EMIRATES REAL ESTATE FUND Investor presentation
March 2016
STRICTLY PRIVATE AND CONFIDENTIAL DISCLAIMER
Emirates NBD Fund Managers (Jersey) Limited, Emirates Funds Limited, Emirates Portfolio Management PCC and all their underlying sub funds, domiciled in Jersey, are regulated by the Jersey Financial Services Commission. The information and opinions expressed herein are made in good faith and are based on sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. These opinions are not intended to serve as authoritative investment advice and should not be used in substitution for the exercise of ones own judgement. This information, including any expression of opinion, has been obtained from or is based upon sources believed to be reliable, and is believed to be fair and not misleading. Any opinion or estimate contained in this presentation is subject to change without notice. Neither Emirates NBD Group nor any of its directors or employees give any representation or warranty as to the reliability, accuracy or completeness of the information, nor do they accept any responsibility arising in any way (including by negligence) for errors in, or omissions from the information. For further details of the investment products available from the Emirates NBD Group, please contact your local Emirates NBD Bank PJSC / Emirates Islamic Bank PJSC Branch. This document is provided for information and illustration purposes only. It does not constitute a solicitation, recommendation or offer to buy or sell any specific investment product or subscribe to any specific investment management or advisory service. Prospective investors in a Fund must obtain and carefully read the Fund’s most recent Private Placement Memorandum and Supplement as well as seek separate, independent financial advice if required prior to making an investment in the Fund to assess the suitability, lawfulness and risks involved. This presentation is not for distribution to the general public but for intended recipients only and may not be published, circulated, reproduced or distributed in whole or part to any other person without the written consent of Emirates NBD Asset Management Ltd. (“Emirates NBD AM”). Where this presentation relates to a Fund or an investment product licensed to be marketed, it is directed to persons authorized to invest in the Fund / investment product, as applicable and residing in jurisdictions where the Fund / investment product is authorized for distribution or where no such authorization is required. The Fund / investment product, where applicable, is intended for sophisticated investors only who understand the risks involved in investing in the Fund / investment product and can withstand any potential loss there from. The Fund / investment product may not be guaranteed and historical performances are not indicative of the future or likely performance and should not be construed as being indicative of or otherwise used as a proxy for the future or likely performance of the funds / investment products. The value of the investment and the income from it can fall as well as rise as the Funds / investment products are subject to investment risks, including the possible loss of the principal amount invested. The information contained herein does not have any regard to the specific investment objectives, financial situation or the particular needs of any person. All Shari’a compliant products and services are approved by the Shari’a Supervisory Board of Emirates NBD Asset Management Limited. Past performance is not indicative of future performance. The value of investments and the income derived from them may go down as well as up and you may not receive back all the money which you invest. This information has been distributed by Emirates NBD AM for and on it’s own behalf. Emirates NBD AM is duly licensed and regulated by the Dubai Financial Services Authority. The price of shares/units/notes and the value of segregated accounts and any income arising from them may fall as well as rise. When a subscription involves a foreign exchange transaction, it may be subject to the fluctuations of currency values, which may adversely affect the value, price of income of any security or related instrument mentioned in this presentation. It should be noted that some investments may not be readily marketable. It may therefore be difficult for an investor to sell his/her investment or obtain reliable information about its value and the extent of the risks to which it is exposed. Further, some investment offerings are involved in highly specialised forms of investment and involve risks and transaction costs not normally associated with standard investments in securities. Investment returns will fluctuate and are subject to market volatility, so that an investment when redeemed or sold, may be worth more or less than the original cost. Investments in property and other non-traditional asset classes may not be readily realisable and therefore a delay in paying redemption proceeds or significant costs in realising an investment might apply.
2 EXECUTIVE SUMMARY
DHCC 25 Dubai Healthcare City 3 EXECUTIVE SUMMARY Background
Shari’a-compliant UAE real estate focused fund with yield generating assets
. Emirates NBD Asset Management (“ENBD AM”) is pleased to present an opportunity for investors to participate in the UAE’s real KEY FACTS estate market . Emirates Real Estate Fund (“EREF” or the “Fund”) Gross Fund Size TTM1 Returns ‒ Shari’a compliant open-ended investment company ‒ Incorporated in Jersey, Channel Islands in 2005 USD 438m +5.90% ‒ Managed by Emirates NBD Asset Management Ltd. (the “Investment Manager”) – a leading asset manager in the region and fully-owned subsidiary of Emirates NBD ‒ Purpose is to acquire and accumulate real estate assets in the UAE Properties, # Dividend Yield2 with the aim of generating high rental income and capital appreciation in the mid- to long-term 9 5.75% ‒ Target return of 6-8% p.a. ‒ Fund awarded ‘Real Estate Fund of the Year’ at the MENA Fund Manager Performance Awards 2016, ‘Best Real Estate Fund UAE’ by the International Finance Magazine 2015, ‘Real Estate Fund of 3 4 the Year’ at the MENA Fund Manager Performance Awards 2015 Gross Yield LTV and ‘Best Real Estate Fund’ at the Islamic Business & Finance Awards 2013 8.1% 0.6% . Investor subscriptions into the Fund ‒ The Fund is also currently exploring options which could provide additional liquidity
1)Trailing 12 months, 2) Annualised yield, 3) excludes cash position, (9.3% excl. cash and Burj Daman) 4) Loan-to-Value Performance as at 31st March 2016 4 March 2016 UPDATE Portfolio Summary
9 assets across Dubai and Sharjah
Asset
Al Commercial Thuraya
Al Farah 53% Plaza Residential 24% Al Thuraya 1 DHCC 49 Garhoud Star
Geographic DHCC 25
Dubai Burj Daman 73% Sharjah Arabian Oryx 4% House Remraam
Cash Commercial 1 23% Residential
1) The Fund intends to target a cash balance of 5%-10% for the portfolio.
