Oman’s Pearl REIF IPO Provides Unique Opportunity to Diversify Investments

Institutional and individual investors in Oman will soon have the opportunity to invest in an initial public offering (IPO) of The Pearl REIF through the secondary sale of units. Earlier this year, Oman Investment Authority (OIA) and Omantel together announced the formation of The Pearl REIF, a real-estate investment fund approved by the Capital Market Authority (CMA) aimed at offering a unique opportunity to invest in large-scale, income-producing real-estate assets. The promoters intend to sell 49% of their stake in the fund through the IPO and on the successful completion of the transaction The Pearl REIF will be listed on the Muscat Stock Exchange, according to a press statement. Sohar International Bank is providing financial advisory, investment management and placement services of The Pearl REIF.

In line with Oman Vision 2040, the government has been pursuing several initiatives toward economic diversification through enhancing investment opportunities and creating a robust investment ecosystem that nurtures financial stability and sustainability for all investors. A real-estate investment fund (REIF) is a fund that owns and typically operates income-producing real-estate or related assets. These may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans. REIFs provide a way for institutional and individual investors to earn a share of the income produced through commercial real-estate ownership – without actually having to go out and buy commercial real-estate.

Speaking about the investment opportunity, Wahbi Sulaiman al Riyami, chairman of The Pearl REIF, said, “OIA and Omantel jointly have formed The Pearl REIF, demonstrating the collaboration and synergy underlining their shared passion for contributing to the continued progress and success of Oman’s economy. As an investment vehicle, The Pearl REIF is a compelling and rare opportunity for investors considering real-estate to diversify their portfolios. We are confident that the strong promoters and marquee tenants of these properties will demonstrate the strength of the offering.” “The Pearl REIF will play an important part in contributing to achieving economic and social goals, whilst within an investment portfolio they can offer a strong and stable annual dividend and the potential for long-term capital appreciation,” he added.

Commenting on the mandate, Ahmed al Musalmi, CEO of Sohar International, said, “Sohar International has demonstrated an unwavering commitment to the realization of the objectives outlined in Oman Vision 2040 and the country’s revenue diversification agenda. Our bank is proud to be associated with one of the most important milestone in the history of privatization and monetization of the government assets. We would like to thank Oman Investment Authority and Omantel for their strong and firm partnership with Sohar International Bank. We are keen and prepared to play more instrumental roles in the creation of structures such as The Pearl REIF. The launch and successful public issue of the REIF will be a stepping stone towards achieving the vision of the country.”

The Pearl REIF will be established as a closed-ended Sharia-compliant REIF in Oman. It is Oman’s largest and first REIF that avails the Islamic Ijara financial facility. The objectives of the fund are to generate income from long-term real-estate rentals and capital growth from investment in real-estate, compliant with Sharia principles. The Pearl REIF expects to generate a consistent dividend to unitholders, based on the estimated revenue and expenses, and also to distribute at least 90% of its distributable profits. What makes The Pearl REIF a unique investment opportunity is that it’s backed by two of the largest institutions of Oman, respected and reputed – Oman Investment Authority and Omantel.

Marquee tenants

The Pearl REIF benefits from two tenants with impeccable track records: Omantel and Lulu. Omantel has already confirmed a definitive agreement with The Pearl REIF for the sale and leaseback of its iconic headquarters building located in Madinat Al Irfan. A long-term lease agreement, advance rental payments, and in-built rent escalations make the investments more attractive. The company operates its headquarters in the building, making it a strategic part of its operations. Lulu Hypermarket Salalah has also a long-term lease agreement for the property. Advance annual rent payments, and in-build rent escalation and the strategic location in the heart of the city reinforce the investment.

Robust financial facility

The Pearl REIF is capitalized to maximize the benefits to shareholders. The fund is optimally financed to allow high possible returns without taking on aggressive risks. The facility is availed under the Islamic Ijarah financial facility which is an effective and practical financing tool. Limited covenants which are to be tested on an annual basis and attractive pricing add further strength to the financing strategy of the fund.

Active fund management strategy

The Pearl REIF envisages becoming one of the largest REIFs in the region adding heft to any negotiations with potential counterparties. The fund will actively scout for yield accretive investment opportunities, and continually optimize the transaction structure through an appropriate mix of debt, equity, and cash to maximize shareholder return. As the trusted investment manager of The Pearl REIF, Sohar International brings to the table its years of industry experience, market knowledge, and skilled team of professionals. Working closely with the Fund Management Body, the bank will ensure all operations are in synergy with the strategy, objectives, and overall vision of the fund. Sohar International is strongly positioned to deliver optimum solutions that will be customized to align with the fund’s unique demands ensuring that all processes are carried out in a seamless, secure, and safe manner.