Investor appetite for REITs ramps up in Gulf

New apartments stand under construction at the Al Qasr residential project, built by Dar Al-Arkan Real Estate Development Co., in Riyadh, Saudi Arabia, on Wednesday, Oct. 13, 2010. Builders in the Persian Gulf region, hit by slumping orders in their home countries, are eager to expand in Saudi Arabia when lending picks up. Photographer: Waseem Obaidi/Bloomberg via Getty Images
Updated 03 July 2018
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Investor appetite for REITs ramps up in Gulf

LONDON: Regional appetite for real estate investment traded funds (REIT) is ramping up, say market experts, as investors get to grips with the relatively new financial instrument and authorities throw themselves behind promotional campaigns.
In Saudi Arabia, Riyadh-based Mefic Capital is expected to list its new REIT on the Tadawul exchange this month following a successful subscription period in May.
The company will list SR879.5 million ($235 million) of its REIT units following a successful subscription period in April and May, joining the 13 REITs currently listed on the exchange.
Over in the UAE, the Dubai Financial Market (DFM) on Sunday signed an agreement with Dubai Land Department to promote the listing of REITs by providing various incentives to companies.
The DFM is also set to develop a new platform for the listing and trading of REITs, said Essa Kazim, chairman of the DFM, in a statement on July 1.
Simon Townsend, head of valuation, advisory and consulting at CBRE Middle East, said that Gulf markets were becoming more aware of such funds.
“The region has seen a growth of these REIT funds as the market has become more familiar with these vehicles and structures,” Townsend told Arab News.
The use of REITs allows investors to gain exposure to the real estate market through allowing the collective ownership of fully-constructed real estate assets that generate regular income.
The market for these types of funds has been growing throughout the Gulf since the the first REIT was launched in 2014 on Nasdaq Dubai.
Since then, Abu Dhabi, Saudi Arabia and Bahrain have all brought in regulatory frameworks for the use and listing of the funds. Oman finalized its regulation at the beginning of the year.
Townsend said the structure is particularly appealing to smaller investors keen on obtaining real estate exposure.
“Investors whether individuals or small/mid-size investment groups have been able to invest with clarity in components of the real estate market that traditionally have seen high barriers to entry such as large-scale commercial properties where entry prices have historically only enabled the larger investors to benefit,” he said.
Mefic Capital’s REIT will provide investors access to the Saudi and UAE real estate market through eight properties. Only Saudi citizens or companies with a Saudi presence exclusively will be able to invest in the fund.
Management fees have been set at 0.35 percent, with a guaranteed minimum 2 percent annual return when the fund doesn’t meet a 5 percent investment threshold, making it the first listed real estate fund in Saudi Arabia to have a guaranteed return.
The success of the 1.23 billion riyal REIT demonstrates market demand for this kind of instrument, said Alain Sfeir, corporate partner at Clyde & Co. in Saudi Arabia, the law firm that advised Mefic Capital, in a statement.
“The size of the fund’s public offering gives you an indication of the appetite for Saudi diversified investment opportunites at the moment,” he said.

Decoder

What are REITs?

Real Estate Investment Traded Funds, or REITs, are financial instruments that allow all types of investors to obtain investment exposure to the Real Estate Market. This is achieved through collective ownership of constructed developed real estate qualified to generate periodic and rental income. REITs can invest locally, regionally and globally, where the total asset value outside the Kingdom shall not exceed 25% of the fund's total asset value. (Source: Tadawul.com)


Abu Dhabi Commercial Bank picks Barclays to advise on merger

Updated 15 November 2018
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Abu Dhabi Commercial Bank picks Barclays to advise on merger

  • Potential merger involves ADCB, Union National Bank (UNB) and Al Hilal Bank
  • A merger of the trio could create an entity with around $113 billion in assets

ABU DHABI: Barclays has been appointed by Abu Dhabi Commercial Bank (ADCB) to advise on a potential merger plan involving Union National Bank (UNB) and Al Hilal Bank, banking sources told Reuters.
The merger, announced by the banks in September, is the latest consolidation among state-owned companies in the United Arab Emirates’ (UAE) capital.
ADCB, majority owned by the Abu Dhabi government and the second largest bank in the emirate after First Abu Dhabi Bank (FAB), declined to comment. Barclays also declined to comment.
If it goes ahead, a merger of the trio could create an entity with around $113 billion in assets, according to Refinitiv data, and the UAE’s third-biggest lender after FAB and Emirates NBD.
A separate source said two banks could be created out of the consolidation, with the conventional banking units of ADCB and UNB merging to create one lender.
Another could be formed through combining the Islamic banking units of ADCB and UNB, along with Al Hilal.
AlKhaleej newspaper reported the same arrangement was being considered last month, citing sources.
The tie-up was at an early stage, UAE Central Bank governor Mubarak Rashed Al-Mansoori told reporters last week on the sidelines of a conference, adding he expected more consolidation in the future.
FAB was created by last year’s merger between National Bank of Abu Dhabi and First Gulf Bank.
The emirate of Sharjah is weighing a merger between three of its banks — Bank of Sharjah, Invest Bank and United Arab Bank, Reuters reported in September, citing sources.