5 Q1 2016 UPDATE Portfolio Details
The Fund has a Gross Asset Size (incl. cash) of USD 438m (AED 1. 60b)
. Commercial and City Valuation % of the Rental Income Gross Rental Property Area Occ. residential properties Location (AED m) Portfolio (AED m) Yield valued at AED 1,608m Commercial (‘000 sq. ft.) . Currently, the properties Al Thuraya Tower 1 Dubai 308.6 19.2% 208 92% 28.1 9.1% are concentrated on office buildings in prime Burj Daman Dubai 247.7 15.4% 99 27% 6.4 2.6%** locations in Dubai that DHCC 49 Dubai 118.9 7.4% 81 100% 13.3 11.2% are generating attractive yields DHCC 25 Dubai 91.9 5.7% 71 90% 9.5 10.3% . This portfolio roughly Garhoud Star Dubai 80.1 5.0% 100 93% 8.0 10.0% generates a pass-through Sub-total 847.2 52.7% 559 74% 65.3 7.7% rental income of AED Residential (Units) 100.2M, generating a portfolio yield of ~8.1%* Arabian Oryx House Dubai 140.5 8.7% 128 100% 12.4 8.8% . Weighted occupancy of Al Farah Plaza Dubai 106.0 6.6% 170 96% 9.2 8.7% the portfolio is 83% Remraam Dubai 85.0 5.3% 105 100% 8.1 9.5% . The Fund intends to Al Thuraya Sharjah 59.0 3.7% 139 99% 5.1 8.6% target a cash balance of Sub-total 390.5 24.3% 542 99% 34.8 8.9% 5%-10% for the portfolio to meet any Total portfolio (ex cash) 1,237.6 77.0% 82% 100.2 8.1% redemptions. Net cash 370.7 23.0% Total portfolio (incl cash) 1,608.3 100.0% 100.2 6.2%
Source: ENBD AM, as at 31st March 2016 *Gross rental yield excludes excess cash in portfolio **Burj Daman targets a 9% gross rental yield fully occupied 6 EXECUTIVE SUMMARY Asset Allocation and Leverage
The Fund is spread across nine assets in Dubai and Sharjah including residential, commercial and retail space
Geographic Sector
23% 23% Commercial 53% Dubai 73% 53% 4% Residential 24% Sharjah 4% Cash 23% Cash 23% 24% 73%
Portfolio Leverage
Lender Emirates Islamic Bank
Amount outstanding USD 2.7m (AED 10m)*
Expiry April 2020
Loan-to-Value Ratio (LTV) 0.6% **
Source: ENBD AM, as at 31st March 2016 * The Fund has an AED 240M (USD 65M) facility available. **Fully drawn the Fund LTV would be 13% 7 EXECUTIVE SUMMARY Key Terms as at 31st March 2016
Fund Structure Shari’a compliant , open-ended investment company; a sub-fund of Emirates Funds Ltd
Current GAV USD 438m
Invest in physical properties: ‒ that are either completed or build to suit; Main Objective ‒ with a UAE focus in a wider GCC context; and ‒ that could provide a strong rental income stream with mid- to long-term capital growth.
Target Return 6-8% p.a.
Fund Manager Emirates NBD Fund Managers Jersey Limited
Delegate Investment Manager Emirates NBD Asset Management Limited
Domicile Jersey, Channel Islands
Fund Regulator Jersey Financial Services Commission
Administrator & custodian State Street
Valuers CB Richard Ellis, Cavendish Maxwell
Auditor Ernst & Young
Legal Adviser Voisin & Co
Fees Management fee 1.5%; performance fee 20% over a hurdle rate of 7%
Minimum Subscription Amount USD 100,000
8 EXECUTIVE SUMMARY Why ENBD AM?
The Fund has delegated the investment management responsibilities to ENBD AM, a leading asset manager in the region
• One of the largest and most diverse teams in the region with a strong track record across asset classes and Experienced team • Vastly experienced in regional as well as international markets, in both Shari’a compliant and conventional products
Strong parent • Being part of an independent asset management company yet 100% owned by one of the largest banks by backing assets in the region, Emirates NBD
• Proven bottom up research driven investment process, focusing on company and economic fundamentals, Investment coupled with a top down overlay approach • Blend of value and growth, with greater emphasis on value • Flagship funds externally recognized by third parties
• Direct clients through own sales force Global • distribution Internal channels of Emirates NBD Group (Priority Banking, Private Bank, Islamic Bank) capabilities • Funds approved by global platforms such as Zurich, Friends Provident, Skandia, Hansard, Generali, Allfunds, Fund Channel, iFAST and Alico
Highly regulated • Internal oversight provided by internal auditors as well as various risk and investment committees entities • External regulation by the DFSA, JFSC, CSSF and financial auditors
9 EXECUTIVE SUMMARY Investment Highlights
Established Fund with long positive track record from one of the Portfolio of existing assets generating largest asset managers in the region strong rental income
EREF Potential upside and improved Vibrant real estate liquidity options being explored market especially in Dubai
Pipeline of attractive opportunities including those in other types of real estate (industrial, education, hospitality, etc.)
Fund awarded ‘Real Estate Fund of the Year’ at the MENA Fund Manager Performance Awards 2016, ‘Best Real Estate Fund UAE’ by the International Finance Magazine 2015, ‘Real Estate Fund of the Year’ at the MENA Fund Manager Performance Awards 2015 and ‘Best Real Estate Fund’ at the Islamic Business & Finance Awards 2013
10 PORTFOLIO
Crescent Tower Sharjah Corniche 11 PORTFOLIO Background
Jan Feb Dec Jun Nov Apr Jul Jul Oct Jun Sep 05 05 05 06 06 07 07 08 14 15 15
12 PORTFOLIO Al Thuraya Tower 1
G+29 office building in Dubai Media City Al Thuraya Tower Al Thuraya Tower 1 is a high rise commercial tower, located at a prime location in Dubai Media City with attractive views over TECOM and Palm Jumeirah. The building also offers retail amenities and 620 car parking spots on site.
