UAE-based Emirates REIT, one of the largest shari'a-compliant real estate investment trusts, has recorded a 9.7 per cent decline in its rental income for the year ended December 31, 2020 compared to the year before, while its total property income fell 9.4% and net property income was down 11.3 per cent due to challenging market conditions. 

 

Announcing the 2020 results - prepared in accordance with International Financial Reporting Standards ("IFRS") and audited by Deloitte And Touche (ME) - Equitativa (Dubai), manager of Emirates REIT, said the net asset value as of December 31, 2020 stood at $225.5 million ($0.74 per share), while the year witnessed a decrease of 1.3% in the portfolio’s total property expenses.

 

Given the challenging real estate market conditions, the fund registered a solid occupancy rate of 69% as on December 31, 2020.

 

The financial year 2020 presented unforeseen challenges to the global real estate market, and Dubai was no exception, it stated. 

 

Covid-19’s negative impacts were particularly acute on the office and education real estate sectors which are the pillars of the Emirates REIT property portfolio.

 

During this trying period, the Equitativa team focused its efforts on tenant retention and leasing which proved to be effective in delivering on short-term strategic priorities to support its long-term underlying purpose: the curation of a portfolio of real property assets that produce regular revenue. 

 

The greatest impact of the pandemic was witnessed on Emirates REIT’s portfolio in October 2020, during which the occupancy and income fell to its lowest point; however, from November 2020, the REIT's income has begun a market recovery and only increased.

 

The REIT manager has been proactively responding to market conditions, focusing on operational efficiencies, asset enhancement, and tenant retention. 

 

The revaluation loss effect on profit was partially offset by several factors: increasing rental and total property income, reducing total property expenses, signing new leases, executing renewals of leases, and improving operating margins.

 

As a result, during the year ended 31 December 2020, the REIT manager signed 97 new leases, totalling approximately 175,560 sq.ft.; and executed 142 lease renewals, totalling more than 289,830 sq.ft.

 

With a diversified portfolio and tenant mix and a limited exposure to retail (10% of the NLA), Emirates REIT has taken prudent steps to manage liquidity and preserve financial flexibility thorough out 2020, it added.

 

Equitativa Chairman Abdulla Al Hamli said: "2020 witnessed unprecedented times, with particular uncertainty and challenges impacting the real estate market worldwide. Emirates REIT assets have witnessed a larger than normal drop in valuation due to the high volatility and lack of certainty of the real estate market."

 

"We trust that such volatility will recede and that following the decisive actions of the UAE government, the market is already on a fast recovery trajectory," he noted.

 

Sylvain Vieujot, Executive Deputy Chairman and CEO of Equitativa, said: "Despite strong downward pressure on the market, our resilient property portfolio performed well, demonstrating its enduring value with each new and renewed tenant lease."

 

"We are particularly pleased with portfolio occupancy and longer-term leasing trends among our leading properties, as in the case of Index Tower which contributes so significantly to our overall income," he noted.

 

"Having completed our earlier announced external review, led by global investment bank Houlihan Lokey, regarding strategic options for our portfolio, the Board believes Equitativa is now in a stronger position to confidently move forward with an improved operational structure necessary to deliver greater value to its shareholders," he added.