The Palmon Group will await until 2021 to have a listing of its Manrre Reit (real estate investment trust), thus giving more time for the market to recover.
“Yes, we had initially decided on a 2020 timeline for the share float — but it’s a bit of a slow going for the local stock markets at the moment,” said Manohar Lahori, Chairman of Palmon, which is the promoter of the fund. “For now, we continue to attract serious investor interest in our fund, which will principally invest in industrial and logistics assets.”
By the end of this year, the Reit — which essentially clubs investments from multiple investors to pick up exposures in real estate categories — would have reached Dh500 million in size. At the time of its launch last year, the promoters had committed Dh225 million as equity.
Recently, Dubai Investments confirmed that its subsidiary Al Mal Capital would float a mixed-use Reit some time in the second quarter. This had earlier been scheduled for late last year. Of those that have listed, there is ENBD Reit, which went in for an IPO in 2017 and has its shares on Nasdaq Dubai. The first such Reit listing in the Gulf was from Emirates Reit in 2014.
According to Lahori, it made sense for Manrre Reit to hold off for a more opportune time for new investors to come on board into the fund and for existing ones to exit, if they so choose. “We are going through an extensive audit and due diligence, and will have a better understanding when those details come out,” he added. “Even from an investor perspective, waiting for the full audit makes sense. We are not into spinning stories to attract investors. ” (Over the last three quarters, the Reit issued dividends of 8 per cent.) Even otherwise, Palmon has been picking up assets, such as two floors and some retail space on the Swiss Tower in Jumeirah Lake Towers. It is on the verge of closing within a day or two a labour camp that is pre-leased to a local consumer goods firm.
“We will only pick up real estate that is pre-leased — and we will not buy anything that is under construction,” said Lahori. Once all the funds are in, industrial would make up 60-65 per cent of the portfolio; but there will be no residential.”
Industrial has been getting quite a bit of attention from funds in recent times. Recently, ENBD Reit confirmed that it was scouting for up to three such deals before summer, which would result in $50 million (Dh184 million) or so flowing into Dubai real estate.
The Jebel Ali area has been recording renewed interest among both funds and businesses that want to set up logistics hubs there.
“It’s possible that with all that interest, industrial real estate values in Dubai can spike in the short- to medium-term,” said Lahori. “But we are mostly focused on deals that are Dh25 million to Dh50 million, while the competition is looking at Dh50 million to Dh100 million.
“This gives us a certain advantage — there are many small businesses who want to lease rather than own warehouses or logistics. But banks are not readily financing the SME sector, and these businesses would rather sell their industrial assets and then lease them back.
“This is where a fund such as ours can play a role. But with big investors in industrial assets, they may not be in a hurry to sell their assets. By targeting the smaller seller, I believe, it plays to our advantage in building up a portfolio at the earliest.”
It’s a two-tier market in Dubai’s industrial real estate
* Someone holding a brand new warehouse in a high-demand location in Dubai is having no issue finding a tenant or a buyer. In fact, the pricing on these continue to be stable, both from a sales and rental perspective, according to a recent report by Cavendish Maxwell, the consultancy. “Older, dilapidated properties that no longer comply with current legislation and requirements (such as those of Dubai Civil Defence) have continued to feel negative pressure on capital and rental values, and we expect to see further declines in this segment.”
* Demand is being driven by SMEs, “many of which are seeking opportunities to relocate and benefit from the softer market conditions in an attempt to reduce their occupational costs”, the report adds. Dubai Investments Park is the prime choice among onshore locations, while Jebel Ali Free Zone Area (JAFZA) holds the mantle among free zones.