The family behind a Dubai-based real estate investment trust (REIT) focused on the logistics market have changed the structure of the fund and said that they are reconsidering a plan to float it on one of Dubai's two stock exchanges.

Speaking at a DIFC funds event held by fund administrator Ocorian in Dubai on Tuesday, Manrre REIT director Meher Mirchandani said that Manrre REIT’s structure had been changed to an ‘Exempt’ fund, which is open to investors putting in a minimum of $50,000. It was previously a ‘Qualified Investor Fund’, where the minimum ticket size for investors is $500,000.

The fund has also switched to a platform managed by Dalma Capital, and is weighing up its options in terms of its final structure.

Manrre REIT was created last year as a closed-end fund containing 19 commercial and industrial units that had been acquired over a 30-year period by Dubai-based Palomon Group. Its initial aim was to raise up to 330 million dirhams from investors, growing over a three-year period to a size to a 500 million dirham fund that could then  be listed either on the Dubai Financial Market or Nasdaq Dubai (Read more here).

However, speaking to Zawya on the sidelines of Tuesday's event, director Kunal Lahori said that rule changes within Dubai's International Financial Centre last year had also opened up the possibility of the vehicle instead becoming an open-ended REIT.

"Basically, we have three options. One is to sell off all of the assets to strategic investors or a financial institution. The second is to make an open-ended structure and continue perpetually - more like a fixed income/dividend play," he said.

The third option would be to continue with its IPO plans, but chairman Manohar Lahori pointed out that the two REITS currently listed on Nasdaq Dubai are both trading at a significant discount to their net asset value (NAV), due to a lack of liquidity and negative investor sentiment towards Dubai real estate.

"There's a lot of selling, but nobody's buying," Manohar said.

Both of the publicly-listed REITS on Nasdaq Dubai are trading at a significant discount to their net asset value (NAV), and have recently taken steps to address this.

Emirates REIT last week said its NAV per share stood at $1.376 at the end of 2018, but its share price closed at $0.78 on Thursday. It recently appointed Al Ramz Capital as a liquidity provider to boost liquidity in its shares. ENBD REIT, meanwhile, had a NAV per share of $1.11 at the end of 2018, but its shares currently trade at just below $0.56 per share. The firm gained approval from shareholders late last year to cancel $84.5 million shares and to create a 'distributable reserve". It then launched a share buyback programme to underpin its share price last month. (Read more here).

Kunal said that no decision has been taken on which route to take with the fund, adding that a decision would be made "a couple of quarters before the end of our three-year period".

"Depending on the investor, depending on the outlook we will decide which works best at that particular time."

Kunal told Zawya in a separate email that since the fund's launch last year, two assets have been sold and three have been added, including an asset leased to food delivery platform on five-year deal and an office building leased to Al Tamimi Investments. As a result, the fund has a current size of around 220 million dirhams.

He added that it is currently in talks to acquire an asset leased on a 10-year deal to a "large conglomerate" that would bring the fund size up to 275 million dirhams.

Mirchandani said the fund is also offering owners of real estate the opportunity to make 'in-kind' investments by contributing properties to the REIT in return for participating shares.

A UAE Real Estate Investment Market Report published earlier this month by Knight Frank said that investment in logistics and real estate assets in the country "continue to be perceived as an attractive proposition" by investors, due in part to the growth of e-commerce operators looking for fulfilment space, but it added that few deals had been carried out due to a lack of credible investment opportunities.

Knight Frank Middle East's head of research, Taimur Khan, told Zawya in an interview that investors are attracted to the sector by the potential of signing up tenants to longer-than-average lease lengths.

"We've seen the likes of Amazon or Souq coming into the market and doing their own build-to-suit. For this region, where historically your average lease length is 2-5 years, you're looking at a much longer lease length there. For investors, that's incredibly good," he said.

However, he added a caveat that some investors were put off by ownership limitations, most notably within major industrial free zones where units sit on land where ownership rights remain with a master developer.

"The issue is that because of the ownership structure... a lot of (industrial land) hasn't really been developed," he said.

(Reporting by Michael Fahy; Editing by Mily Chakrabarty)

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