Emirates REIT, the UAE’s first regulated sharia-compliant real estate investment trust, has posted net profit of $35.11 million in the first half (H1) of the year, marking a 2.8 per cent rise in the figures of H1 2014.

Net property income rose 6.4 per cent to $45 million, while total assets increased by 5.3 per cent in the six months to $626 million.

Loan-to-value stood at 27.2 per cent at June 30 and net asset value increased to $1.48 per share representing an annualised total return of 16.4 per cent.

The REIT also started to realise significant capital appreciation on Index Tower in Dubai, UAE, reflecting a positive start to leasing the asset. This contributed to increasing total assets by 5.3 per cent in the last six months to $626 million.

Emirates REIT paid shareholders a total dividend of $24 million for 2014, equivalent to $0.08 per ordinary share. This was an increase of 60 per cent over the dividend relating to 2013.

For the first half of 2015, the annualised total return of the REIT was 16.4 per cent.

After payment of the dividend on 30 June 2015, the REIT’s net asset value was $1.48 per share. Emirates REIT aims to continue to distribute a dividend to its shareholders twice a year; an interim dividend at the end of January and a final dividend in June.

Operationally, a primary focus over the first six months of the year has been the fit-out and lease of commercial space in Index Tower. In June and July, two floors out of the total of 17 have already been released, fitted out and furnished. Three additional floors are in the process of being fitted out and furnished and should be ready for leasing during the fourth quarter of 2015.

In the first half of 2015, the REIT recognised the first significant valuation gain on Index Tower. This asset now represents 43 per cent of the REIT's total asset portfolio by value. For the coming months, the trust expects to see further capital appreciation as occupancy rates rise, and next year should witness the impact of cash flows reflected in the income stream.

The effect of Index Tower in the first half of 2015 has been to increase expenses and reduce net rental income margin, compensated by the increase in asset value, a statement said.

The rest of the portfolio has continued to perform well. Occupancy, excluding Index Tower, remained steady at 94.6 per cent. Passing income across the whole portfolio was up 4.8 per cent year on year to $36.8 million.

The REIT manager has continued to improve the tenant mix across the portfolio and continues to make progress at Le Grande Community Mall, which was acquired in May 2014.  An agreement has been signed with Choithrams, the chain of UAE-based supermarkets and department stores, to be the anchor retailer in this mall.

As of June 30, the REIT’s loan-to-value ratio remained at 27 per cent, leaving significant headroom for further borrowings to fund acquisitions.

After the period end, in early August 2015, the REIT agreed to develop a new school in the Akoya development. The REIT acquired the freehold land plot and leased it immediately to the school operator at a 10.1 per cent net yield. Over the course of the next year, the REIT will fund the further development of the school and expects to achieve an internal rate of return for this project in excess of 11 per cent.

Akoya is an upcoming prime residential development in Dubai. The REIT's total investment in this project is expected to be $56.7 million. The REIT also expects to see an immediate valuation gain of $1.6 million at the end of August. The transaction enhances rental income from day one and should provide long-term secure cash flows.

Sylvain Vieujot, executive deputy chairman of Emirates REIT Management, said: “We have had a strong first half from an operational and financial perspective and the recent transaction to develop a new school in Akoya and continued progress made at Index Tower maintains our momentum into the second half of the year.”

“The REIT’s strategy of active portfolio management and the acquisition of properties with upside potential enables it to consistently deliver a healthy total return,” he added. – TradeArabia News Service