Shariah-compliant Real Estate Investment Trusts (REITs) are an increasingly popular investment option for individuals looking to diversify their portfolio while adhering to Islamic financial principles. These investment vehicles allow individuals to invest in a diversified portfolio of real estate assets, while ensuring that the investments are structured in accordance with Shariah law.
By investing in Shariah-compliant REITs, individuals can potentially earn stable returns, while also contributing to socially responsible investment practices. In this article, we will explore 12 smart additions to your investment portfolio that are Shariah-compliant and offer potential for long-term growth.
Al-`Aqar Healthcare REIT
Al-`Aqar Healthcare REIT is the first Islamic REIT in the world, established in 2007 with a focus on healthcare-related properties in Malaysia. The fund has a size of 735+ million units and a portfolio consisting of 23 properties with a total property value of 1.54 billion dollars.
The REIT invests primarily in high-quality healthcare assets, including hospitals, medical centers, nursing homes, and other healthcare-related properties in various regions of Malaysia, such as Kuala Lumpur, Selangor, Johor, and Penang.
The primary goal of the Al-`Aqar Healthcare REIT is to provide stable and recurring income streams for investors through rental income from the healthcare properties in the portfolio. To achieve this goal, the REIT acquires properties with long-term lease agreements from reputable healthcare providers.
The management team of the REIT is committed to maintaining high standards of asset quality, tenant occupancy, and cash flow sustainability, ensuring that investors receive consistent returns. With its unique Islamic structure, the REIT is a viable investment option for investors seeking Shariah-compliant investment opportunities.
In summary, as the world’s first Islamic REIT, Al-`Aqar Healthcare REIT offers investors an opportunity to invest in a well-diversified portfolio of 23 high-quality healthcare properties in Malaysia, with a total property value of 1.54 billion dollars, and the potential for stable and recurring rental income.
Axis REIT
Axis Real Estate Investment Trust (Axis REIT) is a leading real estate investment trust in Malaysia that provides investors with a diverse portfolio of 62 high-quality properties located in the Klang Valley, Johor, Penang, Pahang, Negeri Sembilan and Kedah. The portfolio includes a mix of industrial, commercial and office properties that are leased to a diverse range of tenants.
The primary objective of Axis REIT is to provide stable and recurring income streams for its investors through rental income generated from its diversified portfolio of properties. The REIT is committed to delivering long-term growth and value creation for its unitholders, and aims to successfully benchmark itself against the world’s most successful REITs in terms of total returns to unitholders.
Axis REIT’s management team is dedicated to maintaining high standards of asset quality, occupancy rates, and cash flow sustainability, and is committed to delivering consistent returns to its investors. The REIT is also the preferred choice for both Shariah and non-Shariah investors, as it is structured to comply with Islamic investment principles.
In addition, Axis REIT is committed to sustainable and responsible investment practices, such as implementing green initiatives in its properties and prioritizing tenant satisfaction and retention.
Al Hadharah Boustead REIT
Al-Hadharah Boustead REIT has an interesting history, starting its investment portfolio in plantation estate and mills. Late 2012, the REIT became Malaysia’s only Islamic Plantation Real Estate Investment Trust, with 12 oil palm plantations and 3 palm oil mills covering a total area of 20,000 hectares.
In 2013, Al-Hadharah Boustead REIT was taken private by its parent company, Boustead Holdings Bhd, making it the first REIT in the country to be privatized.
As of the present day, the parent company of Al-Hadharah Boustead REIT, Boustead Holdings Berhad, has grown to comprise over 80 listed and non-listed subsidiaries and associate companies, spanning across a wide cross-section of the Malaysian economy through five Divisions, namely plantation, property and industrial, pharmaceutical, heavy industries, and trading and finance investment.
Al Salam REIT
Al-Salām Real Estate Investment Trust (Al-Salām REIT) is a Shariah-compliant fund that primarily invests in diversified properties that comply with Islamic investment principles. The REIT’s properties are strategically located across Malaysia, providing investors with exposure to various regions and markets.
