Notwithstanding the protracted slump in the real estate sector across the wider Gulf region, the promoters behind Oman’s maiden Real Estate Investment Trust (REIT) — the Aman Real Estate Investment Fund (under formation) — are optimistic that the promise of a healthy dividend yield will lure Omani, expatriate and international investors to buy shares in the Fund when it opens to the public on Thursday.
Around 100 million units, representing 50 per cent of the Fund’s capital of RO 20 million, are being offered via an Initial Public Offering (IPO) that opens on Thursday, January 2. The balance 50 per cent of the Fund will be offered to Sandan Development LLC against the acquisition of 708 properties that are part of Madinat Sandan — a light industry real estate project coming up at Halban just outside Muscat Governorate.
At a press briefing on Tuesday, Abdul Samad al Maskari, CEO of Thara Global Business LLC — the Financial Adviser and Investment Manager of the Fund, said the ongoing downturn in the real estate industry is unlikely to dampen investment interest in Oman’s first sharia-compliant REIT.
“It’s true that for the last 4-5 years, the real estate across the region has suffered a decline, but an upturn is anticipated by 2020-21. We also believe that the assets being acquired from Madinat Sandan are quality assets of good value.”
With an initial anticipated dividend yield of seven per cent, the Aman Fund makes for a promising investment, said Al Maskari. “A 7 per cent return can be attractive for local Omani, expatriate and international investors alike. This rate of return is higher than interest that can be earned on a bank deposit, for example. Besides, the investment is liquid and safe, and it’s possible to make a quick exit from the Fund by selling the units on the Muscat Securities Market.”
A veteran investment banker, Al Maskari is credited with pioneering the introduction of a number of sharia-compliant products in the local market much before they became mainstream. As CEO of Al Madina Investment, one of the largest investment firms in the Sultanate, he oversaw the launch of Oman’s first sukuk — the Tilal sukuk — in 2012, followed by Oman’s first real estate fund — the Tilal RE Fund in 2016. Al Madina Investment also spawned the establishment of Al Madina Real Estate, Al Madina Takaful, Muscat Grand Mall, Grand Millennium Muscat Hotel, and a number of other real estate, tourism and hospitality developments.
According to the official, the IPO is an opportunity for retail investors to invest in a developed real estate light industry asset which will provide recurring income through rental income and capital growth on the back of growth in the industrial sector in Oman.
REITs / REIFs, he stressed, are becoming increasingly popular instruments across the Gulf and Middle East region for investment in real estate. Recognising this potential, the Capital Market Authority issued REIT Regulations in January 2018 to provide a framework conducive for the roll-out of real estate investment funds — conventional and sharia-compliant — in the Sultanate.
REITs can make an important contribution to the growth of the real estate sector in Oman with beneficial impacts for the wider economy, according to Thara Global. Besides promoting accountability and transparency in the sector, REITs represent less risky investment options for small and big investors, and provide regular income to the unit holders. Additionally, they open up the real estate sector to Foreign Direct Investment (FDI), thereby stimulating the development of vacant lands while also boosting the contribution of the sector to the GDP. Furthermore, they provide exit options and liquidity to cash-strapped property developers.
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