Current Valuation Location Dubai Media City AED 308.6m Acquisition Date 9th November 2006 Title Freehold Occupancy Asset Type Office/retail
92% Net Leasable Area 208,571 sq. ft.
Weighted Unexpired Lease Gross Rental Yield 0.67 years Term
9.1% Average Passing Rent AED 135 per sq ft Asset management highlights: Key Tenants • Reduced expenses having renegotiated the facility management contract with Operon • Increased rentals to above standard rates in the free zone whilst maintaining high occupancy • Increased parking income due to higher building occupancy and greater demand for parking • Largest tenant, Huawei, extended lease at higher rental
13 PORTFOLIOPORTFOLIO Burj Daman
A-grade office building in a important free-zone The Burj Daman holding consists of 2.5 floors (the fund fully owns the 10th and 14th floors and half of the 15th floor), together with additional parking, in this prominent commercial tower which is centrally located within the DIFC, in close proximity to the Gate Precinct.
Current Valuation Location DIFC AED 247.7m Acquisition Date 10th June 2015
Title Freehold Occupancy 27% Asset Type Office Net Leasable Area 98,827 sq. ft.
Weighted Unexpired Lease Gross Rental Yield 5.24 years Term
2.6%* Average Passing Rent AED 230 per sq ft Asset management highlights: • Offices marketed via major agencies including CBRE, JLL and Colliers • Over 250,000sqft of enquiries received since acquisition • Subdivision and fit-out of the 10th Floor complete. This floor is already 70% leased • Fit out works on the 14th Floor are in process • DIFC and the developers have agreed terms on a proposed footbridge
*Burj Daman targets a 9.2% gross rental yield fully occupied 14 PORTFOLIO DHCC 49
G+5 office building in Dubai Healthcare City DHCC 49 Building 49 in DHCC is a five-storey commercial complex including retail incorporating two basement levels of 161 car parking spaces. Some of the office units have been fitted out and incorporate A/C, suspended ceilings and a kitchenette; communal toilets are also provided.
Current Valuation Location Dubai Healthcare City AED 118.9m Acquisition Date 19th April 2007
Title Freehold Occupancy 100% Asset Type Office/retail Net Leasable Area 80,808 sq. ft.
Weighted Unexpired Lease Gross Rental Yield 1.70 years Key Tenants Term
11.2% Average Passing Rent AED 165 per sq ft Asset management highlights: • High occupancy due to strong market demand and existing tenants expanding • Completion of waterproofing and landscaping project has improved the building appearance • Retail offerings onsite including Mr Sub and Jugo Juice • Large tenant vacating – already interest in vacant space
15 PORTFOLIO DHCC 25
DHCC 25 G+6 office/retail building in Dubai Healthcare City DHCC 25 is a six-storey commercial tower located in DHCC with two basement parking levels for 98 car spots. The office units have been fitted out with A/C, suspended ceilings, a kitchenette and communal toilets. The building has 24 hour security and houses retail units at the ground floor level.
Dubai Healthcare Location Current Valuation City AED 91.9m Acquisition Date 26th July 2007
Title Freehold Occupancy 90% Asset Type Office Net Leasable Area 71,034 sq. ft.
Gross Rental Yield Weighted Unexpired Lease 1.45 years Term
10.3% Average Passing Rent AED 133 per sq ft Key Tenants Asset management highlights: • All vacant units fitted ready for immediate tenant occupation • High building occupancy due to expansion by existing tenants • Re-commissioned HVAC system to increase efficiency • Refurbished bathrooms to enhance appearance
16 PORTFOLIO Garhoud Star Building
G+4 office/retail complex in Al Garhoud Garhoud Star Garhoud Star is a complex comprising of leasable office and retail space accommodation over ground, mezzanine and three floors. The building has leased out 16,000 sq. ft. to Emirates Airlines until December 2016.
Current Valuation Location Al Garhoud, Dubai AED 80.1m Acquisition Date 9th July 2008
Title Freehold Occupancy 93% Asset Type Office/retail Net Leasable Area 100,083 sq. ft.*
Weighted Unexpired Lease Gross Rental Yield 0.50 years Key Tenants Term
10.0% Average Passing Rent AED 80 per sq ft
Asset management highlights: • Ground floor retail leased to Emirates Airlines • Expansion by existing tenants including Skycom & Asus • Maintaining high building occupancy and rental increases upon lease renewal • Targeted for disposal in H1 2016
*Excludes storage 17 PORTFOLIO Arabian Oryx House (previously ART IV), TECOM
G+13 residential tower in TECOM C Arabian Oryx House is a residential tower with 128 units in TECOM, Dubai. The building is mainly comprised of units of 1 & 2 bed apartments.
Current Valuation Location TECOM C, Dubai AED 140.5m Acquisition Date 19th October 2014 Title Freehold Occupancy Asset Type Residential
100% No. of Units 128
Weighted Unexpired 0.67 years Gross Rental Yield Lease Term One bed: AED 81,574 / unit 8.8%* Average Passing Rent Two bed: AED 107,905 / unit Four bed: AED 170,000 / unit Asset management highlights: • Refurbishment works to swimming pool, CCTV & access control system and common areas completed. • Building leased to individual tenants to achieve highest possible rents • 100% occupancy achieved in Q1 2016 due to successful leasing strategy
18 PORTFOLIO Al Farah Plaza
G+10 residential tower in Al Nahda Al Farah Plaza Al Farah Plaza is a residential tower with 170 units in Al Nahda, Dubai. The building comprises of studio units as well as one-bedroom, two-bedroom and three-bedroom apartments.
