The Gulf Cooperation Council (GCC) region holds the seed for a rather good potential for real estate investment trusts (Reits), according to a report.

"There is good potential for Reits in the region with the UAE, Qatar and Kuwait ranked respectively as first, third and fourth highest percentages of millionaire households in the world," Kuwait and Middle East Financial Investment Company said in a report.

In addition, huge opportunities in undeveloped real estate in Saudi Arabia signalled a good potential for Reits, where investors hold $267 billion (Dh981bn) in Shariah-compliant assets as of August 2008. Remarkably, amid the financial crisis, a Kuwait- based Reit – Markaz Real Estate Fund established in 2003 – announced 10.4 pr cent total annual return; seven per cent cash and 3.38 per cent capital gain paid on a monthly basis payments, reportedly in September 2009.

In September, Olivier Laroche, Senior Manager of AT Kearney Middle East, told Emirates Business that most developers in the Middle East have assets suitable for Reits on their balance sheets and their numbers rose with the crisis.

"They could offload assets from their balance sheets and sell it to funds and attract international investors in their own funds. This will bring fresh cash to the market and build fund management business lines, which will be new sources of revenue for property developers," he had said. According to the report, the first publicly listed Shariah-compliant Reit was established in August 2008 in Singapore, however by June 2009, the Mena's first Islamic Reit establishment was approved by the Central Bank of Bahrain.

On a regional scale, one of the earliest established Reits in the GCC was in 2006, by HSBC & Daman "The Arabian Real Estate Investment Trust (Areit)".

Their primary focus was to invest in the commercial sector and prime locations in the GCC. According to the new chief investment officer at Areit, investors received return distributions of eight per cent per annum with an IRR in excess of 50 per cent since June 2006.

On a global scale, Reits have a global market capitalisation of $700bn in 2009. The trusts are a medium-risk investment class delivering returns ranging from five to 10 per cent on average.

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