News

January 10, 2018

ENBD REIT buys Souq Extra Dubai Silicon Oasis

ENBD REIT (CEIC), the Shari’a compliant real estate investment trust managed by Emirates NBD Asset Management, has acquired a community retail centre in Dubai Silicon … Continued

ENBD REIT (CEIC), the Shari’a compliant real estate investment trust managed by Emirates NBD Asset Management, has acquired a community retail centre in Dubai Silicon Oasis (DSO) from Souq Extra for Dh210 million ($57 million), with Phase 1 closing at Dh84 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 sq ft 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, said: “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 per cent net yield on cash, offering shareholders a net leveraged return of 11 per cent 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 per cent occupied,” he added.

ENBD REIT acquires the community retail centre using its existing finance facility at a gross yield of 9.9 per cent and net yield of 8.0 per cent. It has also agreed terms to acquire Phase 2 of the development on completion in the last quarter of 2018, also at an 8 per cent net yield. The acquisition will lift the loan to value across the portfolio to 36 per cent post Phase 1 and 42 per cent after Phase 2, which remains below the target ceiling of 45 per cent.

Phase 2 of the Souq Extra DSO comprises a 55,000 sq ft 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, said:  “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 cash flows. 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”.