Dubai: The Dubai real estate fund’s operator Al Mal Capital has its priorities on where those investments should be going.
More school buildings? Yes.
Colleges? Maybe.
Offices? Definitely not.
That hyper-focus has come in handy as Al Mal Capital REIT – listed on DFM – has built a portfolio valued at Dh580 million and with a principal focus on education-linked assets. That’s the way Sanjay Vig, Managing Director at Al Mal Capital wants to keep things.
“As far as my REIT (real estate is concerned, I intend to focus only on education, healthcare and long term industrials,” said Vig. “Purely because the intent of the REIT is to specialize on ‘recession-resistant’ sectors. These are single-let, reduced asset management activity, triple-net leases. And the biggest core is that I know what I’m going to get even in 2032 - the rental is defined for the next 20 years, 25 years. “So, we know what investors will make…”
Rights issue and a Dh750m capital
That kind of assuredness is winning Al Mal Capital REIT – which listed on DFM early 2021 - its investors. The fund, looking to expand its asset base, announced a rights issue on February 5, intending to increase the capital of the fund by 400 million units at Dh1.1 a share, a near 114 per cent hike. (In addition, there was a further Dh40 million via issue premium.)
Any new school that opens in the UAE will have long waiting lists. So, if we are making schools an asset priority, there is every reason for us to do it.
More asset building in the seven emirates – especially with schools – is the plan. But there will not be any offices.
“As far as office real estate is concerned, purely because there’s a lot of competition and volatility,” said Vig. “As an asset manager, it’s difficult for us to be assuring investors what they would be making when I don’t know what my rental (from offices) will be even as near as next year.”
“But commercial could also imply logistics and warehousing, and we are happy to do that where the tenancy is more long-term.”
The fund has already identified the assets where the proceeds from the rights issue will go into. This includes two additional properties in Dubai.
“These are the schools that have never lost a student to another in decades, and then you have the ones that are coming up because of the latent demand in this market,” said Vig. “Any new school that opens in the UAE will have long waiting lists. So, if we are making schools an asset priority, there is every reason for us to do it.”
Opening up to foreign investors
As of now, the REIT is open only to UAE and Gulf investors as well as listed local companies - but that could change and ‘we will open this REIT to a certain extent to foreigners also’.
Difficult ride
It has not been easy ride for REITs – which essentially group together investors to place their funds across real estate asset classes - in the UAE. Some had failed to meet investor expectations, and that can make for a bumpy ride. And property markets being cyclical, returns too can go through bouts of heavy fluctuations.
In the recent past, there had been other entities that had tried to put together REITS, whether here or some of the Gulf markets. Those haven’t come to much fruition.
This is where Al Mal Capital and its REIT have made measured headway. And again, that focus on assets that are recession-resilient have helped.
“While we've done K-12 so far, we are absolutely open to higher education (college properties) also, because once a certain catchment area is achieved and the facility have a certain credibility, students will come,” said Vig.
As to whether it’s time to consider doing the same outside of UAE, Vig said: “By law, we are permitted to invest 25 per cent of the fund outside. At this point of time, because we've just started and I believe there's a lot of potential available, we will continue to focus on UAE. And then subsequently venture outside - maybe Saudi Arabia and so on…”