Current Valuation Location Al Nahda, Dubai AED 106.0m Acquisition Date 18th December 2005 Title Freehold
Occupancy Asset Type Residential
96% No. of Units 170
Weighted Unexpired 0.48 years Gross Rental Yield Lease Term One bed: AED 49,054 / unit Average Passing Rent Two bed: AED 65,161 / unit 8.7% Three bed: AED 78,145/ unit Asset management highlights: • Building upgrade completed to improve marketability for sale • Installed a CCTV system • Exterior repainting completed in 2015 • Targeted for disposal in H1 2016
19 PORTFOLIOPORTFOLIO Remraam Residential
G+5 and G+6 residential tower in Remraam, Dubailand Remraam Residential comprises two residential towers, sharing a common parking and podium level, offering 105 units in mainly 1 & 2 bedrooms, in the freehold community development known as Remraam by Dubai Properties. The property is fully-leased to the hotel company Media Rotana, for their staff requirements.
Current Valuation Location Dubailand AED 85m Acquisition Date 27th September 2015 Title Freehold Occupancy 100% Asset Type Residential No. of Units 105
Weighted Unexpired Gross Rental Yield 1.29 years Lease Term Studio: AED 29,231 / unit 9.5% One bed: AED 52,002 / unit Average Passing Rent Two bed: AED 74,790 / unit Three bed: AED 125,233/ unit Asset management highlights: • Two year lease to Media Rotana, with the tenant confirming interest to extend lease beyond 2 years
20 PORTFOLIO Al Thuraya
G+17 residential tower in Sharjah Al Thuraya Tower Al Thuraya is a 17-storey residential building, comprising of 139 one- and two-bedroom units located in Sharjah, near the main Dubai highway. The building includes amenities such as a gym facility and swimming pool. Additionally, the building accommodates retail space.
Current Valuation Location Sharjah AED 58.9m Acquisition Date 22nd Nov. 2006
Title Freehold Occupancy 99% Asset Type Residential No. of Units 139
Weighted Unexpired Gross Rental Yield 0.49 years Lease Term One bed: AED 32,093 / unit Average Passing Rent 8.6% Two bed: AED 41,835 / unit Asset management highlights: • Building upgrade completed to improve marketability for sale • Retiled swimming pool • Targeted for disposal in H1 2016
21 PROPOSED DISPOSALS For Sale
Garhoud Star Al Thuraya Tower Al Farah Plaza
Three assets located in Sharjah and Dubai, have been identified for disposal in line with the fund’s overall strategy to disinvest from its older assets to acquire newer buildings in Dubai and Abu Dhabi.
Status UNDER OFFER FOR SALE
Garhoud Star Building* Al Thuraya Al Farah Plaza*
Building
Property G+4 office/retail complex in Al Garhoud G+17 residential tower in Sharjah G+10 residential tower in Al Nahda
Occupancy 93% 99% 96%
*Sale mandate with JLL 22 RECENT DISPOSALS Ageing Sharjah Assets
Crescent Tower Al Buhaira
Two assets located in Sharjah, one commercial and one residential, were disposed in Q4 2015. A premium of 9.46% was achieved above the 30th September 2015 market value. The fund’s overall strategy is to disinvest from its older Sharjah assets to acquire modern buildings in Dubai and Abu Dhabi.
Crescent Tower - G+17 residential tower in Sharjah Al Buhaira - G+22 office building on Sharjah Corniche
Building
Office market in Sharjah becoming increasing challenging with Sharjah residential market has performed well but early signs of a competition from new supply. Market rents falling, with a high slowdown are evident. A large number of legal cases and Reason for Disposal vacancy (25%) on the building which had been difficult to fill since vacancies were becoming developing on this property over the the previous tenant vacated in 2013. course of H2 2015.
Age of Building 22 years (1993) 13 years (2002) Market value as at AED 99.8 million AED 67.5 million 30th September, 2015
Sales price AED 110 million AED 67 million
Premium 10.2% (AED 10.2 million) -0.74% (AED 0.5 million)
23 FUND PERFORMANCE
Garhoud Star Building Al Garhoud, Dubai 24 Q1 2016 UPDATE Historical Price Performance
Historical performance* 1 Year 5.90% 2 Year 18.24% 3 Year 35.98% 4 Year 47.66% Since inception 29.53%
Performance data -2016* Q1 2016 1.24% Year to Date 1.24% *as at 31st March 2016
8% 1 year performance vs. other asset classes 5.90% 6% 4% 2.00% 2% 1.10% 0% -2% -4% -3.66% -6% EREF High Dividend Equitites GCC Fixed Income US Treasuries
Source: GCC Fixed Income - JP Morgan Middle East/GCC Total Return Index, as at 31st March 2016 High-Dividend Equities - MSCI World High Dividend Index, as at 31st March 2016 US Treasuries – 7-10yr USDT ETF, as at 31st March 2016 25 FUND PERFORMANCE Quarterly Price Movements and Dividend History
The Fund has consistently paid dividends throughout all market fluctuations
15% Bear market 10% Dividend paid %
5%
0%
1.24%
1.22% 1.45%
1.72%
2.62%
1.04%
2.56%
1.51%
2.73%
3.33%
2.53%
4.01%
3.56%
3.42%
1.85%
3.32%
5.60%
3.99% 3.05% 3.18%
2.78%
1.86%
5.77%
3.26%
3.00%
3.72%
3.65%
2.77%
1.69%
0.69%
4.76%
- 0.82%
-5% 1.29%
-
- 5.60%
-10% -
7.21%
7.34%
7.45%
7.71%
6.98%
-
-
-
- - -15%
Bull Recovery 22.66%
-20% market - story
-25%
Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15
Sep-11 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-12 Sep-13 Sep-14 Sep-15
Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16
Annualized dividend paid % Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec *Feb Dec Jun Dec Jun Dec Jun Dec Jun Dec 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 6.55 6.53 6.27 6.51 6.20 6.25 5.39 6.07 6.68 7.41 5.46 1.51 6.57 5.29 5.65 5.75 5.50 5.50 5.75 5.75 5.75
• A capital distribution was paid during this quarter Figures as at 31st March 2016 26 FUND MANAGEMENT
Al Buhaira Al Nahda, Dubai 27 FUND MANAGEMENT Proposed Strategy
The Fund has identified and would like to capitalize on specific real estate opportunities that complements its existing profile
• Active management of the assets to the highest standards in order to maximize long-term Fund Management net income and increase market value. Strategy on Existing • Manage capital expenditure on the assets to ensure they operate efficiently. Portfolio • Constantly investigate and implement value add opportunities on the existing portfolio. • Identify opportunities where disposal would enhance the returns for shareholders.
