ENBD REIT, the Nasdaq Dubai–listed real-estate investment trust, is working towards rebalancing its portfolio following the sale of a residential asset on the outskirts of Dubai earlier this month.

Samir Kazi, the head of real estate at Emirates NBD asset management and CEO of ENBD REIT, said that the trust’s current strategy is not to actively pursue selling more properties following the sale of two residential towers in Remraam, but unsolicited offers would be considered.

Kazi said the REIT had taken advantage of high residential property prices and high demand to dispose of its Remraam properties as the amount of income it was generating was lower than the amount of interest on the debt. The two buildings were sold for AED 53.6 million ($14.6 million).

The sale leaves a portfolio consisting of 10 properties, 60% of which are offices and 20% are residential, valued at just under $400 million, Kazi told Zawya.

Kazi, who took over the REIT at the end of last year, said the strategy so far had been to resolve a disconnect between its underlying value and share price by putting in place a turnaround strategy, dealing with issues including the portfolio itself, revenue and operating expenses, borrowing costs and management and fund costs. 

The sale of Remraam was the first after the REIT was listed in March 2017, as the asset was not performing optimally, he said, and high demand had presented an opportunity to deal with debt and replace it with a better performing asset. 

He has also tackled the ‘low hanging fruit’ of dividend payments, increasing six-month payouts from $3.5 million last year to $4 million for the first half of 2024, he said. 

High borrowing costs are a challenge for the REIT as well as other real-estate players, he added, as investors expect a certain return which they can also receive from cash deposits in a high-interest rate environment.

Kazi said a Federal Reserve rate cut next month would be welcome, as it would allow the REIT to restructure its loan when it comes up for refinancing, and there will also be a conversation with lenders to demonstrate that it is performing well, so the risk attached could be reduced.

“If you can hedge at an optimal time, if you can identify the time and period, you can mitigate some of the risk. You can improve the quality of the asset, improve the credit of the asset, and look to improve the other margins so the overall cost of debt starts coming down,” he said. 

Following the tackling of dividends, risk and interest payments, the focus will be on rebalancing the portfolio.

If the next asset sale is an office, the REIT could consider residential, retail, or education, he said.

REITs have been popular in the United States because of their tax efficiency, Kazi concluded, which has only become a factor in the UAE recently with the introduction of corporate tax, making it more of an investor consideration going forward.

(Reporting by Imogen Lillywhite; editing by Seban Scaria)