ENBD Reit’s net asset value drops to $174m
The investment trust is looking at new ways to bring further value to existing tenants through a series of strategic upgrades currently in progress
ENBD Reit, the Shariah-compliant real estate investment trust managed by Emirates NBD Asset Management Limited, announced on Tuesday that its net asset value (NAV) for the first quarter ended 30th June 2021 dropped to $174 million from $180 million in the previous quarter.
The decline in NAV by one per cent is predominantly due to sustained valuation pressures and softening real estate market conditions as the regional macroeconomic conditions remain in the early stages of post-pandemic recovery, ENBD Reit said in a statement.
The investment trust’s management team has reduced expenses by 16.9 per cent following a year of actively managing down operating costs in the portfolio. Occupancy in the portfolio remains stable at 75 per cent for the period ending 30th June 2021 compared to 76 per cent as at March 31, 2021, and 75 per cent for the same period in the previous year. The active leasing strategy catering to tenants’ needs continues to play a significant role in protecting occupancy rates, but challenging real estate market conditions subdued further recovery. The weighted average unexpired lease term has increased from 3.2 years to 3.97 years as 30th June 2021 compared to the previous year.
The total dividend paid to shareholders for the year ended March 31, 2021 was $9.25 million, equivalent to 8.6 per cent annualised dividend return of ENBD Reit’s share price. The gross rental income for the period stood at $7.48 million, declining by 11 per cent from $8.44 million for the same period last year, it said.
The Reit’s loan-to-value ratio increased to 52.7 per cent as a result of valuation pressures in the property portfolio, and the management team is in the process of refinancing an important debt facility with Standard Chartered bank, amounting to $45 million. “The Reit maintains a regular dialogue with all lenders to ensure that covenants are maintained at manageable levels.”
Anthony Taylor, head of Real Estate at Emirates NBD Asset Management, said in light of adverse conditions, the net rental income and occupancy rates for the first quarter have held up well – the result of active portfolio management. Meanwhile, NAV remains under pressure, declining by one per cent from the previous quarter.
“Our priority in recent quarters has been to ensure stable occupancy, which we have achieved through a range of initiatives, including support for struggling tenants and focusing on asset upgrades. Total expenses have been reduced by almost 17 per cent compared to June 30, 2020, the result of the management team’s proactive cost management initiatives, including renegotiating our contracts with service providers, lower financing costs from our Shari’a-compliant debt facilities which account for the lion’s share of the Reit’s costs and reduced management fees due to a lower NAV,” said Taylor.
He said the investment trust is looking at new ways to bring further value to existing tenants through a series of strategic upgrades currently in progress.
“Most notably, at Al Thuraya Tower 1, where we are taking advantage of lower occupancy rates to make significant upgrades to improve the look and feel of the building. We also recently completed sub-division works at Burj Daman to create units that cater to smaller businesses and corporates looking to downsize, by reducing both costs and office space requirements, given that flexible working is becoming a more normal practice. We continue to take a pragmatic approach to potential asset disposals, with a number of assets in the portfolio being considered for sale, where we believe that fair value can be achieved,” said Taylor.
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