Institutional investors and private equity fund investments are increasingly gaining the spotlight as a strong key player that can help revive vital sectors of the economy, particularly real estate, as various sectors begin to rise from the impact of the COVID-19 pandemic, according to Medallion Associates, a leading private real estate investment advisory firm. Market experts in the UAE are looking at the strength of private equity and fund structural investments considering the healthy flow of foreign direct investments (FDI) into the country in 2019, which has jumped to more than 34% amounting to about $14 billion from $10.4 billion in 2018.
Real estate developers and operators across almost every asset class are facing the potential long-term impact of the novel coronavirus outbreak and are re-examining their business models to adapt to the challenges during the crisis. This scenario has led to market analysts exploring new opportunities for institutional investors to focus on other real estate assets such as warehousing, logistics and data centres to be a new haven for investments.
Masood Al Awar, Chief Executive Officer, Medallion Associates, said: “The UAE has always showcased its innovativeness and is at the global forefront even during major challenges such as the current pandemic and we have seen them in the country’s exceptional response such as rolling out of stimulus packages, easing on regulations, and reduction of fees. These quick actions can lead to an increase in the loan-to-value ratio applicable to mortgages, which is a solid step in supporting the real estate sector.”
“At the onset, it might seem difficult to see the underlying opportunities amidst the crisis as the implications of COVID-19’s global spread are felt by all sectors, and it had been quite visible for the real estate. However, innovative thought leaders would always look into future potentials and enable business owners to see the value of creating new product offerings for new investors and take advantage of offering wholesale deals at competitive prices,” he added.
Medallion Associates examined market scenarios which indicated that while real estate investments in offices, residential, and retail complexes remain quiet, other segments are facing upward trends and present a more stable option to outperform other asset classes in real estate in the near term.
The private real estate investment advisory firm noted that as experts, they observed the various investor personalities in the market even at the beginning of this unprecedented situation and witnessed many seasoned investors kept their composure and stay focused on their long-term objectives, while many others as well had to deal with uncertainties as the value of their portfolio declined, and thus required different types of support from their relationship managers and wealth advisers.
Al Awar further advised that buyers and investors must take advantage of the opportunities to fill up the need for cash flow, the decline in prices, and increase their investments. He urged them to develop a systematic approach through regular investing and be more futuristic in their strategy as investments in real estate always tend to smooth out the cost of investment over time.
Market studies show that in recent years, real estate industry leaders have been diversifying their sources of revenue by exploring digital strategies and enhancing tenant experiences. Considering these factors, the COVID-19 crisis has prompted the sector to accelerate these types of strategic change.
Investors can benefit from low mortgage interest rates, higher LTVs (loan to value), reduced service charges and attractive valuations to make the best of their investments at present. In addition, the market-friendly policies of the UAE offer investors the security and viability of their investments.
“This is not the time to take a step back. In fact, this is the right opportunity to grow because whatever the cause may be, challenges will always be there, but seeing the best options in these situations enable investors and companies to gain the best position in the industry,” Al Awar concluded.