reuters.

Emirates REIT on Tuesday offered to exchange unsecured sukuk for secured ones as part of a revamp aimed at bolstering the sharia-compliant real estate investment trust's balance sheet, which has been hit by the coronavirus crisis.

The plan envisages extending the bonds' maturity to 2024 from 2022, as well as a deferral of coupon payments for a year.

Creditors will be given instead first-ranking mortgage security over certain assets in Dubai and its financial centre with an aggregate value of about $280 million.

But some creditors plan a counter proposal to Emirates REIT soon, four sources familiar with the matter said.

"A sizeable contingent of sukuk holders has been organized on an ad-hoc basis for some time with advisors in place," one said, adding:

"Whereas we welcome the offer as a step in the right direction and an acknowledgment of the problems at hand, there are fundamental concerns concerning the continuing operations and governance of the REIT which need to be addressed."

The 2022 sukuk, which declined sharply last year, rallied on Wednesday, one of the sources and a trader said.

Three of the sources said some sukuk holders have been in talks with advisory firm Rothschild, which declined to comment.

Emirates REIT last year appointed Houlihan Lokey to advise it on a strategic review.

Houlihan Lokey managing director Arun Reddy told Reuters on Wednesday that the exchange proposal would likely generate more secondary interest for the new sukuk than the existing ones.

Sylvain Vieujot, chief executive of Equitativa, which manages Emirates REIT, said the offer on the table was "the most investor-friendly option we could envision."

The move comes after years of sluggish performance of Dubai real estate, exacerbated by the COVID-19 pandemic.

Emirates REIT's portfolio stood at $690 million at the end of 2020, while its net property income decreased by 11% year-on-year to $52 million.

(Reporting by Davide Barbuscia, Yousef Saba and Hadeel Al Sayegh; Editing by Alexander Smith) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: davide.barbuscia.reuters.com@reuters.net))