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ENBD REIT (CEIC) Limited (“ENBD REIT”), the Shari’a compliant real estate investment trust managed by Emirates NBD Asset Management Limited, has announced its acquisition of a community retail centre in Dubai Silicon Oasis (“DSO”) from Souq Extra LLC for AED 210 million, with Phase 1 closing at AED 84 million. This strategic acquisition further diversifies ENBD REIT’s alternative portfolio and enhances its rental income return profile.
Launched in January 2017 by Souq Extra, a UAE retail and mixed-use property developer and manager, Phase 1 of the Souq Extra DSO community centre has 36,000 ft² of gross leasable area comprising 42 retail units fully let to blue-chip tenants including Carrefour Market, KFC, McDonald's and Starbucks. All rental income is guaranteed for two years.Souq Extra was advised on the transaction by Cavendish Maxwell and Knight Frank.
Anthony Taylor, Fund Manager, Real Estate at Emirates NBD Asset Management, commented:
“This acquisition diversifies ENBD REIT’s asset mix into retail and will enhance the rental income return profile of the portfolio. Both phases of this well-located development are being purchased using our existing finance facility at an 8% net yield on cash, offering shareholders a net leveraged return of 11% on equity.
We are pleased with the progress made since our listing in March 2017. In just nine months, we have completed the full allocation of the capital raised at listing and fully committed our existing finance facility in line with our growth strategy to acquire assets that are 100% occupied.”
ENBD REIT acquires the community retail centre using its existing finance facility at a gross yield of 9.9% and net yield of 8.0%. It has also agreed terms to acquire Phase 2 of the development on completion in the last quarter of 2018, also at an 8% net yield. The acquisition will lift the loan to value across the portfolio to 36% post Phase 1 and 42% after Phase 2, which remains below the target ceiling of 45%.
Phase 2 of the Souq Extra DSO comprises a 55,000 ft² expansion centred on a cobblestone public piazza with a European character. The retail strategy focuses on core community services including a regional medical centre, a popular children’s nursery, a well-renowned fitness centre, popular activity-based entertainment concepts, premium F&B and fast-casual indoor and outdoor dining concepts.
Ben Ganley, Chief Executive Officer, Souq Extra, commented:
“Our transaction with ENBD REIT is a strong endorsement of Souq Extra’s unique model, whereby institutional grade assets are developed, pre-leased and immediately delivered to institutional investors seeking sustainable cashflows. The DSO Phase I asset sale and the Phase II forward sale are notable highlights of a successful 10-year track record for Souq Extra and its prominent individual and sovereign investors.”
Andrew Love, Head of Investment at Cavendish Maxwell and Joseph Morris, Head of Capital Markets at Knight Frank commented:
“This disposal by Souq Extra highlights the continued demand for quality, income producing real estate assets in the United Arab Emirates. ENBD REIT’s acquisition is testament to the institutional quality of the asset, which is located in an extremely strong catchment and will further benefit from Phase II’s opening in 2018.”
Other acquisitions completed by ENDB REIT this year include Uninest student accommodation in Dubailand, South View School in Remraam Community and The Edge office building in Dubai Internet City.
As at 30 September 2017, ENBD REIT’s Net Asset Value (NAV) totalled USD 295 million. In October 2017, ENBD REIT announced that it had fully invested the USD 105 million proceeds from listing on Nasdaq Dubai in March 2017 and has now fully committed its current Islamic finance facility of USD 191 million. Following the acquisition of Phase 1 of Souq Extra DSO, the total property portfolio value is $466 million (AED 1.7 billion).
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