Emirates Reit considers delisting as regulator investigates its manager
Dubai-based real estate investment trust hit by worsening property downturn
Emirates REIT, a Dubai-based real estate investment trust, is considering delisting amid the worsening property downturn as the emirate’s financial regulator opened an investigation into the reit’s manager.
The Dubai Financial Services Authority, regulator of the Gulf business hub’s international financial centre, said on Sunday that it began a probe into the manager, Equitativa Dubai, in late May. “If we find evidence of misconduct or wrong-doing, we will take appropriate action,” it said in a statement.
Equitativa Dubai, which has denied any wrongdoing, intends to co-operate with the investigation, which it said related to rules such as valuations and corporate governance.
The reit’s board said on Sunday it was considering delisting from Nasdaq Dubai as part of a “comprehensive review of strategic options”.
The statement blamed a downturn in United Arab Emirates equity markets and weakness in Dubai’s real estate sector for the “unjustifiably large gap” between the share price and the value of the sharia-compliant fund. Its shares are down 73 per cent this year.
“A delisting from Nasdaq Dubai would allow Equitativa to work on closing the gap that currently exists between Emirates REIT’s share price and net asset value,” it said. The fund’s manager has also previously reported irregular trading by market participants that it said could have contributed to its low share price.
Dubai’s commercial real estate sector is down about a third since the oil price crash of 2014 triggered a regional slowdown in demand. The impact of the coronavirus pandemic on the trade and tourism-focused emirate is expected to heap more pressure on occupancy as firms cut staff and downsize office space.
Emirates REIT manages a portfolio of 11 commercial properties across Dubai, including offices, schools and retail, valued at Dh3.6bn ($980m).
The DFSA’s probe comes amid increasing scrutiny of the UAE’s reputation for financial probity after a spate of scandals, including the collapse of Dubai-based private equity firm Abraaj and the alleged fraud at Abu Dhabi-based healthcare group NMC, among others.
Some shareholders have become increasingly vocal about their concerns over Emirates REIT’s poor performance and claims of high management fees.
A local news report, citing a letter from disgruntled shareholders, earlier this month, alleged that the reit’s management had misrepresented asset values. The shareholders called on the DFSA to launch an investigation, including an analysis of the manager’s valuations of investment properties and operating expenses, the report said.
Responding to the article, Emirates REIT described the “rumour” that it had breached its fiduciary duties as “wholly unsubstantiated”. It also said real estate consultancies CBRE and Asteco independently value its assets, which are also audited by Deloitte.