The first Bahrain Bourse-listed real estate investment trust (REIT) has been announced by Eskan Bank with Securities & Investment Company (Sico) acting as lead arranger.

A listed REIT is an investment vehicle that invests directly in real estate with its units traded like a stock on exchanges, said a report in the Gulf Daily News (GDN), our sister publication.

Eskan Bank’s Sharia-compliant REIT is likely to have a total value of BD20 million ($53 million), with a tranche to be offered to the public through an initial public offering (IPO) later this year.

The portfolio will consist of two income-generating and unleveraged properties currently owned by Bahrain Property Musharaka Trust (BPMT), which was formed in May 2011 in collaboration with institutional investors and high net worth individuals.

The properties are Segaya Plaza – a fully-occupied retail and residential development in Segaya – and Danaat Al Madina – a mixed-use development in Isa Town.

The apartments of Danaat Al Madina have been sold to Bahraini beneficiaries and the commercial components shall be transferred to the REIT.

Eskan Bank said it, along with Cluttons, is currently in the process of leasing the asset, which has received strong interest since being offered to the market.

According to the bank’s general manager Dr Khalid Abdulla the REIT gives Bahrainis the opportunity to share in its significant property development activities and benefit from commercial and residential rental income across diversified assets.

“Eskan Bank wishes to position itself as a partner of choice for investors seeking development opportunities to satisfy a pent-up demand (social housing) while providing tangible exits boosting investors’ confidence in the kingdom,” he said.

As arranger, Sico is responsible for managing the entire process, which includes internal property valuations along with independent real estate valuers, legal structure, regulatory submissions, and the initial public offering.

The firm’s chief executive Najla Al Shirawi said the new alternative investment asset class will contribute in adding depth to the kingdom’s real estate sector, while helping to improve liquidity on the Bahrain Bourse.

Bahrain Bourse (BHB)’s REIT listing rules came into effect on May 17 with requirements including a minimum of two properties and a combined asset value of not less than $20 million.

BHB chief executive Shaikh Khalifa bin Ebrahim Al Khalifa said the announcement underlined the keen interest from property developers and managers in REIT as an alternative investment option, and also among investors who would benefit from investing in real estate as an asset without directly owning and managing the property.

CBB regulations mandate that the dividend pay-out ratio of a listed REIT has to be at least 90 per cent of net realised income.

Sico head of corporate finance Wissam Haddad said the structure of the new REIT provides significant built-in safeguards.

“Trustees act as watchdogs on behalf of unit holders, and are supported by an independent trust manager, custodian, auditors and legal counsel,” he added.

“Now traded in more than 37 jurisdictions worldwide, REITs have consistently delivered higher returns with significantly lower fees than other major alternative asset classes, and have shown little correlation to the returns of the broader stock markets.”

The Eskan Bank REIT is set to be the second Sharia-compliant listed REIT in the Gulf region. - TradeArabia News Service