Manama, Kingdom of Bahrain – Eskan Bank announced today that it has received authorisation from the Central Bank of Bahrain (CBB) for the establishment and registration of Bahrain’s first retail real estate investment trust (REIT). This paves the way for the REIT’s subsequent initial public offering (IPO) and listing on the Bahrain Bourse (BHB), for which Securities & Investment Company (SICO) has been mandated as lead arranger.
Commenting on this pioneering development, Dr. Khalid Abdulla, General Manager of Eskan Bank, said: “In line with our social mandate, this new REIT with a minimum participation of just BD 500, gives Bahraini investors as well as GCC nationals and institutions the opportunity to share in Eskan Bank’s significant property development activities, and benefit from commercial and residential rental income across diversified assets. This underlines our commitment to encourage private sector participation in the Bank’s real estate development projects that target social housing and its related amenities. Such a landmark financial instrument will add to the breadth of investment opportunities in the Kingdom of Bahrain, and position our institution as an innovative bank spearheading financial sophistication and depth.”
Congratulating Eskan Bank on this notable achievement, Ms. Najla Al Shirawi, Chief Executive Officer of SICO, said: “We are delighted to be working with the Bank to lead and manage this historic REIT listing in Bahrain. The introduction of this new alternative investment asset class will add greater depth to the Kingdom’s real estate sector, while helping to improve liquidity on the Bahrain Bourse. In addition to an attractive target yield of 6.5 per cent, we have taken prudent steps to structure embedded protections in the REIT. These include long-term capital expenditure reserves, and unit-trading liquidity through a dedicated market maker. Our involvement illustrates SICO’s commitment to broaden the investment products available to investors in the local market, while further reinforcing our status as a leading provider of corporate finance services in the GCC since 1997.”
With a total value exceeding the regulatory minimum of US$ 20 million, the Eskan Bank Realty Income Trust is a Shari’ah-compliant REIT seeded with two income-generating and unleveraged properties: Segaya Plaza, a mixed retail and residential property located in Segaya; and the commercial components of Danaat Al Madina, a mixed-use property development situated in Isa Town.
The Sharia-compliant REIT will be the second of its kind to be listed in the GCC region, and the only unleveraged public REIT. The formal investor launch of is expected to be announced soon. The IPO, which is planned for late October this year, will be managed in full compliance with the new listing rules for REITs that were issued by the Bahrain Bourse in May 2015.
According to Mr. Ahmad Tayara, Chief Business Officer & Deputy General Manager of Eskan Bank: “It is our intention to augment the existing seed assets of this REIT by inviting private and public sector real estate players – whose properties meet the REIT’s strict criteria for acquiring assets as well as regulatory requirements – to approach us so we can consider the future inclusion of their assets in the Eskan Bank Realty Income Trust. This will expand and diversify the pool of assets, thereby providing an improved yield for investors, as well as enhancing the risk profile of the REIT over time. It will also allow said players to have more monetization alternatives.”
Dr. Abdulla and Ms. Al Shirawi expressed their appreciation to the Central Bank of Bahrain and the Bahrain Bourse for their guidance and constructive cooperation in the development, authorisation and planned listing of this landmark retail REIT. They also paid tribute to new rules, regulations and reforms being introduced by the CBB and BHB concerning investing activities that will lead to capital market growth. They noted that such initiatives will improve the depth and liquidity of the Bourse, enhance its sophistication and competitiveness, and contribute to attracting additional local, regional and international investors.
A listed REIT is a regulated investment vehicle that invests directly in real estate, with its units traded like a stock on capital markets. REITs provide investors with access to ownership in large, high-value real estate projects at low ticket sizes; a regular and stable income stream; portfolio asset diversification and enhanced liquidity; and the reassurance of significant built-in regulatory safeguards.