• The Investment Manager has identified select pipeline opportunities that approximate to USD 500m. • These opportunities fall under the following characteristics: • Areas in Dubai Pipeline Opportunities • Minimum Target size of AED 150M per asset • Target net yield of 7.5% - 9% • These opportunities are being sourced ‘Off-market’ via local relationships and through Emirates NBD.
• Commercial assets – income producing with strong lease covenants. • Residential assets – completed or nearing completion, preferably with long-term corporate tenants in order to house employees. Sector Considerations • Education assets – development opportunities pre-leased to prominent school operators. • Industrial assets – longer term leases to “blue-chip” corporate tenants in areas supported by significant infrastructure development.
28 FUND MANAGEMENT Future Pipeline
Potential Assets
• Freehold development opportunity Transaction size Build-to-suit Educational asset • Single fully-recovering lease to school operator • Target between 9-10% yield ~AED 175m
• Single owner office tower in freehold area Transaction size Commercial office tower • Multi-tenanted to global corporates on 3-5yr leases • Target above 8% initial yield ~AED 250m
• Single lease to global tenant for staff accommodation Transaction size Build-to-suit residential asset for staff accommodation • Long term land lease • Target above 8% yield ~AED 450m
29 FUND MANAGEMENT Impact of Potential Acquisitions/ Disposals
Weighting in the Fund – assuming acquisitions in sequence from left to right
Including School Including 3 Disposals Including Residential
5% 10% 19%
23% 45% 22% 45% 49% 13%
23% 23% 23%
Commercial 49% Commercial 45% Commercial 45% Residential 23% Education 23% Education 23% Education 23% Residential 13% Residential 22% Cash 5% Cash 19% Cash 10%
ENBD AM, as at 31st March 2016, assuming a constant 7% cash position
30 FUND MANAGEMENT Acquisition Process
End negotiations or End negotiations or renegotiate with the renegotiate with the seller and present once seller and present once again to the IC for again to the board for approval approval If not If not suitable suitable
Present to Investment Identify asset Conduct initial due Committee (“IC”) for Recommend to the for purchase diligence (“DD”) If recommendation to the If Board for approval suitable Board suitable
Appoint legal to prepare Schedule appointment at On signature of SPA: Sale and Purchase Dubai Land Department •Appoint legal to conduct relevant legal DD (ownership, title, Agreements (“SPA”) for transfer lease agreements etc) •Appoint consultants to conduct relevant DD (engineering, subject to successful DD structure etc) •Appoint valuer (CBRE or Cavendish Maxwell) to prepare market valuation On transfer, conduct handover process Upon successful outcome of DD and all other conditions, SPA and reconciliation of becomes unconditional accounts
31 FUND MANAGEMENT Divestment Process
End negotiations or End negotiations or renegotiate with the renegotiate and present purchaser and present once again to the board Receive and negotiate once again to the IC for for approval offers from qualified approval purchasers in the market If not If not suitable suitable
Prepare sale information Present to Investment Identify asset Recommend to the Board pack & circulate to 3 Committee (“IC”) with for sale If offer for approval qualified active agents suitable support from Head of RE If offer suitable
Appoint legal to prepare Schedule appointment at Sale and Purchase Dubai Land Department Agreements (“SPA”) for transfer On signature of SPA: •Provide purchaser with all relevant access and information in subject to successful DD order for them to conduct DD
Upon successful outcome of DD and all other conditions, SPA On transfer, conduct becomes unconditional handover process and reconciliation of accounts
32 FUND MANAGEMENT Fund Structure & Governance
The Fund Board Shari’a Supervisory Board
Custodian David Marshall Dr Hussein Hamid Hassan State Street Custodial Gary Clark Dr Ojeil Jassim Al Nashmi Services (Jersey) Limited Mark Creasey Dr Ali Al-Qurra Daghi Tariq Bin Hendi Shari’a Supervisory Board of ENBD AM
Administrator, Secretary Manager & Registrar (“Administrator”) Emirates Funds Limited1 Emirates NBD Fund Managers State Street Fund Services (Jersey) Limited Jersey Limited
Emirates Real Estate Fund Delegate Investment Manager Limited (“DIM”) (the “Fund”; sub-Fund of Emirates Emirates NBD Asset Management Funds Ltd.) Ltd
Investment Committee Independent Property Property Service Providers . Tariq Bin Hendi, ENBD AM Senior Executive Officer Valuers Emirates Islamic Bank PJSC . Christopher Seymour, Partner/Head of Property UAE for EC Harris CB Richard Ellis Asteco Propoerty Management . Abdullah Al Awar, Dubai Islamic Economy Development CEO Cavendish Maxwell Better Homes . Sophie Llewellyn, VP Investment of MAF . Fahad Kazim, Chief Commercial Officer, Meraas Holdings
1) Umbrella fund for ENBD AM. The Fund is a sub-fund of Emirates Fund Limited.
