Bahrain-based Eskan Bank said it has finalised the formal registration of its real estate investment trust (REIT) with the Central Bank of Bahrain (CBB) thus paving way for the launch of its ground-breaking retail REIT public offering on November 22.

This will now enable the REIT to be launched to Bahraini and GCC institutional and retail investors, with a subsequent listing on the Bahrain Bourse (BHB).

The bank has completed all CBB-related regulatory requirements and in readiness for this landmark event, it has appointed Bahrain Islamic Bank (BisB) as the official receiving bank for the subscription offering.

Securities & Investment Company (Sico) is the mandated lead manager for the public offering and listing of Bahrain’s first Sharia-compliant REIT that is open to retail investors, as well as the sub-investment manager and dedicated market maker.

Welcoming the development, Dr Khalid Abdulla, the general manager of Eskan Bank, said: "Following full regulatory compliance with the CBB, we are now proceeding with plans for the public offering of the REIT, which will open for subscriptions on November 22."

It will be open for subscriptions for a two-week period only, with the closing date set at December 6.

The REIT has a target distributable yield of 6.5 per cent net of all costs, and a minimum subscription of BD500 ($1,316), which should make it accessible and attractive to individual Bahraini and GCC nationals seeking a safe investment opportunity in the kingdom’s real estate sector,” he added.

Sico’s chief executive Najla Al Shirawi said the Eskan Bank REIT incorporates several unique features, designed to enhance its attractiveness and provide safeguards for investors.

These include an efficient structure with one of the lowest expense ratios; no real estate development risk as found with most other REITs; and no debt, which is rare in real estate investment structures, stated Al Shirawi.

"The two income-generating properties that comprise the REIT – Segaya Plaza and Danaat Al Madina – currently have an overall occupancy rate exceeding 85 per cent. This is expected to increase in the near future, given that the commercial assets of the Danaat Al Madina property were only handed over last year," she added.

Eskan’s chief business officer and deputy general manager Ahmad Tayara re-affirmed the bank’s intention to expand and diversify the REIT in the future.

"We will augment the existing seed assets by inviting private and public sector developers to include their properties in the Eskan Bank Realty Income Trust, subject to meeting the REIT’s strict criteria for acquiring assets and compliance with regulatory requirements. This will provide an improved yield for investors as well as improving the risk profile of the REIT over time," he noted.

Wissam Haddad, the head of corporate finance at Sico, said: "Eskan Bank’s REIT has an annual target distribution yield of 6.5 per cent, payable twice a year, while still being able to allocate sufficient cash reserves annually to ensure the properties remain in prime position for decades ahead."

"This distributable yield is especially attractive given the modernity of the properties; the liquidity provided on the Bahrain Bourse with a dedicated market maker; the diversity of the property types and tenant base; as well as no short-cuts being taken with regards to the appointment of professional management," observed Haddad.

"In comparison, US equity REITs have an average yield of 3.7 per cent (even with 30 per cent of average debt on their properties); while local equities are currently distributing an average annual yield of 4.4 per cent," he added.-TradeArabia News Service