Emirates REIT (EREIT) has reported its headline figures for 3Q16. Total revenue (USD12.7mn) came in line with our estimate, showing 18.1% Y-o-Y growth, driven by higher contribution from the Index Tower and Jebel Ali School (JAS). Office space at the Index Tower saw a moderate 4% sequential rise in occupancy rate to 24%, which is in line with the emirate’s reduced activity in the office market on seasonality. On a negative note, income before revaluation gains came in weaker than expected at USD2.8mn (miss estimated by 12.4%), implying higher-than-expected operational and/or financing costs. LTV was roughly unchanged sequentially in September at 35%, but surged to 39% post the quarter’s close, with the closure of a new loan agreement. We had expected revaluation gains (so far undisclosed for the quarter) to have totaled USD8.5mn, mostly coming from revaluation gains, following completion of JAS in August. EREIT has also announced that its NAV as of end of September had reached USD480.7 (USD478mn in August). This is equivalent to USD1.60/share (USD1.59/share in August), translating into a P/NAV ratio of 0.70x, on the latest closing share price.   Key positives: Ramp-up in occupancy at Index Tower office space to 24% in September 2016, up from 20% in June 2016 (September 2015: 4%). This implies 19.0% in occupancy rate at the Index Tower, including the retail space (up from 16.3% in June 2016). The overall portfolio occupancy rate was 80%, up from 77% in June 2016 and 75% a year ago Revenue met expectation, coming in at USD12.7mn in 3Q16 (+18.1% Y-o-Y, +7.6% Q-o-Q, EFGe: +1.4%). 9M16 revenue totaled USD36.3mn (+21.7% Y-o-Y). The growth was driven by higher rental income from the Index Tower and Jebel Ali School (JAS)   Key negatives: Net income before revaluation gains missed by 12.4% in 3Q16, likely on higher-than-expected operating and financing costs, coming in at USD2.8mn in 3Q16 (+25.4% Y-o-Y, +0.8% Q-o-Q) and USD7.8mn in 9M16 (+33.9%)   Leverage up again, albeit post quarter close. Management had indicated that while the LTV ratio reached 35%, roughly unchanged sequentially, it grew to 39% post the quarter’s close, as a USD54mn 10-year loan facility was secured   We expect the company to continue to increase its borrowing in order to meet its capex requirements over the short-term and to sustain its high dividend payout ratio, which represents our main concern. EREIT offers a dividend yield of 7.1% for 2016e. We have a Neutral rating on the name, with our DDM-based FV of USD1.24 showing an upside potential of 10.7%. (Company disclosure, Mai Attia, Sara Boutros)   Emirates REIT (DU): USD1.12 as of 30 October 2016, Rating: Neutral, FV: USD1.24 per share, MCap: USD336mn, REIT DU / REIT.DI