33 FUND MANAGEMENT Fund Management Team
Tariq Bin Hendi Chief Executive Officer
Tim Rose Head of Real Estate Asset Management Fund Management Operational Support
Ben Coombe Asif Siddique Anthony Taylor Senior Portfolio Manager Accounting and Finance Manager Fund Manager
Melanie Fernandes Kiran Ashok Jon McGloin Asset Manager Assistant Operations Transaction Manager
Alex Vilavasseril Fardan Al Fardan Property Manager Investment Manager
34 FUND MANAGEMENT Key Members of the Real Estate Investment Team
Tim Rose, Head of Real Estate Tim has over 20 years’ experience in Real Estate throughout New Zealand, Europe, and the Middle-East. He joined Emirates NBD in 2005, and has been Head of Real Estate since 2011. The role’s primary focus is Emirates Real Estate Fund comprising over $416m of direct real estate in the UAE. Tim was previously with Dubai International Financial Centre during the establishment of the centre, developing the Gate Precinct. Prior to this he was in London with DTZ Debenham Tie Leung, advising a variety of corporates on their real estate holdings throughout the UK and Europe including HSBC, Natwest, Invensys, and Ford. Earlier, Tim was with Waltus in New Zealand, managing an investment portfolio of property prior to listing. Tim holds a Bachelor of Commerce Degree and Post Graduate Diploma in Commerce from Lincoln University in New Zealand, and also a MBA with Cass Business School in London. In addition, he is a Member of the Royal Institute of Chartered Surveyors (MRICS), a Registered Valuer in New Zealand, and a Senior Member of the NZ Property Institute.
Anthony Taylor, Fund Manager
Anthony has 9 years experience in Corporate Real Estate in the Middle East and Africa. He has a wide-range of experience from asset management at Public Investment Corporation (South Africa), managing a $250m portfolio of real estate assets to property management with CBS Property Management. Anthony has further experience in valuations at Old Mutual (South Africa), qualifying as an Associated Professional Valuer in real estate. At Emirates NBD Asset Management he was responsible for establishing the advisory service prior to his current role. Anthony holds an Honours Degree in Property from the University of Cape Town and is a member of the Royal Institute of Chartered Surveyors (MRICS).
Ben Coombe, Senior Portfolio Manager Ben has 17 years experience in Corporate Real Estate having worked in New Zealand, the UK, and the Middle East. He has four years experience working as a Property Manager for Goodman Properties- $1b dollar REIT in New Zealand with predominantly office and industrial assets. For a further 7.5 years Ben worked in Dubai, spending over 6 years working with Emirates NBD Asset Management as the Senior Portfolio Manager on the Emirates Real Estate Fund. Ben is responsible for enhancing the current portfolio of 5 commercial and 4 residential assets. Prior to joining Emirates NBD Ben was employed by Limitless, a local developer, working on a number of large scale projects including The Galleries office project in Jebel Ali. Ben holds a Bachelor of Property Degree from the University of Auckland and is working towards his MRICS.
35 FUND MANAGEMENT The Fund’s Investment Committee
Tariq Bin Hendi, Chief Executive Officer, Emirates NBD Asset Management Tariq has replaced David Marshall as the head of Emirates NBD Asset Management. Tariq brings over 13 years of asset management, private equity and investment banking experience across funds, capital markets and extensive real estate exposure on a local basis but also internationally. Prior to his current appointment, Tariq was Deputy Head of Corporate Advisory at Commercial Bank of Dubai, with the responsibility for the build-out of a new Corporate Advisory unit, a previously non-existent business line at the bank. In previous roles, Tariq held a number of senior management positions, most recently with Mubadala, based in Abu Dhabi, as part of the Acquisitions and Investment Management / Group Strategy department, and prior to that with Citigroup, based in London, as part of the Investment Banking / Alternative Investments Fund Management team. Tariq holds degrees from Columbia University, London Business School, and Clayton State, and will soon complete his PhD from Imperial College London.
Abdullah Al Awar, CEO, Dubai Islamic Economy Development Centre Abdulla Mohammed Al Awar is the CEO of Dubai Islamic Economy Development Centre. Prior to his current role, Al Awar was the CEO of Dubai International Financial Centre for the period from 2009 to 2012. During his overall 8-year tenure with DIFC that saw him hold various executive positions, he leveraged his exceptional skills in strategic planning, operational management and financial control. Under his strategic leadership, DIFC was ranked as the leading financial centre in the region for the years 2009-2012, demonstrating an average 13% client growth year on year and improving the organization's efficiency and performance. Al Awar has served as member of several committees and boards in Dubai including the Economic Committee of the Executive Council of Dubai, Dubai Free Zones Council and Bourse Dubai. Al Awar holds a Bachelor of Science Degree in Business Administration from the University of Colorado at Boulder, US. He has also graduated from the Mohammed Bin Rashid Program for Leadership Development, an executive education program, through affiliation with Cranfield University, UK, IMD and INSEAD.
Sophie Llewellyn, Director, Majid Al Futtaim Properties Sophie has in excess of 20 year’s real estate experience, 14 of which have been working across the Middle East and North Africa. Sophie is currently a Director at Majid Al Futtaim Properties where her responsibilities include the management of the investment value of the portfolio together with providing advice on investment, development feasibility and asset management opportunities. Prior to joining MAF, Sophie worked for a number of organisations, in particular CB Richard Ellis, initially based on London and then across their MENEA region specialising in Valuation and Development advisory. Sophie is a founding Board Member of the RICS UAE National Association. Her current ex-officio roles include being a member of the RICS MENA World Regional Board, the MEA Representative on RICS International Governing Council and advisor on Investment Committee of the Emirates Real Estate Fund.
36 FUND MANAGEMENT The Fund’s Investment Committee
Christopher Seymour, Partner/Head of Property UAE for EC Harris that forms part of the larger corporate Arcadis Christopher brings over 20 years’ experience in project management, PFI/PPP, technical advice, procurement and risk management. His experience extends to specialism in commercial development, master-planning, retail, hospitality and facilities management. Christopher is also co- chair of the Middle East Council for Offices (MECO) which has recently issued the Best Practice Guide for office development. Christopher also holds the position of General Manager ARCADIS Gulf and has been with Arcadis in various senior management positions since 2003 in both the UK and the Gulf. Prior to Arcadis, he was Divisional Director at AYH plc which was acquired by Arcadis in 2005. Christopher hold a BSc degree from the University of South Bank and is a Fellow of the Royal Institution of Chartered Surveyors (FRICS).
