Transactions have picked up recently after the easing of restrictions, but overall, the market remains weak compared to last year
Dubai real estate investment trust ENBD REIT has seen its net asset value (NAV) decline by $15 million in three months due to the property market slowdown and the coronavirus pandemic.
Managed by the asset management unit of Emirates NBD, the trust also reported on Thursday that the rental income from its portfolio, as well as the occupancy, was down, while its loan to value ratio (LTV) increased during the period April to June this year.
In a statement, the fund said its NAV for the first quarter of its financial year ended June 30 stood at $215 million, down by nearly 7 percent compared to $230 million in the previous quarter. April 1 marks the start of the fund’s financial year.
“The decline in NAV is largely attributed to pressure on portfolio valuations, mainly due to soft real estate market conditions and macroeconomic uncertainty around COVID-19” the fund said.
The fund, however, assured that it managed to sustain stable cashflows throughout the quarter and maintained a sustainable cash position since the payment of the $5.1 million final dividend in July 2020.
Demand for properties in the UAE declined significantly during the coronavirus lockdown. Transactions have picked up recently after the easing of restrictions, but overall, the market remains weak compared to last year.
COVID-19 Impact
According to ENBD REIT, the occupancy rate in its “blended portfolio” as of June 30 stood at 76 percent, down from 82 percent in the previous quarter.
The REIT’s LTV went up to 48 percent from 44 percent in the previous quarter, following valuation losses and drawdown of $13.6 million, that was earmarked for upgrades to certain assets in the portfolio
“Rental income from our portfolio is down on a year-on-year basis, mainly due to the relief measures that we have introduced for struggling tenants, along with lower occupancy in certain office and residential buildings,” said Anthony Taylor, head of real estate at Emirates NBD Asset Management.
“We have, however, been successful in managing down costs, with total expenses reduced by 20 percent compared to 30th June 2019, due to lower finance costs resulting from refinancing, reduced management fees and active cost saving initiatives rolled out with service providers across our properties,” he added.
The fund said the impact of the pandemic on its cash flow is anticipated to be in the region of four to six percent of the last financial year’s total revenue.
The fund has been looking for solutions to relieve the financial pressures from tenants. To date, 71 tenants have sought rental relief, with $2.7 million offered as deferred payments.
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