The first real estate investment trust (REIT) is expected to list on Bahrain Bourse (BHB) next month, chief executive Shaikh Khalifa bin Ebrahim Al Khalifa said yesterday (May 17).

Speaking at a Press conference at BHB premises in Bahrain Financial Harbour Mall, he said a REIT is an investment vehicle that invests in real estate directly, either through properties or mortgages and sells like a stock on exchanges.

It is set up as a trust whereby investors hold interest in the form of units, said a report in the Gulf Daily News (GDN), our sister publication.

He said "REIT Listing Rules issued by Bahrain Bourse" came into effect yesterday and include the pre-requisites that have to be met for listing on the bourse.

The rules allow both Bahraini and foreign REITs to be listed and open up a new market for Bahrainis as well as foreign institutional investors.

Bahrain's state-of-the-art legal and regulatory environment, resilient market infrastructure for securities trading, clearing and settlement, high regulatory and investor protection standards, solid financial sector supervision, diversified offer of financial products and services, unique concentration of investment fund industry experts and unrivalled know-how in cross-border investment funds business, all made the kingdom an attractive destination for listing REITs, Shaikh Khalifa said.

The bourse has seen keen interest from property developers and managers in REIT as an alternative financing option and also among investors who would benefit from investing in property as an asset without directly owning and managing the property.

According to him, the introduction of a workable REIT regime will facilitate investment in productive assets and provide much needed liquidity in the market.

"The real estate sector contributes significantly to the GDP (gross domestic product) of the country, and hence the continuous regulation of the sector will benefit all involved stakeholders," he said.

The chief executive said REIT structures have adequate safeguards built-in, with trustees acting as watchdogs on behalf of unitholders.

They are also regulated by the Central Bank of Bahrain (CBB) and must be authorised by the CBB before they can be listed.

A CBB-authorised REIT is governed by the Financial Trusts Law No. 23 of the Year 2006, Volume 7 of the CBB Rulebook, as well as the listing rules.

Although Bahrain introduced the Financial Trust Law in 2006, due to the financial downturn in 2008-2009, no further development in REITs took place until recently, he said.

REITs wanting to list on BHB must have a minimum asset value of $20 million or its equivalent in another currency, Shaikh Khalifa said.

According to CBB regulations, the dividend payout ratio of a REIT has to be at least 90 per cent of its net realised income, and unitholders can expect to receive stable distributions.

BHB director of marketing and business development Hani Al Mandeel, who also addressed the Press, said REITs provide investors an alternative investment asset class and access to ownership in large, high-value real estate projects at low ticket sizes.

"Typical REIT portfolios include high income-generating properties such as shopping malls, offices, hotels, healthcare and industrials," he said.

"Listed equity REITs consistently deliver higher returns with significantly lower fees than other major alternative asset classes."

Al Mandeel said the listed REIT market is increasingly becoming global phenomena.

"The growth is being driven, predominantly, by the appeal and adoption of REIT regulations in more than 37 jurisdictions." - TradeArabia News Service