ENBD REIT, the Shari’a compliant real estate investment trust managed by Emirates NBD Asset Management Limited, has announced its strategic priorities for 2020-21. In March, shareholders voted in favour of maintaining the current structure of the Fund, which will remain as a listed Real Estate Investment Trust on Nasdaq Dubai. In 2020, ENBD REIT’s management will focus on flexible solutions for combating the market challenges created by the Covid-19 pandemic and a low oil price environment, while taking advantage of lower interest rates and hedging opportunities. The REIT’s medium-term objectives are to reposition the real estate portfolio by increasing the diversity of its holdings, and to act opportunistically on disposals and acquisitions that will deliver competitive shareholder value.
Short-term priorities: agility to navigate headwinds, lower cost of funding
With the current structure of the Fund and its portfolio remaining in place, the REIT’s management will focus on agile solutions for the portfolio that will enable it to maintain robust occupancy levels and stable rental income during a period of market volatility, in light of the Covid-19 pandemic and low oil prices. ENBD REIT is already rolling out a series of flexible initiatives for occupants throughout its portfolio, which will assist tenants facing genuine financial difficulty, as well as bolster occupancy and encourage longer-term lease agreements. At the same time, management will take advantage of low interest rates via Shari’a compliant hedging arrangements to fix financing covenants at the lowest possible cost for the future.
Medium-term objectives: repositioning portfolio, opportunistic on transactions
Throughout 2020-21, ENBD REIT intends to reposition its property portfolio by increasing its diversification, and in particular by growing the weighting of the ‘alternative’ assets segment, which currently accounts for 19% of the portfolio’s total value. Preferred asset classes for potential acquisitions include industrial facilities, logistics/warehousing, and healthcare, with longer lease terms a common feature of such properties, making them attractive for achieving stable rental income, extended unexpired lease terms and resilient long-term valuations in a challenging macroeconomic environment.
Management will take an opportunistic view on potential disposals from the portfolio, on the basis that they offer fair value in the life cycle of the property and that there are suitable opportunities to utilise excess capital. Proceeds from asset disposals may partially be utilised to settle current debt obligations, in order to maintain an appropriate Loan-to-Value (“LTV”) ratio, with balances either returned directly to shareholders or redeployed towards new acquisitions in favoured asset classes, in line with the REIT’s commitment to delivering shareholder value.
Anthony Taylor, Head of Real Estate at Emirates NBD Asset Management, commented:
“Our priorities this year and next year will be to continue to build on diversity in the portfolio – thereby de-risking our position in the context of the market – while taking advantage of lower interest rates to bring down costs. Looking ahead, we believe an opportunistic view on disposals and acquisitions will deliver healthy returns, and we are looking forward to executing on this strategy in the months and years ahead.
No-one in any sector is in any doubt that 2020 is going to be a challenging year. Our portfolio came under pressure during 2019 as a result of soft real estate market conditions, and in the short-term these conditions have been exaggerated by the Covid-19 pandemic and a return to low and volatile oil prices. We do, however, remain agile and well-positioned to navigate headwinds and are engaging with tenants across the portfolio with the intention to assist those in genuine financial difficulty. We recognise that a gradual uptick in the real estate market cycle is probably delayed, but we have the diversity and the resilience in our portfolio to maintain occupancy and rental income, with sufficient cashflow to maintain dividend payments to shareholders.”
