ENBD REIT and Institutional Real Estate in the UAE

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1 Tim Rose, Head of Real Estate Emirates NBD Asset Management ENBD REIT and Institutional Real Estate in the UAE Cityscape Talks: 11 th September

2 What is ENBD REIT? A long and consistent track record A real estate investment trust (REIT) formed by Emirates NBD Asset Management Invests in a diversified portfolio of Shari'a compliant real estate, with a primary focus on the United Arab Emirates Listed on Nasdaq Dubai under ticker symbol ENBDREIT and regulated by the Dubai Financial Services Authority (DFSA) Previously Emirates Real Estate Fund, a Jersey based open-ended fund Best Real Estate Fund UAE Sector Fund of the Year MENA Fund Manager Performance Awards 2017 Best Real Estate Fund UAE International Finance Magazine 2015 Real Estate Fund of the Year MENA Fund Manager Performance Awards 2016 Best Real Estate Fund Islamic Business & Finance Awards 2013 Since inception in 2005, provided investors with a regular and stable source of income by paying a dividend semi-annually Achieved long-term capital appreciation in net asset value per unit 2

3 Snapshot ENBD REIT (CEIC) Limited Offices: 62% Al Thuraya 1 Binghatti Terraces Portfolio property value USD 352m Properties 8 Residential: 28% Alternative: 10% Burj Daman Arabian Oryx House DHCC 49 Remraam Occupancy 86% WAULT 2.3 years Loan-to-Value 29% Gross yield* 8.7% *on property portfolio (gross rental revenue / portfolio value) DHCC 25 Uninest 3

4 Portfolio characteristics Growing annual income by sector (USDm) YE June 2017* Office Residential Annual Contractual Rental Alternative Diversified asset class (% by value) 10% *excludes sold assets in this period Strong Occupancy 28% 0% 20% 40% 60% 80% 100% 62% Al Thuraya 1 91% Burj Daman 56% DHCC49 83% DHCC25 85% Binghatti Terraces Arabian Oryx House 100% 98% Office Residential Alternative Remraam 100% Uninest 100% 4

5 Investment strategy Which sectors are we focusing on? Which areas are we focusing on? Focus is on good quality properties in the following sectors: Office 50-60% Residential 25-35% Alternative 20-30% The portfolio aims to be diversified across the UAE: Dubai 50-75% Abu Dhabi 10-20% Office Residential Alternative Key focus points Freehold or long-term leasehold titles USD 30m+ Aim to lengthen tenant lease terms Target off-market, relationship driven transactions Dubai Abu Dhabi Other Emirates Development Development to hold Limited to up to 30% of NAV Other Emirates <10% (tenant driven) 5

6 REIT regulations Establishing a REIT in the UAE The objective of a REIT is to generate a regular dividend income stream for investors, typically derived from income from investment properties, usually in the form of rent, with the additional opportunity for capital appreciation of the underlying assets and increases in the value of the equity. Key elements of our regulations: ENBD REIT is required to distribute a minimum of 80% of audited net income LTV is limited to up to 50% of GAV Development projects are limited to up to 30% of NAV ENBD REIT would require a majority stake in all joint ventures Independence, both in terms of committees and related parties An external Fund Manager needs to be appointed 6

7 The UAE needs more REITs Why? The UAE needs more listed REITs ENBD REIT (Nasdaq Dubai) Market cap: USD 257m Emirates REIT (Nasdaq Dubai) Market cap: USD 285m Saudi Arabia leads the field Riyad REIT Fund (Tadawul) Market cap: USD 605m Aljazira Mawten REIT Fund (Tadawul) Market cap: USD 274m Jadwa REIT Alharamain Fund (Tadawul) Market cap: USD 806m Taleem REIT (Tadawul) Market cap: USD 425m Al Maather REIT Fund (Tadawul) Bahrain has one REIT Eskan Bank REIT (Bahrain Bourse) Saudi REITs are entitled to hold up to 30% of their assets outside of the Kingdom. If more REITs in the UAE are not established, attractive institutional real estate assets will be acquired by Saudi REITs 7

8 What makes REITs attractive? Key benefits Opening real estate to investors Bringing liquidity to the sector Governance and regulation Equity opportunities previously available only to large investors capable of acquiring whole assets REITs offer real estate companies access to investors via capital markets, to fund acquisitions and projects REITs provide a stricter regulatory framework than direct investment in a real estate asset or fund Bringing greater liquidity to the real estate and development sector by widening the spectrum of potential investors REITs offer liquidity to investors: buying into a portfolio at a lower price than directly acquiring assets REITs are obliged to adhere to minimum dividend payment requirements Diverse portfolios mitigate investment risk and investors can exit or shorten a position at the time of their choosing A defined governance structure (Eg. Board of Directors; Investment Committee, etc.) mean diligent and scrupulous deployment of capital 8

9 In summary The UAE has established a regulatory environment that is ripe for the growth of REITs REITs deliver a regular dividend income stream, the opportunity of capital appreciation on underlying assets and increases in value of equity Saudi Arabia is currently leading the charge in the development of a REIT market REITs open the real estate market to investors who previously had difficulty accessing it, while also bringing liquidity into sector Governance and regulation of REITs mitigates risk associated with direct real estate investment or investment through funds 9

10 Thank you