Fahad Kazim, Chief Commercial Officer, Meraas Holding Fahad brings over 15 years’ experience in project management, risk management, strategy and planning. Fahad’s most recent roles have been with Meraas as one of their Directors from their early days to what they have become today, one of the most prominent Dubai developer. He has experience in managing large Real Estate feasibility studies, financial modelling for start ups, managing capital allocation in line with the business strategy and risk management principles, overseeing management of the property portfolio of the company to ensure optimisation of returns and cash yields. He originally qualified in accounting and is currently a Board Member with Dubai Parks & Resorts and Dubai Hills. He completed his graduation at Concordia University from Montreal and completed his CPA (Certified Public Accountant) in 2002.
37 FUND MANAGEMENT The Fund’s Board of Directors
David Marshall, Director David Marshall has recently been promoted to General Manager – Products & Advisory, Emirates NBD Bank. Prior to this Marshall was the Senior Executive Officer (now replaced by Tariq Bin Hendi) of Emirates NBD Asset Management, with a mandate to further grow and develop the business in line with global industry benchmarks. In addition to leading the business, Marshall is a Director of Emirates NBD Fund Managers (Jersey) Limited, Emirates Funds Limited and Emirates Portfolio Management PCC, the fund management and fund companies set up by Emirates NBD in Jersey, Channel Islands. He is also a director of the Emirates NBD SICAV, domiciled in Luxembourg. Prior to his current appointment, Marshall was Head of Product and Distribution, Emirates NBD Asset Management, for more than seven years, with the responsibility for investment product development and the management of the company’s global distribution channels. Before joining the bank in 2005, Marshall held a number of senior management positions for Old Mutual International, a leading offshore retail financial services group. Marshall brings with him over 17 years of experience, spanning a range of financial services sectors. Marshall holds a BA (Hons) degree in English Language and Literature from the University of London. He is also certified by the Chartered Institute for Securities & Investment, and holds the Investment Management Certificate of the CFA Society of the UK.
Gary Clark, Director Gary Clark, ACA, is an independent director. Until 1 March 2011 he was a Managing Director at State Street and their Head of Hedge Fund Services in the Channel Islands. Mr Clark, a Chartered Accountant, served as Chairman of the Jersey Funds Association from 2004 to 2007 and was Managing Director at AIB Fund Administrators Limited when it was acquired by Mourant in 2006. This business was sold to State Street in 2010. Prior to this Mr Clark was Managing Director of the futures broker, GNI (Channel Islands) Limited in Jersey. A specialist in alternative investment funds, Mr Clark was one of a number of practitioners involved in a number of significant changes to the regulatory regime for funds in Jersey, including the introduction of both Jersey’s Expert Funds Guide and Jersey’s Unregulated Funds regime. Additionally, he is a director of Emirates NBD Fund Managers (Jersey) Limited and Emirates Portfolio Management PCC.
Mark Creasy, Director Mark is a Chartered Certified Accountant, qualifying with KPMG in Jersey in 1995. He has more than 20 years experience in the finance industry. In 1998, he joined Standard Bank Jersey Limited, where he held a number of senior roles, including six years as a Director in their Funds division. In 2011 he moved to JTC Management 16 Emirates Funds Limited | Prospectus Limited where he is a Director in the corporate services business area. He is a Director of a number of Collective Investment Fund and has experience in both conventional and Shari’a compliant structures. He is a fellow of the Chartered Association of Certified Accountants and is a Member of the Chartered Institute for Securities & Investment. Additionally, he is a director of Emirates Portfolio Management PCC.
38 MARKET OVERVIEW
Al Thuraya 39 Sharjah MARKET OVERVIEW Real Estate Market leveling off
The UAE real estate market has come off it’s highs of 2014
Dubai Residential Prices (AED/ft2) Abu Dhabi Residential Prices (AED/ft2)
2,500 3,000 1,000 2,000 2,500 900 800 1,500 2,000 700 1,500 1,000 600 1,000 500 500 500 400
Apartment Villas Apartment (LHS) Villas (RHS)
Dubai Real Estate Cycle Abu Dhabi Real Estate Cycle Decline Trough Recovery Peak Decline Trough Recovery Peak Residential Staff Hotels Accommodation Offices Staff Accommodation Industrial Offices Education Education Industrial Hotels Residential
Source: REIDIN.com, ENBD AM, as at 31st March 2016
40 MARKET OVERVIEW Dubai Real Estate Overview
• Returns in Dubai’s real estate sector have stabilized in 2016 after being Dubai’s real estate market has stabilized following downward pressure in 2015 under pressure in 2015.
• The hospitality sector has been one Decline Trough Recovery Peak of the most affected due to less demand from certain countries. Affordability is key with the strong USD and AED.
• Growth in residential has slowed in Staff 2015. The outlook for 2016 remains Accommodation flat. There is stronger demand for staff accommodation given limited supply of affordable options.
• The commercial office sector recovery has experienced relatively Industrial stronger growth to the other real estate sectors. Market uncertainty Education given the fall in oil price.
• The industrial and educational Offices sector continue to benefit from a Hotels lack of supply. The long-term lease structures associated with these assets are attractive to investors Residential during market volatility.
