Emirates NBD Real Estate Investment Trust (ENBD REIT), the Shari’a-compliant real estate investment trust managed by Emirates NBD Asset Management, reported a slight decline in its net income to US$21 million in the last financial year ending March 31, 2024.
Its Net Asset Value (NAV) increased 8.5 percent to US$195 million or USD 0.78 per share. The company’s property portfolio value increased 4 percent to US$384 million, driven by an enhanced occupancy rate of 93 percent, up from 88 percent a year ago, and the highest rate ever achieved by the REIT.
“The investments across multiple properties, combined with active asset management strategies, resulted in gross income increasing to US$34.5 million from US$31.3 million the previous year. Net income (including non-cash movements in valuations) was slightly lower than the previous financial year at US$21.0 million,” the company said in a statement,
“The net rental income or Funds From Operations (FFO), which excludes non-cash movements in valuations and is used for dividend payments to shareholders decreased to US$7.8 million from US$9.2 million the previous year, mainly due to rising financing and operating costs offsetting the revenue gains.”
It said, significant asset management activities took place during the year, including the refurbishment projects at Binghatti Terraces, both DHCC 49 and 25, and Arabian Oryx House. Additionally, the international WELL Health-Safety certification for Al Thuraya Tower 1 has been renewed, portraying a steadfast commitment to health, safety, and sustainability. These efforts, alongside robust leasing activities, positively influenced asset valuations.
The year also saw board and management changes, including Ali Al Mazroei becoming Chairman and Samir Kazi taking over as CEO. Following a comprehensive review of the portfolio and engagements with key stakeholders, ENBD REIT has embarked on a turnaround journey to address the portfolio performance through a comprehensive plan centred on three key pillars: 1) improving operating income through a bottom-up approach, 2) Managing financing costs, and 3) Optimising the portfolio to enhance overall returns. These initiatives are anticipated to drive profitability with initial benefits coming through over the next 6 to 12 months.
Samir Kazi, Head of Real Estate at Emirates NBD Asset Management and CEO of ENBD REIT, said, “The proactive approach to asset management and leasing has driven the highest occupancy rates in the REIT’s history and supported the portfolio value uplift. We expect further positive momentum in Dubai’s real estate market conditions with healthy demand for high-quality sustainable assets, despite the persistent high interest rate environment.
“Following a comprehensive review of the portfolio, we have identified a clear turnaround plan for ENBD REIT to unlock value for shareholders. Our focus will be on enhancing the attractiveness of our properties to drive income and occupancy levels, manage our financing and other costs whilst improving the overall mix of the portfolio. This is the beginning of our turnaround journey and I am confident in our ability to demonstrate improvements in the next 9 to 12 months as we execute our sustainable growth strategy.”
The portfolio’s Weighted Average Unexpired Lease Term (WAULT) stands at 3.74 years, with the Loan-to-Value (LTV) ratio maintained at 50.6 percent. During the first quarter of the year, 50 percent of the debt was successfully hedged to mitigate the impact of the rising interest rates in the years ahead and improved predictability during the current interest rate cycle. Additional opportunities to lower financing costs are under review.
The proposed final dividend of US$4 million payable to shareholders is equivalent to an annualised 4.1 percent of the cum-dividend NAV and an annualised 9.1 percent of the share price, bringing the total dividend for the year to US$7.5 million. Following the AGM and subject to shareholders’ approval, the shares will trade ex-dividend on 30 July 2024, with the record date set as 31 July 2024 and the payment date 27 August 2024.
Muhammad Asif Siddique, Senior Finance Manager at Emirates NBD Asset Management and Chief Financial Officer for ENBD REIT, added, “The portfolio performed well, supported by investments to maintain the attractiveness of our properties, drive high occupancy levels and in turn increase valuations. Whilst gross income improved, the increase in financing costs due to the higher interest rate environment and higher operating expenses associated with the improvement in occupancies impacted our net income. Having hedged 50 percent of our debt early in the financial year, we are now reviewing additional opportunities to lower costs further whilst maintaining a prudent capital management approach as we execute our turnaround strategy.”
Ends
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