The Dubai real estate fund, Emirates REIT (REIT.DI) recently made an announcement that shook the industry. According to the company, they're considering de-listing their Dubai real estate investment fund. This is due to the fact that Dubai and UAE’s real estate sectors have been hit by the pandemic.
Dubai Real Estate Fund Considers De-listing Due to COVID-19
According to Emirates REIT, they're considering de-listing their Dubai real estate fund from Nasdaq Dubai. The reason behind their exit strategy is due to UAE's downturn in the real estate sector. Aside from that, the company is also suffering from weak equity market conditions.
It's likely that the company will return to operating as a private REIT. Despite this latest movement, the Emirates REIT is hopeful that it'll be temporary and they'll go back to public initial offering again. The company revealed they had to come up with such a crucial decision for their investors and the fund's best interest.
The Cause
For the past few months, the Emirate REIT noted the UAE's public equity markets have been plummetting. The sudden downturn due to the pandemic affected the shares' performance. It had lead to an unjustifiably large gap between the fund's current share price as a contrast to its true value. The Dubai real estate sector, meanwhile, has been sluggish for years.
This is due to the oversupply of homes, condominiums, and townhouses with stilled economic growth. While Dubai hoped to recuperate in the upcoming Dubai Expo 2020, it didn't happen. The current pandemic crisis has shut down most of Dubai’s operations and canceled Dubai Expo 2020. These unfortunate circumstances have exacerbated the Dubai real estate sector.
The Trading Value
The Emirates REIT has an astounding $45 million Dubai real estate market capitalization. Despite its big capital in boosting the real estate sector, the market is still facing a challenging operating environment. The REIT shares traded at $0.15 last Sunday. Its net asset value (NAV) plummeted to $1.57.
The Issue
Meanwhile, the Emirates REIT manager, Equitativa, was being investigated due to issues pertaining to his company management, specifically on corporate governance. The Dubai Financial Services Authority is currently handling the investigation.
Both companies revealed its extending its full cooperation during the course of the investigation. Equitativa served as Emirate REIT’s fund manager. The investigation started last May 2020. However, neither disclosed more details about the said investigation.
The Good News
Despite the Emirate’s pullout on Dubai real estate funds, the experts remain positive in the market’s recovery. As Dubai now resumes its economic operations, they have noted a notable increase in Dubai’s condo, apartment, and townhouses sales for the past few months.
Some sales even peaking and tying to a pre-COVID-19 era (e.g. January-February 2020 sales). This is due to low prices, flexible payment terms, and waived fees. The Dubai government recently implemented these policies to encourage people into investing in Dubai real estate market. So make sure to take advantage of this golden opportunity and invest in Dubai real estate properties now!
