Dubai: The real estate fund ENBD REIT has secured a hedge for up to 56 per cent of its outstanding debt.
This was done through a Sharia-compliant profit swap with Mashreq Bank on its Dh400 million facility. It will fix the variable rate of EIBOR (Emirates inter-bank offered rate) for a two-year period starting June 2021.
ENBD REIT is now focused on mitigating the impact of the pandemic on operations, “by reducing costs and maintaining them at minimal levels,” it said in a statement.
“With cost of financing the REIT’s single largest expense, amounting to 47 per cent of total expenses as at March 31, by fixing EIBOR at these lower rates, ENBD REIT intends to benefit from lower finance costs for the next three years, on a significant portion of its facilities [and] thereby improving profitability.”
According to Anthony Taylor, Head of Real Estate at Emirates NBD Asset Management, “Our priority this year is to manage down costs, and maintain them at optimal levels. This has already been achieved in a number of areas, in both our property portfolio and at fund level, having announced earlier this year the reduction of our management fees and discounts on Board and Committee remuneration.
“Given a lower interest rate environment, we have a compelling opportunity to reduce our finance costs – the REIT’s single largest expense – into the future.”