Monday, February 27, 2017

Emirates REIT posts strong rental growth in 2016

Emirates REIT, the UAE’s first regulated sharia compliant real estate investment trust listed on Nasdaq Dubai and managed by Equitativa, has reported a rental income of $45.3 million for 2016, up 23 per cent over the previous year.

Emirates REIT also posted strong rental growth for the fourth quarter in 2016 which increased by 25 per cent to $13 million from the previous year's $10.4 million.

Overall, for the year ended December 31, 2016, the total property income increased 22.2 per cent to $50.7 million, said the company in a statement.

The increase in rental income was principally attributable to increased leasing at Index Tower, and the rent of the new British Columbia Canadian School, it added.

At the year-end, total occupancy across the portfolio reached 81 per cent and the weighted average lease expiry of the total portfolio was stable at 8.5 years.

The strong underlying performance over 2016 saw FFO, or funds from operations, or cash profit, increase to $11.3 million, a year-on-year increase of 37.6 per cent.

Revaluation gains over 2016 were $36.5 million and reflect an increase in contracted cash flow. They include post completion gains on Jebel Ali School and gains following the leasing of commercial floors at Index Tower.

The slowdown in revaluation gains reflects the maturing of the portfolio over time and the slowdown in the broader commercial real estate sector.

As of December 31, 2016, the Emirates REIT's total portfolio value has hit $752.7 million, thus registering a year-on-year increase of 12 per cent.

The net asset value was $1.65 per share, or $493 million, a 5 per cent increase after the dividend distributions of $0.4 cents in both January and June 2016.

In 2016, Emirates REIT completed the construction of the new Jebel Ali School campus on time and within the budget. The property, located in the Akoya development in Dubailand, saw an 18.3 percent post completion valuation gain of $12.8 million.

Following a similar model, the Emirati firm launched another school development with the British Columbia Canadian School.

The REIT acquired a leasehold plot in Dubai Investments Park and immediately leased it back to the school. Development started in September and the overall investment is estimated to be $24 million. The estimated IRR on this project is expected to exceed 12 per cent, it added.

During the latter part of 2016, the REIT Manager made progress in negotiating pre-leases on over 50 percent of the retail podium gross floor area at Index Tower. This includes competitive negotiations with anchor tenants. The remodeling and fit-out of the retail space is expected to start in Q2.

Sylvain Vieujot, the chief executive of Equitativa Dubai, the REIT manager, pointed out that the company continues to offer strong total returns despite the slower market for commercial property.

"Our FFO has grown by 38 percent demonstrating a conversion from valuation gains into actual cash flow. The efforts of the team allowed us to take advantage of the challenging environment to reduce operating costs," he noted.

"Our experience in developing schools has been very successful and we expect the REIT to continue investing in the education sector," he added.

According to him, the asset management team made good progress driving down building expenditure across the portfolio, through negotiations with existing suppliers and energy efficiency programmes.

This lead to an eight per cent relative cost reduction across the portfolio, he added.-TradeArabia News Service

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