Executive Summary

In 2017, the Tadawul stock exchange witnessed the listing of seven Real Estate Investment Trusts (REITs), a new high in comparison to other exchanges. The interest has not waned in 2018 with five listings so far and at least six more in the pipeline. Successful REIT IPOs showcase strong appetite of Saudi Arabian investors towards real estate. Due to the various advantages of REIT, we believe that this asset class will gain greater prominence. We expect the market to expand into various advanced types of REITS from its current form of Equity REITs.

Since only two of the twelve listed REITs, have provided positive total returns since listing, we believe that the time is ripe to introduce a framework to evaluate investment attractiveness of various REITs listed in Saudi Arabia. The current REIT market constituents have significant differences in their risk and return characteristics, they differ in exposure to locations, sectors, yields, sizes and more importantly the risk categorization offered to them by the CMA. We have used a seven-factor framework to analyze each of the REIT listed in the Saudi Arabian market. We have equally weighted each of the parameter. The final outcome of the exercise has been to arrive at a weighted average score for each of the REIT signifying its relative attractiveness.

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