Shares in ENBD Reit, the UAE’s second real estate investment trust, rose by 5.4 per cent during its first day of trading on Nasdaq Dubai yesterday as the company said it planned to focus more on investing in schools, health care and logistics, besides residential and commercial property.
Shayne Nelson, Emirates NBD’s group chief executive, and Tariq Bin Hendi, ENBD Reit’s director, jointly rang the bell at the Dubai Financial Market yesterday formally to announce ENBD Reit’s float on Nasdaq Dubai.
Shares in the company, which is managed by Emirates NBD Asset Management, the fund management arm of Dubai’s largest bank, closed at US$1.17 yesterday after listing at an offer price of US$1.11.
ENBD Reit raised $105 million through an initial public offering (IPO), which the company says it hopes to spend on income-producing property assets in Dubai and across the UAE.
"We’re very comfortable that we can deploy US$105m into the market in a short space of time into assets that are income producing and that will give us a good return for our investors," said Anthony Taylor, the fund manager for real estate for Emirates NBD Asset Management. "We obviously have aspirations to be much larger than we are today. To grow to the size we want to be eventually we have to do it in stages."
The company is targeting investment opportunities close to the new Dubai airport around Dubai South, and teaming up with tenants in Abu Dhabi on long-term leases.
ENBD Reit’s portfolio, which until recently has been operated as a Jersey open ended fund, comprises seven buildings; two thirds of it is in offices and one third in residential.
The company said it wanted its allocation in the future to be about 50 per cent offices, 20 to 30 per cent residential and 20 to 30 per cent what it called "alternative assets" comprising warehouses, clinics, hotels and schools let on long-term leases.
The news comes as more and more reits are expected to start trading in the UAE and across the Arabian Gulf. Saudi Arabia approved reit listing rules last year to bolster its housing market and currently has two listed. In Bahrain, the country’s first Sharia-compliant retail reit was listed in January on the local bourse.
Last month, the fund manager behind ENBD Reit’s main rival, Emirates Reit, announced it had teamed up with Al Hamra Real Estate Development and National Bonds to create the UAE’s first residential real estate trust, which is expected to float on one of the UAE markets at a later date. The fund manager is also looking to set up reits based around hotels, logistics and sporting assets.
"There is room in Dubai for 10 or 20 reits," said Mr Taylor. "This is a very significant part of the investment horizon. We feel comfortable, being second, that many more will follow and it’s important to have an established market."
Despite the listing, the volume of shares traded was thin, standing at just 2,000 from a total share issue of 94,594,595. By comparison, the number of shares traded in the UAE’s first reit, Emirates Reit, which is also traded on Nasdaq Dubai, stood at 50,000 yesterday.
Analysts said that the low volume traded was down to the fact that reits tend to be held by investors for longer-term holds than other types of equities.
"We probably would have expected a larger volume of trades on a stock’s first day of trading but in general we would expect reits in the region to trade with low volumes because these vehicles are attractive to the sort of people who are going to be buying real estate assets and tend not to be active trading investors," said Saleem Khokhar, the head of fund management at NBAD. "Emirates Reit has been in existence for a while so it may have a larger client base but in general it is not a widely traded stock."
Emirates Reit is Sharia-compliant and was floated on Nasdaq Dubai by the fund manager Equitativa in 2014.
"I think there is space for two reits in the Dubai market," Mr Khokhar said. "The market for real estate is sought after and commercial real estate in the UAE is not easy to get hold of. However, the question may be whether it is a good time to invest in commercial real estate in Dubai."
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