UAE investors can pick up some Belt & Road action

Dubai

Want a piece of the property action in China’s Belt & Road (B&R) Initiative? Investors in the UAE and from the region can do so via a new real estate investment trust (Reit) set up and operated by the firm that created Emirates Reit. The target is to raise more than $200 million to $300 million in the initial phase and then scale up further.

Equitativa, which operates Emirates Reit, has aligned with Hong Kong based Affluent Partners Holdings to launch the B&R Reit.

A personal initiative of Chinese President Xi Jinping, the multi-billion dollar Belt & Road Initiative plans to create a new land and sea trade route connecting countries and continents, from Asia to Africa and reaching up to the doors of Europe. Several projects have already been taken up in some of these countries, with Chinese financial institutions lending funds and with Chinese contracting firms taking a central role. The corridor will extend its coverage to the Middle East as well.

But there have been criticisms that some of the countries may find it difficult to foot the bill for their part in this, and that it is also a move by China to exert dominance.

However, Sylvain Vieujot, Group Chairman of Equitativa, wants to separate the political and economic aspects of what B&R initiative could eventually deliver. “Funds raised by the Reit will only be interested in selective asset purchases along the trade corridor being created. It does not mean the fund will invest in property assets in all of the countries through which the corridor passes.

“There is no interest on our part in the political agenda of the B&R, but only on the economic growth that this will bring about. Working with Affluent Partners will increase our fund raising capabilities in Asia and gives us the opportunity to identify more assets.”

Equitativa has two existing Reits - essentially funds mopped up from multiple investors and then put into longer term yield generating properties - with a pure UAE focus. The first one has built up a sizeable portfolio of commercial assets, including schools and industrial.

The second, launched in 2017, has a pure residential focus, and now has assets of Dh1.2 billion. Forty per cent are residential assets in Abu Dhabi, while 30 per cent each are shared between Dubai and Ras Al Khaimah.

In the recent past, Equitativa has also extended its fund manager’s role to India and Pakistan through dedicated funds.

On whether the soft property market in the UAE has hurt Reit prospects, Vieujot said: “Two things need to be in your favour to make things happen - one, the need to buy properties at a reasonable price. And, two, you need to be able to rent those properties at a higher rate.

“Right now, only the first part of the equation is in favour. That’s why it’s a tricky time to be launching new Reits in the UAE. On our part, we are not going to slow down and we will keep picking up quality property.”