Since its listing on the Main Market of Bursa Malaysia Securities Berhad in 2015, Al-Salām REIT has grown its portfolio from 31 properties to 54, with a mix of commercial, retail, and Food & Beverage assets. This diversification allows the REIT to manage risk and enhance its returns for investors.
The manager of Al-Salām REIT is Damansara REIT Managers Sdn Berhad, a subsidiary of Johor Corporation (JCorp) Group of Companies. The manager is licensed under the Capital Markets and Services Act 2007 to manage Islamic REITs, ensuring compliance with Shariah principles and providing investors with a trusted and credible investment option.
KLCC REIT
KLCC Real Estate Investment Trust (KLCC REIT) is Malaysia’s largest real estate investment trust and is a stapled security together with KLCCP, forming the only staple security in the country. The Fund is an Islamic Real Estate Investment Trust that aims to provide its unitholders with regular and stable distributions, improving returns from its property portfolio and capital growth, while maintaining an appropriate capital structure.
The Fund has an approved size of 1,805,333,083 units and is managed by KLCC REIT Management Sdn Bhd with Maybank Trustees Berhad acting as the Trustee. KLCC REIT’s investment policy is to invest, directly and indirectly, in a Shariah-compliant portfolio of income producing Real Estate used primarily for office and retail purposes in Malaysia and overseas. The Fund’s distribution policy is to distribute at least 95% of its distributable income for FY2013 and FY2014, and at least 90% for each subsequent financial year, on a quarterly basis.
KLCC REIT has a gearing policy of up to 50% of the total asset value of the Fund. The Fund was constituted by the Deed dated 2 April 2013, entered into between the Manager and Maybank Trustees Berhad, and was registered and lodged with the Securities Commission on 9 April 2013. KLCC REIT was listed on the Main Board of Bursa Malaysia Securities Berhad on 9 May 2013 as an income and growth Islamic Real Estate Investment Trust.
Sabana Industrial REIT
Sabana Industrial REIT, formerly known as Sabana Shariah compliant industrial REIT, is a real estate investment trust listed on the Singapore Exchange. The REIT has a diversified property portfolio valued at $866.2 million as at 31 December 2021, comprising 18 properties located across Singapore. The portfolio has a total gross floor area of approximately 4.2 million square feet and is divided into four main industrial property segments: High-tech Industrial, Chemical Warehouse and Logistics, Warehouse and Logistics and General Industrial. Sabana Industrial REIT is managed by an external manager, Sabana Real Estate Investment Management Pte. Ltd. (the “Manager”). The Manager is responsible for managing the day-to-day affairs of the REIT, including its property acquisitions and disposals, leasing, property management, and financing activities, among others.
Since October 2021, The REIT is no longer Shariah-Complaint:
Musharaka REIT Fund
The Musharaka Real Estate Investment Trust (REIT) Fund is a Shariah-compliant investment vehicle that focuses on the growing real estate market in Saudi Arabia. The fund’s 13 real estate assets are primarily located in the Eastern Province and Riyadh, as well as in the UAE, spanning across residential, hospitality, industrial, and commercial sectors. As of the end of 2021, the fund’s assets value totaled SAR 1.4 billion, with a capital of SAR 880 million.
Listed on the Saudi Stock Exchange (Tadawul) and included in the benchmark FTSE EPRA Nareit Global Real Estate Index Series, the Musharaka REIT Fund is expected to deliver a total return of 8.6%, which is considered one of the highest in the market. The fund manager aims to increase the net return on the capital by investing in new and distinctive assets that benefit the unitholders.
The fund’s Shariah compliance is overseen by the Shariyah Review Bureau, a member of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The Fund invests mainly in developed real estate assets capable of generating rental and periodic income, and distributes at least 90% of its annual net profits to its investors. The fund will not invest in white lands, and may allocate up to 25% of its total asset value in real estate development and usufruct rights.
