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Dubai regulator fines Emirates REIT manager for misleading reports on asset

DUBAI, Dec 8 (Reuters) – Dubai Financial Services Authority (DFSA) said on Wednesday it had imposed a $210,000 fine on Equitativa, the manager of a sharia-compliant real estate investment trust, because of misleading statements regarding one of its assets.

Equitativa made misleading statements on two occasions in 2018 regarding one of Emirates REIT’s 11 assets, a school in Dubai Investment Park, the DFSA said.

“The DFSA also identified concerns around Equitativa’s fund valuation practices,” it said in a statement.

Equitativa has agreed to pay the fine, the regulator said.

The fund manager said in a statement that the settlement brings to a close all investigations on Equitativa.

“To be clear, none of the findings alleges any financial impropriety on part of Equitativa or its employees,” it said.

“Having agreed to settle with the DFSA, Equitativa can now turn its full attention to reinvigorating Emirates REIT and accelerating its plans for growth,” Equitativa said.

Equitativa in 2018 failed to provision for money Emirates REIT was owed by the school in question despite the school being in default of its rental payments, the regulator said.

Equitativa did not reduce the valuation of the asset in the fund’s half-year financial statement, despite the school lacking an operator for the following academic year, the DFSA added.

“Rather, the school was presented as 100% occupied with a secure tenant with a 28-year lease in place,” the DFSA said.

“This meant that EREIT’s financial statements did not comply with relevant requirements under International Financial Reporting Standards and that EREIT’s net profit for the six months to 30 June 2018 was overstated,” it said, referring to Emirates REIT.

When, later that year, the fund manager informed its investors that the school was no longer operating, it gave the “misleading impression that a new operator had been secured and would be in place for the following academic year. This did not accurately reflect the actual state of negotiations at the time, and the School remains vacant”, the regulator said.

Equitativa has agreed to address concerns around its valuation practices and will appoint an independent valuation expert for Emirates REIT’s 2022 valuation reports, DFSA said.

Emirates REIT (REIT.DI) created some stir in the Dubai credit market this year when it failed to gain support for an offer to exchange $400 million Islamic bonds for new paper, after the coronavirus strained its finances. read more

Reporting by Davide Barbuscia; Editing by Himani Sarkar

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