Al Mal Capital’s real estate investment trust (REIT) is planning to increase its capital by up to AED 440 mn through a tradable rights issue as it looks to grow and acquire new assets, according to an ADX disclosure (pdf). If fully subscribed, the rights issue would see the fund raise its total capital to just north of AED 790 mn from AED 350 mn today. Al Mal is a unit of Dubai Investments.

What’s Al Mal doing with the money? The firm intends to use the proceeds from the rights issue to execute its investment strategy (pdf), which involves diversifying the portfolio, with a minimum of 75% of the funds allocated in the UAE and up to 25% in the GCC and other countries. The fund’s primary focus is on income-generating real estate assets within sectors like education, healthcare, and industrials — whether through direct ownership, development, or investment in tradable securities.

The mechanics: Existing unit holders will receive tradable rights at a ratio of one right for every 0.87516 units they own on 23 February. Every full right allows the unit owners to ultimately buy a new unit at a price of AED 1.10. Rights will be tradeable on the Dubai Financial Market from 26 February to 15 March 2024, the disclosure said.

SOUND SMART- How rights work: Existing unit holders have the option of not exercising their rights (ie: doing nothing); they can exercise their rights (buy units in proportion to the rights they hold); or trade the rights (sell them to someone else through a DFM-listed broker — and buy more rights if they want more of the Al Mal REIT). Investors who own no units can buy the rights from current unit holders, and folks who do nothing or sell their rights would be diluted down if the rights issuance sees others subscribing.

Uh, Enterprise? What’s a REIT? A real estate investment trust is a mutual fund that owns, finances or manages income-generating real estate assets — commercial, residential, office, and other properties. Some will also invest in real-estate-related securities or private equity transactions that are directly related to the industry.

How do I make money on a REIT? Mechanics vary from REIT to REIT, but unit holders (the REIT version of shareholders) are entitled a share of profits (ie: dividends) and they can also see the value of their investment go up if the assets the REIT buys appreciate.

Why would I buy a REIT? If you like the underlying portfolio of real assets, it’s an easy way to get exposure to real estate at (a) a lower ticket price than buying the assets yourself and (b) a REIT is usually a heck of a lot more liquid. REIT units are much easier to buy or sell whenever you want than are the real estate assets themselves.

Background: Al Mal Capital’s REIT was the first to IPO on the Dubai Financial Market late 2020, raising AED 350 mn. It has since acquired Wesgreen International School from Al Batha Real Estate for AED 265 mn, as well as Al Shola Schools in 2021 for AED 300 mn. The acquisitions led to the full deployment of the fund’s capital, the company said in October last year.

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