Manrre Logistics hopes to conclude 2022 with $100 million in assets without breaking a sweat
The Jebel Ali Free Zone
Dubai: Ecommerce has changed the dynamics of Dubai’s retail sector, and it is doing the same for commercial real estate assets. Investors are interested in anything related to warehousing that can meet the needs of eCommerce.
“Any warehousing or logistics space with average ongoing 3-5 year leases – or even longer – is what’s finding buyers,” added Kunal Lahori, CEO of Manrre Logistics Fund, which has bought $71.3 million in such properties in the previous three years, all of which are in Dubai. It just topped it off by inking a deal with Amazon, which is the ultimate sign of approval for storage leasing.
“We should have achieved $100 million in total fund size by the end of the year – demand isn’t going away soon.” The Dubai e-commerce story, which accounts for only 8% of the total retail sector, has several merits. Yes, it is expanding at a rate of 50%. Compare this to the 15-18% increase in eCommerce in the United States and Europe. As a result, the need for eCommerce-connected warehousing will only grow.”
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When will Manrre Logistics Fund reach its goal of $100 million? If CEO Kunal Lahori gets his way, the year will end before Christmas.
New Distribution Centers
Jebel Ali Free Zone is expanding its logistical capacity over the next 2 years, while Dubai CommerCity, a newcomer to the market, is positioning itself as a hub for eCommerce enterprises and all of their demands. Dubai South does have its own eCommerce cluster, which continues to grow with each new major signing.
Outside of eCommerce requirements, there is a lot of leasing activity. Cars24, a pre-owned automobile buy-and-sell marketplace, leased space in the Jebel Ali Free Zone last year, in what should be one of the largest such agreements in Dubai to date.
According to some in the local real estate market, industrial properties were the first to rebound following the COVID-19 outbreak and accompanying decline in pandemic intensity. Again, the necessity to meet the growing number of online buyers and stock up on them fueled demand – and pricing – for warehouse space. Even as early as the second half of 2020, such type of property in Dubai had ready investors and tenants.
Since then, prices have risen, and Lahori is fully aware of these changes. “The easiest strategy to mitigate such asset price increases is to engage in structured deals that provide a consistent RoI (return on investment) of 8.5 to 9.5 percent.” Rents are also increasing. We will not get into a transaction if the return potential is less than 7-7.5 percent.”
Manrre, which is led by the Dubai-based Palmon Group, has recently attracted new investors, including high-net-worth individuals & family offices from the Gulf. The fund currently has 24 properties listed, with average lease terms ranging from five to 10 years.
The most expensive asset was purchased for DH 50 Million & leased for ten years to Iron Mountain Solutions, a data management services company. “We are location agnostics,” Lahori said of trying to invest outside of Dubai. “But we have to find the right asset in the right area, with those 5 to10 year leases underlying it,” he stated.
REIT Conversion and IPO
Manrre Logistics Fund will have to wait at least another three years to become a full-fledged REIT (Real Estate Investment Trust) with its own IPO. “For an IPO, we need to get the fund to a specific size,” said Kumal Lahori, CEO. “For the time being, there is renewed interest in Dubai as companies seek to expand in the post-Covid environment. That’s where we need to be — the initial public offering can wait.” The previous REIT to go public on DFM was Al Mal Capital’s REIT, which did so in early 2021.