Equitativa, the largest REIT manager in the GCC, and manager of Emirates REIT, the largest Shari’a compliant REIT in the world and first REIT listed on Nasdaq Dubai, today announced that it had signed a buy and lease-back agreement with the Lycée Français Jean Mermoz.
Equitativa has agreed on behalf of Emirates REIT to acquire with Lycée Français Jean Mermoz premises in Al Quoz, Dubai, for AED 75 million (USD 20.5m), and immediately lease it back for an initial period of 27 years.
Equitativa expects the transaction to generate an estimated Internal Rate of Return (IRR) in excess of 12% and provide an initial net yield of 9.75%.
Following completion of the acquisition, Emirates REIT’s educational sector portfolio will immediately increase to AED 875m (USD 238m), representing 27% of the total portfolio. The total portfolio will comprise eleven properties for a total value of AED 3.3 billion (USD 886 million).
The Lycée Français Jean Mermoz is located in the heart of the residential area of Al Quoz, between Business Bay and Al Barsha neighbourhoods. It was inaugurated in September 2017 and currently provides French curriculum education. After completion of the two extensions, the facilities comprising a large gym, an auditorium and two indoor pools alongside the classrooms will be able to accommodate up to 1,500 students.
The Lycée Français Jean Mermoz simultaneously assigned the interest on the land leasehold plot to Emirates REIT and entered into an Istisna agreement to fund the construction of facilities’ extension in two phases. The construction of the first extension will start immediately.
The overall investment including the development of two extensions is estimated to be approximately AED 138 million (USD 37.6 million) and generate an IRR in excess of 12%. The facilities, constructed to the school operator’s specifications, will propose a final built-up area over 21,000m2.
Sylvain Vieujot, Chief Executive Officer of Equitativa Dubai, commented:
“We are pleased to enter this new partnership with the Lycée Français Jean Mermoz, the fourth educational facility in Emirates REIT’s portfolio. This agreement is similar to the ones completed previously with The Jebel Ali School and British Columbian Canadian School. Our successful track record in managing both schools will be replicated to similar successes in the Lycée Français.
With this new acquisition, we are immediately strengthening Emirates REIT’s rental income, offering substantial upside valuation and securing long-term cash flows.