LONDON: Regional appetite for real estate investment traded funds (REIT) is ramping up, say market experts, as investors get to grips with the relatively new financial instrument and authorities throw themselves behind promotional campaigns.
In Saudi Arabia, Riyadh-based Mefic Capital is expected to list its new REIT on the Tadawul exchange this month following a successful subscription period in May.
The company will list SR879.5 million ($235 million) of its REIT units following a successful subscription period in April and May, joining the 13 REITs currently listed on the exchange.
Over in the UAE, the Dubai Financial Market (DFM) on Sunday signed an agreement with Dubai Land Department to promote the listing of REITs by providing various incentives to companies.
The DFM is also set to develop a new platform for the listing and trading of REITs, said Essa Kazim, chairman of the DFM, in a statement on July 1.
Simon Townsend, head of valuation, advisory and consulting at CBRE Middle East, said that Gulf markets were becoming more aware of such funds.
“The region has seen a growth of these REIT funds as the market has become more familiar with these vehicles and structures,” Townsend told Arab News.
The use of REITs allows investors to gain exposure to the real estate market through allowing the collective ownership of fully-constructed real estate assets that generate regular income.
The market for these types of funds has been growing throughout the Gulf since the the first REIT was launched in 2014 on Nasdaq Dubai.
Since then, Abu Dhabi, Saudi Arabia and Bahrain have all brought in regulatory frameworks for the use and listing of the funds. Oman finalized its regulation at the beginning of the year.
Townsend said the structure is particularly appealing to smaller investors keen on obtaining real estate exposure.
“Investors whether individuals or small/mid-size investment groups have been able to invest with clarity in components of the real estate market that traditionally have seen high barriers to entry such as large-scale commercial properties where entry prices have historically only enabled the larger investors to benefit,” he said.
Mefic Capital’s REIT will provide investors access to the Saudi and UAE real estate market through eight properties. Only Saudi citizens or companies with a Saudi presence exclusively will be able to invest in the fund.
Management fees have been set at 0.35 percent, with a guaranteed minimum 2 percent annual return when the fund doesn’t meet a 5 percent investment threshold, making it the first listed real estate fund in Saudi Arabia to have a guaranteed return.
The success of the 1.23 billion riyal REIT demonstrates market demand for this kind of instrument, said Alain Sfeir, corporate partner at Clyde & Co. in Saudi Arabia, the law firm that advised Mefic Capital, in a statement.
“The size of the fund’s public offering gives you an indication of the appetite for Saudi diversified investment opportunites at the moment,” he said.
Investor appetite for REITs ramps up in Gulf
Investor appetite for REITs ramps up in Gulf
Closing Bell: Saudi main index closes in red at 10,847
RIYADH: Saudi Arabia’s Tadawul All Share Index dipped on Wednesday, losing 58.51 points, or 0.54 percent, to close at 10,847.93.
The total trading turnover of the benchmark index was SR3.78 billion ($1 billion), as 73 of the listed stocks advanced, while 187 retreated.
The MSCI Tadawul Index decreased, down 7.09 points or 0.48 percent, to close at 1,472.98.
The Kingdom’s parallel market Nomu lost 178.75 points, or 0.77 percent, to close at 22,916.83. This comes as 30 of the listed stocks advanced, while 37 retreated.
The best-performing stock was the Power and Water Utility Co. for Jubail and Yanbu, with its share price surging by 8.47 percent to SR31.24.
Other top performers included Saudi Paper Manufacturing Co., which saw its share price rise by 6.13 percent to SR53.70, and Jamjoom Pharmaceuticals Factory Co., which saw a 4.58 percent increase to SR137.
On the downside, the worst performer of the day was CHUBB Arabia Cooperative Insurance Co., whose share price fell by 5.14 percent to SR17.53.
Saudi Kayan Petrochemical Co. and Arabian Internet and Communications Services Co. also saw declines, with their shares dropping by 4.87 percent and 4.43 percent to SR4.88 and SR181.40, respectively.
On the announcement front, Saudi Kayan Petrochemical Co. announced its annual financial results for 2025, with sales dropping 3.06 percent year-on-year to SR8.45 billion. The company also recorded a net loss of SR893.86 million.
In a Tadawul statement, the company said the net loss and decline in annual sales were driven by a drop in average selling prices, despite higher sales volumes.