41 MARKET OVERVIEW Dubai Residential
The Dubai residential market stabilized in 2016,following a challenging 2015
. Overall the Dubai residential market had strong performance in 2014; 2015 did not matched this earlier performance. . Both villas and apartments down 11% on average in 2015; stabilizing in 2016 at sustainable levels. . Concerns being raised whether this is a similar period to 2008.; our view is that the market is more mature this time around in the cycle as a result of the following factors: ‒ less finance available in the market ‒ strong fundamentals; rental and sales market have experienced similar levels of growth ‒ more regulation, especially in the off-plan sales ‒ greater critical mass in the freehold areas which had been driving the recovery ‒ transfer fees and Central Bank restrictions on LTV can be used going forward to stimulate the market
Dubai Residential Prices (AED/ft2) Dubai Residential Rentals (AED/ft2) 110 1,900 100 1,700 90 1,500 80 1,300 1,100 70 900 60 700 50 500 40
Apartment Villas Apartment Villas
Source: Emirates NBD, www.reidin.com, as at 31st March 2016
42 MARKET OVERVIEW Dubai Commercial
The Dubai office market remains strong, having previously lagged other sectors
. “Flight to quality” has been the general theme for investors and Dubai Commercial Supply (mn ft2) tenants. . Prime commercial assets have maintained high occupancies and 120 4.0 1.3 rents are increasing. 100 0.0 2.9 . Secondary and tertiary areas with high levels of supply are coming 80 under pressure. Tenants becoming more price sensitive. 60 . Consolidation of regional corporate offices is benefiting Dubai with 91.5 94.4 98.3 40 81.8 83.9 90.4 67.8 76.4 its established infrastructure, public transport, education and 57.0 healthcare. 20 . Consequently, occupancies in Dubai have increased – some 0 buildings fully occupied with waiting-lists. 2010 2011 2012 2013 2014 2015 2016 2017F 2018F Completed Future Supply
Dubai Commercial Rentals (AED/ft2) Dubai CBD1 Single Ownership Vacancy Rate 500 40% 35% 400 30% 300 25% 20% 200 15% 100 10% 5% 0 0%
Primary Secondary Tertiary
Source: Emirates NBD, Jones Lang LaSalle, Cluttons, as 31st March 2016 1) Central Business District
43 MARKET OVERVIEW Abu Dhabi Residential
The residential market in the capital has benefited from a number of factors , less affected than the Dubai market
. Apartment prices in the capital down 3% in 2015, villa Abu Dhabi Residential Supply (‘000) prices up slightly. 300 4 6 7 250 . Freehold areas in Abu Dhabi are more in demand with the 200 residential sector continuing to outperform other sectors. 150 252 259 225 236 244 245 246 . While we are not expecting the future supply of residential 100 194 units in Abu Dhabi to dampen the market, it is worth 50 mentioning significant supply expected in the short-term. 0 2011 2012 2013 2014 2015F 2016F 2017F 2018F Completed Future Additions
Abu Dhabi Residential Prices (AED/ft2) Abu Dhabi Residential Rentals (AED/ft2) 180 3,000 1,000 2,500 900 140 800 2,000 100 700 1,500 600 60 1,000 500 20 500 400
Apartment (LHS) Villas (RHS) Apartment Villas
Source: Emirates NBD, Jones Lang LaSalle, as at 31st March 2016
44 MARKET OVERVIEW Hospitality
Dubai Abu Dhabi . The Dubai hospitality sector has not been able to improve on its . The hospitality sector in Abu Dhabi remained steady in 2015, with strong performance over the last few years in 2015. RevPARs up down -7% Y-o-Y and occupancy levels up 1% Y-o-Y at 74% . General move to more affordable hotel accommodation, aided by on average for the year government incentives and strong demand in this segment of the . As occupancy levels increase, average daily rates (ADRs) have market. declined due softening in demand and more supply coming to market. . A 4% increase in the supply of rooms in 2015. This is showing signs of . According to JLL, the level of supply expected to the market over the slowing down the momentum, with occupancy rates coming off their next two years is approx. 22%. This may have an impact on highs of 2014. occupancies. . Revenue per available room (RevPAR) has fallen in 2015 by -11%. This . New attractions for tourists in the city, either recently opened or trend has continued in 2016. currently under construction, should maintain demand and soften the . The strong USD/AED has made Dubai a less affordable destination for impact of supply to an extent a number of tourists.
1,200 100% 800 100% 1,000 80% 600 80% 800 60% 60% 600 400 40% 40% 400 200 200 20% 20% 0 0% 0 0%
RevPAR in AED (LHS) Occupancy Level (RHS) RevPAR in AED (LHS) Occupancy Level (RHS) RevPAR Trendline Occupany Trendline RevPAR Trendline Occupancy Trendline
Source: Emirates NBD, STR Global, as at 31st March 2016
45 MARKET OVERVIEW Investment Challenges within UAE Real Estate
Despite offering positive returns, the UAE real estate sector inherently exhibits several challenges for new investors wishing to participate in this asset class . As with many countries, the UAE imposes restrictions on foreigners purchasing properties (subject to each emirate’s regulations) - GCC nationals are exempted from these restrictions Local Real . Dubai loosened its real estate regulations in 2001 and allowed foreigners to acquire properties in designated special zones- opportunities are Estate Market therefore still limited to these areas Challenges . The past decade’s boom-bust-recovery cycle has warranted higher scrutiny by the real estate regulators in an attempt to protect investors and tenants . In order to limit speculation and exuberant trading activity, the Dubai Real Estate Regulatory Authority (RERA) increased the transfer fees from 2% to 4% in 2013 . Despite the heightened investment activity, the market continues to exhibit a lack of transparency
Real estate investing in the UAE can be capital intensive and offers limited diversification and liquidity options
Asset Class . The investment landscape is currently limited to investing in direct physical assets and some equities (developers, contracting firms, etc.) Challenges . Direct real estate investing can heavily skew portfolio allocations for most individuals and limits diversification options across sectors . Most existing real estate stocks have significant development risk and are growth-oriented i.e. low dividend yields
Residential Towers Industrial . Sellers’ expectations remain high . Ground leases vary between investment areas and have inherent . Potential to pay above market in the current environment renewal risk Challenges . RERA regulation in terms of rental increases . Corporate leases vs. Head leases – inherent risk with head leases in a with Investing market downturn in Specific Commercial Hospitality Sectors . Strata buildings include 3rd party risks with multiple owners and . Current occupancy rates and RevPARs are considered high against Owners’ Associations global figures . Lease contracts often simple exposing investor to tenant risks . Initial returns potentially unsustainable in the long term . Individual buildings achieve varying rentals and occupancy rates . Exposure to industry-specific risk through management agreements versus leases
46 Emirates NBD Asset Management Ltd. DIFC, The Gate, East Wing, Level 8 P.O. Box 506578 Dubai United Arab Emirates (T) +971 (4) 370 0022 (F) +971 (4) 370 0034
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