IPO hopes for new Dh1bn property fund in UAE

National Bank of Abu Dhabi's planned Dh1 billion property fund could become the region's first publicly traded real estate investment trust. Lauren Lancaster / The National

Abu Dhabi's biggest bank plans to launch a Dh1 billion (US$272.2 million) property fund that could become the region's first publicly traded real estate investment trust (REIT).

The fund will target institutional investors and include income-producing commercial property countrywide. A new unit of National Bank of Abu Dhabi has been registered in the Dubai International Financial Centre (DIFC) to operate the fund.

"In the future it is our intention to bring this fund to an initial public offering, thereby creating what we expect to be the region's first publicly traded REIT," said Mahmood Al Aradi, the senior general manager of NBAD's Financial Markets Division and director of NBAD Investment Management (DIFC) Limited.

"In addition to generating significant long-term income for investors, this initiative will attract a new class of institutional investors adding to the real estate sector's liquidity."

The launch of the investment vehicle comes amid tentative signs of recovery in some commercial and residential property markets in the Emirates, with investors returning to buy at what they perceive to be the bottom of the market.

Average residential property prices remained stable in the capital during the first quarter, according to the latest research from Jones Lang LaSalle.

Prices have declined by about 47 per cent from the peak of the market in Abu Dhabi.

REITs are companies that own income-producing property and distribute dividends to their shareholders according to the performance of their portfolios. REITs have been slow to take off in the UAE because of the market instability since 2008.

The launch of the NBAD vehicle follows the creation of Emirates REIT in 2010, which was established by Dubai Islamic Bank and Eiffel Management and which also invests in commercial property. That fund had a value of about Dh250.9m at the end of last year.

Abu Dhabi National Properties and the international property consultant Knight Frank are advising the new NBAD fund. Other partners include Gulf Investment Corporation.

"This will be all commercial property," said James Lewis, a director based in Abu Dhabi at Knight Frank. "We're not going near residential."

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