RIYADH: The number of real estate investment trusts (REITs) in Saudi Arabia has doubled over the past two quarters to 12, with the combined market capitalisation of these trusts now exceeding $2.3 billion, according to a new report from Knight Frank.
The property consultancy said that six new REITs achieved listings on the Saudi stock market, Tadawul, in the final quarter of 2017 and the first quarter of this year. Research manager Raya Majdalani also said that a further six REITs are currently in the pipeline, having received initial approval from the Capital Markets Authority (CMA) to list, subject to regulatory requirements.
Saudi REITs have witnessed a decline in value in recent months, but Khan said that this merely brought them into line with global pricing and was a sign the market was maturing. Knight Frank’s report showed that for the six months to September 30 2017, Saudi REITs traded at an average premium of 1.49x net asset value (NAV), as investors pumped money into the new asset class. However, by the end of March this year, average REIT valuations in the kingdom have broadly fallen in line with the net asset value of their funds – to 1.01x.
Khan pointed out that in more mature markets, REITs usually trade at a discount to NAV – as of April 6 this year, average U.S. REITs were trading at a 6 percent discount to NAV, while globally the average discount to NAV was 17 percent, according to Knight Frank.
