By Lubna Hamdan
Logistics fund Manrre to capitalise on growing e-commerce industry - CEO says now is time to invest in logistics and industrial real estate
The fast-spreading coronavirus is steering consumers away from shopping malls and onto e-commerce platforms, according to the CEO of Dubai-based Dalma Capital.
Speaking to Arabian Business, Zachary Cefaratti said the virus is likely to continue to drive online sales. His comment comes as Manrre Logistics Fund, which is managed by Dalma Capital, placed its shares into Nasdaq Dubai’s share depository to capitalise on the growing e-commerce industry.
“We think the coronavirus is a short term externality. It has no effect on what we’re doing with the fund and again the only impact that we can perceive is actually positive. I went to Dubai Mall this past weekend and even in the summer I don’t see Dubai Mall as empty as I saw it this weekend, so the fact is people still need to shop.
"If anything, actually in the very short term, the coronavirus affecting consumer behaviour would more likely create a spike in e-commerce as people avoid shopping in malls, but again this is a very short term externality. It’s not something that affects our long term investment."
He added, “If coronavirus continues to affect consumer behaviour it will continue to drive more online sales… At the end of the day people still need to keep consuming goods, they still have demand for products and if anything if people want to avoid going to the malls, it’s good for us.”
The UAE has the highest e-commerce penetration rate in the MENA region at 4.2 per cent, followed closely by Saudi Arabia at 3.8 per cent, according to Bain & Company, while e-commerce spending in the GCC alone is expected to total $10.8bn by 2020, according to Dinarstandard's MENASA eCommerce Landscape.
But Cefaratti said the spike in online sales as a direct result of the coronavirus are merely short term, and have no effect on the fund’s investment plan.
“I understand the coronavirus is something that is trending in the media right now but it is something that is having short term effects. It may trigger increased online shopping in consumer behaviour in the long run but it doesn’t have an effect on our investment outlook or investment horizon for this strategy,” he said.
Cefaratti also said now is the ideal time to invest in logistics and industrial real estate as interest rates and real estate prices drop to a near historical low.
“Interest rates are near their historical lows, they’re expected to remain low and are falling so finding yield in this market is difficult but borrowing is cheap so that’s reason number 1. Reason number 2 is asset prices in real estate in the region are at cyclical lows. It is a buyer’s market right now,” he said, adding that logistics and industrial real estate is experiencing favourable supply and demand conditions on the back of significant growth in e-commerce.
“Every billion dollars in e-commerce growth of sales lead to an additional 1.25 million sq. ft. of distribution facilities needed. At the current rate of e-commerce growth, there’s actually very favourable supply and demand conditions in the core segment that the fund focusses on which is logistics, industrial, real estate,” he said.
The Manrre fund, which was launched by Dubai-based Palmon Group in 2018, focuses on institutional-grade logistics and industrial properties across JAFZA, Dubai Investments Park and Dubai South.
In 2018 it reported a total annualised return of 12.5 percent, with a portfolio valuation of $72.33 million at the end of 2019. Of its portfolio total built-up area, logistics and industrial account for 70% of assets.
Cefaratti said the fund has no plans to list its shares on the stock exchange as it continues to focus on private investors who understand the illiquidity premium of logistics and industrial assets.
“One of the benefits of the asset class we’re focusing on, on logistics and industrial assets, is that there’s an illiquidity premium. We actually are compensated by investing in an asset class that are illiquid. Logistics facilities as opposed to apartments or other real estate assets are illiquid. They require time to… you can’t buy them and sell them on a frequent basis.
“So as long as we’re focussing on extracting an illiquidity premium and offering the funds to sophisticated investors then the benefit is for us to remain private so for the current foreseeable future we’re focussing on sophisticated private investors,” he said.