11/17/2021

The REIT Stuff

Viewpoint

It has been four years since I last wrote about Islamic REITs, so it is long overdue a revisit, particularly with the level of activity in recent months.

Saudi Arabia continues to dominate the headlines. Now five years since its REIT legislation was passed, there seems to be no let-up in activity, including Jadwa REIT Saudi Fund pushing through SAR2.5 billion (US$665.74 million) in total asset value, with its capital offering a remarkable seven times oversubscribed. It then lost no time and completed its acquisition of the mixed-use Boulevard Riyadh property.

While Alkhabeer REIT Fund is also intending to increase its capital, Riyad REIT has been focused on international diversification, with the acquisition of a government-let office property in Riyadh, being supplemented with investments into the headquarters of PwC in Belgium and AmerisourceBergen in Pennsylvania in the US.

Add in Musharaka Capital completing the acquisition of a hotel in Riyadh and Al Maather REIT Fund agreeing terms to acquire a hospital in the UAE and you get a true sense of the breadth and depth of Saudi REIT activity at the moment, with a number of new REITs also being considered.

It feels like Oman is playing catch-up. Approaching four years after the REIT legislation was introduced, the Capital Market Authority has provided its initial approval for the first REIT. To be known as Aman REIT, the authorities are hoping that it will bring foreign capital into the country’s real estate sector.

Switching to Asia, the news is at either end of the good news spectrum. In Singapore, the only listed Islamic REIT has dropped its Shariah compliance, with the troubled Sabana Shari’ah Compliant Industrial Real Estate Investment Trust being renamed as the Sabana Industrial Real Estate Investment Trust. Very frustrating when as I understand it, the difficulties were not linked to such compliance.

Contrasting that is the great news that Equitativa Group has entered into a joint venture with Stern Resources in the US to establish a US$500 million REIT in Indonesia. Targeting a range of commercial, retail and hospitality properties, this scale starts to match those of the Saudi REITs and would put Indonesia on the global map for such structures.

So, Sabana REIT aside, it’s great to see this level of REIT activity, and I wonder if other Middle Eastern countries will join Oman in starting to build momentum to challenge what has become the regional dominance of Saudi Arabia.

Written by Philip Churchill, first published in Islamic Finance news Volume 18, Issue 45 dated 10th November 2021.