Real estate

investment trusts

www.keypoint.me

Keypoint is one of the GCC’s most

comprehensive professional business

services providers. We deliver statutory

and corporate advice, accounting,

investment administration, tax and

VAT advisory, human capital

management, IT consulting,

management consulting, financial

regulatory compliance advice and trust

administration services to a wide range

of businesses from corporations and

large financial services and insurance

institutions to family managed

conglomerates and single owner

companies.

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Preface

This brochure provides a brief

introduction to the creation and

conversion mechanisms of Real Estate

Investment Trusts “REITs” in the

Kingdom of Bahrain (“Bahrain”),

offering an overview of the structure of

REITs and the various regulatory

requirements in Bahrain. In addition, it

sets out key highlights of the real estate

industry in Bahrain and the potential

benefits and challenges, which should

be considered by potential REIT

investors.

What are REITs

In 1960 REITs were created in the USA

to offer investors the opportunity to

invest in large-scale, diversified

portfolios of income-generating real

estate. Today, REITs have become a

desirable investment tool for

developers, pension funds, individuals,

investment banks and corporations.

REITs raise capital through a public or

private placement including operator

seed capital.

REITs are set up by a Trust Instrument in

order to directly or indirectly, acquire,

hold, administrate, manage and sell off

local and foreign real estate properties.

Real estate investment trusts (REITs)

By acquiring equities of funds and

companies operating as REITs, investors

can benefit from the characteristics of

real estate investment including a strong

cash yield with a diversified consistent

income stream, long term capital

preservation and appreciation and

protection from inflation. In addition,

REITs could have tax advantages, and

this should be considered as the

countries of GCC prepare to introduce

taxes.

Real estate developers are considering

REITs as an opportunity to access

additional source of capital, which will

help expand the real estate sector

within the economy. REITs can also

enhance the performance of the Capital

Markets sector, the creation of jobs and

uplift the real estate profession within

the Labor Market.

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REITs in the Kingdom of Bahrain

Recently, the laws and regulations

relating to the Bahrain real estate

market underwent extensive reforms. .

These reforms have had a significant

impact on many sectors and gave

investors in the real estate market a

strong investment base protected by

the new laws and regulations.

Further, in 2015, Bahrain implemented

three new significant laws and

regulations related to the rents and

leases of properties, real estate

development and the listing rules of

REITs. These new laws and regulations

were mainly enacted to protect real

estate investors, landlords, tenants,

buyers and developers.

In Bahrain, REITs are established under

the Financial Trust Law under the

purview of the Central Bank of Bahrain

“CBB”. REITs are also governed by the

REITs Listing Rules of Bahrain Bourse

“BHB”.

With reference to the CBB Rule Book –

Volume 7; REITs in Bahrain are classified

as Collective Investment Undertakings

“CIU” with capital raised from the

public or through private placement in a

form of units or shares. REITs can take

one of two forms; Bahrain Domiciled

Expert CIU “BDE” or Bahrain Domiciled

Exempt CIU “BDX”.

The BDE requires the authorisation of

the CBB and can only be offered to

Expert Investors. The minimum capital

requirements are to the equivalent of

U$ 10,000.

The BDX requires initial registration with

the CBB and can only be offered to

Accredited Investors and requires a

minimum initial investment of an

equivalent of US$ 100,000. BDX is not

subject to authorisation or ongoing

supervisory requirement from any

regulatory authority.

Authorisation & registration of REITs

in Bahrain

REITs shall be authorised and registered

in accordance with the CBB

requirements set out in the ARR module

of the CBB rule book volume 7.

The application, information,

prospectus, subscription list and

documents which are requested by the

CBB and BHB must be completed by the

Trustee before launching the REIT and

the listed units shall be in

dematerialised form and freely

transferable.

Bahrain REITs investment rules

The CBB Rulebook stipulates an

operating framework requiring REITs to

invest primarily in income generating

properties.

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The minimum investment by a REIT

shall consist of two properties with a

combined minimum value equivalent to

US$ 20 million and representing least

80% of the Net Asset Value “NAV”.

The following rules also apply to REITs:

Property held for development shall

not exceed more than 20% of the

NAV of the REIT. In addition,

investing in other REITs shall not

exceed 20% of its NAV.

Other assets of REITs must be in the

form of cash or cash equivalent.

REITs can borrow only for

investment purposes. The leverage

shall not exceed 60% of the NAV.

REITs shall distribute annual

dividends of not less than 90% of its

audited net realized income.

Valuation of REIT properties are

governed by CBB rules that include

independence requirements and are

in line with the International

Valuation Standards Committee

guidelines.

Your business is our priority

Keypoint provides a full range of Trust

Administration services:

Advising and liaising with

professional advisors and regulatory

authorities in Bahrain,

Setting up and administering Trust

instruments,

Recommending the most practical

and efficient structure in order to

achieve the REITs objectives.

Keypoint is licensed and regulated by

the CBB to provide fund administration

and trust services.

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Our people

The key source of Keypoint’s strength is our

people. Our team is committed to quality

client service, providing timely and accurate

responses and solutions to any given scenario.

Our consultants, around 55+, are qualified

and experienced in their relevant fields and

hold Masters or Bachelor degrees in Law,

Finance, IT, Management or Business

Administration, and professionals who are

members of the Institute of Chartered

Accountants, Management Accountants,

Internal Auditors, Chartered Financial

Analysts, Certified Information Systems

Auditors, Chartered Institute of Personal

Development and other IT Certifications

including CISCO, PMP, ISO 22301/BS 25999.

Contact us

If you have any enquiries about our REITs

services please contact us and we will be

pleased to discuss your business needs.

Nandakumar Narasimhan

Senior Director

nandakumar.narasimhan@keypoint.com

Tel +973 1720 6860

Rami Al Jallad

Director

rami.aljallad@keypoint.com

Tel +973 1720 6837

Your success is our business

Kingdom of Bahrain

24th Floor, NBB Tower

Government Avenue

PO Box 11718

Manama

T +973 1720 6888

F +973 1720 0026

www.keypoint.com

Hashemite Kingdom of Jordan

Building 19

Yajouz Street, Jubaiha

PO Box 2838

Amman 11941

T +962 065 33 5343

F +962 065 33 0499