Ras Al Khaimah clears Equitativa to invest in onshore property in emirate

Real estate investment trusts, which buy properties and distribute the proceeds to investors, now have the go-ahead to invest in Ras Al Khaimah, above. Satish Kumar / The National

The company behind the UAE’s first real estate investment trust (Reit) is finalising plans for a series of new funds after the Government of Ras Al Khaimah allowed it to invest in onshore property in the emirate.

According to Equitativa Real Estate, the umbrella company that owns the Reit manager for Nasdaq Dubai-listed Emirates Reit, Sheikh Saud bin Saqr Al Qasimi, Ruler of Ras Al Khaimah, has issued a decree allowing current and future Reits and other collective investment funds that it manages to invest in Ras Al Khaimah.

The Emiri Decree, which is similar to one issued by the Dubai Government in February 2013, allows property funds managed by Equitativa to own onshore real estate in Ras Al Khaimah.

The decree is “subject to some conditions including that at least 51 per cent of the shares of the Reit shall at all times remain owned by UAE or other GCC nationals”, Equitativa said.

The company, which recently set up an asset management branch in Abu Dhabi’s new financial free zone Abu Dhabi Global Market, said it was working on launching a number of new specialised Reits focused on the UAE and the wider Middle East.

Emirates Reit shares were unchanged on Wednesday at US$1.11.

Sylvain Vieujot, Equitativa's chairman, told The National that the company was actively looking to buy schools, hotels, industrial property and housing in RAK, which it would be likely to sell into one of its new real estate vehicles.

“The RAK property market is not large enough to warrant a separate vehicle by itself but we would be keen to set up separate Reits for different asset classes,” he said.

“At the moment all of our property is located in Dubai but it is our intention to focus not just on Dubai but across all of the emirates.”

Reits are common in other parts of the world, where they are often sold to investors as a way of putting money into the property market without the difficulties of direct investment. Reits buy properties such as large office buildings and shopping centres, manage them and distribute the rental yield to investors. Most are publicly traded.

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. It owns nine properties, mostly offices and schools all in Dubai.

Despite a strong appetite from investors to put cash into Dubai’s property market, the Reit sector in the Middle East has historically struggled to take off, held back by a shortage of investment-grade office space attractive to such institutional investors. But since Emirates Reit was floated six years ago, more and more companies are looking to enter the sector.

Last year the Moroccan government passed legislation allowing Reits to operate and the vehicles form a key part of Saudi Arabia’s National Transformation Plan, which is currently being implemented. The property arm of GFH Financial Group and London-listed investment company Rasmala have announced an intention to set up Reits in Dubai.

“The UAE has historically set the benchmark for investment activity in the region,” said Faisal Durrani, the head of research at Cluttons. “I think in terms of Reits there is a perception that the availability of Reits sends out a strong message that the country is open for investment and provides a boost for foreign direct investment, which is easy to replicate and particularly welcome at a time of low oil prices.”

“In the UAE, we are seeing more investment-grade stock being built and RAK does have a number of high quality hotels with international operators as well as schools, which are of interest across the UAE due to the shortage of school places.”

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