UAE – November 27, 2024 – The CEO of the REIT’s manager said the right to extend by one year had been exercised for convenience
Emirates REIT’s outstanding sukuk will be refinanced or a new sukuk will be issued by the end of the year despite the entity exercising its right to a one-year extension, said Thierry Delvaux, the CEO of Equitativa, which manages the Nasdaq-Dubai-listed REIT.
Delvaux told Zawya that refinancing of or issuing of a new sukuk is on track and that the deadline extension of the sukuk, which was last refinanced in December 2022 at a value of $380 million, had been exercised in June for convenience. The deadline extension, he said, allowed the REIT to put off refinancing until late 2025, but the intention is to do so by the end of 2024, and discussions are underway with banks and sukuk holders.
“We now have a loan to value (LTV) of less than 26%, which is very attractive for banks or sukuk holders. We have to refinance less than $200 million to do so, and we started a long time ago to talk to those banks and those sukuk holders, so we are well advanced in these discussions,” he said.
The REIT’s portfolio includes three schools, and the rest are commercial offices or malls. The office sector was the strongest in terms of rental growth in the portfolio, Delvaux said, with occupancy reaching 93% and rents for some prime office spaces more than doubling in 18 months.
Refinancing or reissuing a sukuk was one of three pillars in his strategy, he added, with the second and third being increasing rental revenue and taking advantage of market conditions to dispose of an asset, namely the $196 million sale of Office Park in October.
What went wrong?
Delvaux said it was “no secret” that the original sukuk refinance date in 2022 came at the “worst time”, coinciding with spiralling interest rates, requiring coupon payments of 11% and making it impossible to generate significant liquidity.
Part of the solution is to try to fix the interest rate in the longer term and try to stay at an LTV of 30%.
The future
There are likely to be more REITs in the market as more investors start to recognise their value since the introduction of the UAE’s 9% corporate tax.
The REIT’s share price has more than doubled since the Office Park transaction, Delvaux said, and the manager will continue to improve perception of the REIT to bring the share price back to appealing levels.
“I don’t think seeing many more REITS coming is a threat to our REIT. It’s the right thing for the market,” he said.
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