Emirates Reit decides it is time to buy low as Dubai market softens

Dubai property fund borrows hundreds of millions to invest.

The UAE’s only quoted real estate investment trust, Emirates Reit, has increased its borrowings to capitalise on a softening in the Dubai market this year.

The Nasdaq Dubai-listed Emirates Reit said that it had increased its Islamic financing facilities by US$123 million last year in an attempt to buy more buildings as the Dubai real estate market continues to soften.

The new borrowings come on top of ongoing loans of $19.1 million, increasing the company’s total Islamic financing to about $257.3m.

Emirates Reit said that, despite a slowing of rents in Dubai, income from its property portfolio of high-profile Dubai offices, shops and schools increased last year by 12.4 per cent to about $41.5m.

Net profit for the year rose 26.7 per cent to stand at $61.5m, it said.

The company said that the value of its portfolio increased 17 per cent over the year to $673.2m, mostly because of valuation increases of $53.2m, construction progress at its Jebel Ali school and a fit-out and leasing of some floors at its Index Tower office complex.

“Looking ahead, while we are facing a more volatile and challenging macroeconomic outlook, we remain optimistic of our continued ability to deliver consistent shareholder returns,” said Sylvain Vieujot, the executive deputy chairman of Emirates Reit.

“Our borrowing capability places us in a strong position to capitalise on cyclical market conditions for the execution of our acquisition ­strategy.”

The news came as the property broker Cluttons reported that office rents in 13 of the 22 submarkets it analyses in Dubai remained flat last year.

“In the face of a softening global economic backdrop, occupiers remain cost-conscious and budget-driven, with the key word for many being prudence,” said Paula Walshe, the head of international corporate services at Cluttons.

“Landlords, by contrast, appear to be slow to react to the cooling market, with many reluctant to move on asking prices and others demonstrating a lack of flexibility for lease terms at renewal.

“The emerging gulf between market reality and landlords’ expectations is a concern, particularly for a market that is starting to show signs of maturity.”

Emirates Reit was created in the 2010 trough of the Dubai property market and became the first Sharia-compliant Reit to be incorporated at the Dubai International Financial Centre. Its first purchase was Building 24 in Dubai Internet City.

Since then it has acquired a portfolio of eight properties in Dubai.

These include the Index Tower in DIFC, Le Grande Commun­ity Mall in Dubai Marina, Gems World Academy in Al Barsha South, the Office Park commercial building in Knowledge Village, a cluster of three loft offices in Media City and the under-construction Jebel Ali school in Akoya.

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