Al Khabeer REIT
Alkhabeer REIT is a closed-ended, Shari’a-compliant real estate investment traded fund that is publicly offered and subject to applicable laws and regulations in Saudi Arabia. The fund is regulated by the Capital Market Authority (CMA) and aims to achieve continuous rental returns and periodic cash dividends.
The fund has a duration of 99 years and a total asset value of SAR 2,062 million (USD 550 million) after the second additional offering. Its main objective is to generate sustainable rental income yield and periodic cash distributions of not less than 90% of the fund’s annual net profits. To achieve this, the fund invests not less than 75% of its total asset value, according to the latest audited financial statements, in income-generating real estate assets located in Saudi Arabia, excluding Makkah and Medina.
The Alkhabeer REIT fund aims to generate regular cash dividends annually, which are distributed quarterly. It is a publicly offered fund that complies with Shariah principles and follows the Regulations and Instructions issued by the CMA. The fund’s investment strategy focuses on income-generating real estate assets, with the objective of providing investors with a stable source of rental income and periodic cash distributions.
Jawda REIT Al Haramain
Jadwa REIT Al Haramain Fund is a Shariah-compliant closed-end real estate investment trust managed by Jadwa Investment, which offers investors recurring income from properties located primarily in the holy cities of Makkah and Madinah. The fund specializes in providing exposure to the Hajj and Umrah real estate market, particularly in the hospitality and related service sectors. The REIT properties include Tharawat Al-Andaloseya, Tharawat Al-Taqwa, Tharawat Wadi Ibrahim Hotel and Restaurant Building, and the Pharmacy Building, which are located in key areas such as Masjid al Haram, Jabal al Nour, and Mina.
Alwaha REIT Fund
Al Waha REIT Fund is a Shariah-compliant real estate investment trust that is publicly offered and traded on the market. The fund is structured as a closed-end investment vehicle and is subject to applicable Saudi laws and regulations, with oversight from the Capital Market Authority (CMA).
The primary objective of the fund is to generate rental proceeds from its portfolio of 12 properties located in Riyadh. These properties are expected to provide attractive returns to investors, with an anticipated rate of 7.08% in the first year, 8.38% in the second year, and 8.38% annually in years 3-5. The fund aims to distribute periodic cash dividends to investors on a semi-annual basis.
Emirates REIT
Established in 2010, Emirates REIT holds the distinction of being the first Shariah compliant Real Estate Investment Trust (REIT) in the Middle East. Backed by key investors including Dubai Islamic Bank, Tecom, and Dubai Properties, the REIT achieved another milestone in its history when it became the first Gulf-based REIT to be listed on Nasdaq Dubai in DIFC on April 8, 2014.
Emirates REIT has continued to achieve growth and success in the years since, including a USD 400 million Sukuk issuance in December 2017. As of present, the REIT has built up a diverse portfolio of assets totaling around USD 842.7 million under management.
GII Islamic REIT
The GII Islamic REIT (CEIC) Plc is a closed-ended investment company established in the Dubai International Financial Centre (DIFC). Regulated as a Qualified Investor Fund under the laws and regulations of the Dubai Financial Services Authority (DFSA), it is classified as a Domestic Fund, an Islamic Fund, and a Property Fund. The fund is managed by GII Capital, which is wholly owned by Gulf Islamic Investments LLC (GII LLC), a regulated entity under the jurisdiction of the Emirates Securities and Commodities Authority (ESCA). GII LLC has a proven track record of investing and managing income-generating real estate properties globally, with a focus on the UAE, UK, US, and Germany. GII REIT intends to distribute dividends to its investors on a monthly basis, which sets it apart from other REITs that typically pay out dividends quarterly or semi-annually.
Conclusion
With a wide range of Shariah-compliant REITs available, investors can choose the best options to meet their financial and ethical goals. So, whether you are a seasoned investor or just starting out, consider adding Shariah-compliant REITs to your investment portfolio for long-term growth and stability.
In future posts, I will dive into these REITs One by one in order to judge their risk/return profile.
Meanwhile, if you know of any other REIT I didn’t include in this list, please consider sharing them in the comment section below.