Kuwait Real Estate News
Global launches Ijarah Fund for real estate deals
Taking advantage of the Middle East and North Africa (MENA) property sector and the Islamic Financing Competences, the Global Investment House has announced the launch of Ijarah Fund, the Global Real Estate Fund, targeting potential investments and property deals in Kuwait, Bahrain, Tunis, Egypt and Morocco.
The new fund has two unique elements that are considered to be the pillars for the current economic prosperity in the MENA region, says Sameer AlGharaballi, Executive Vice-President, Global Investments.
He mentioned that the funds seek competitive returns and capital preservation through utilizing sophisticated Ijarah structure. The fund size has been set at $300million, and will invest its capital in various real estate properties, be it residential, commercial or industrial in the MENA region. The expected return is about eight to ten percent, which will be distributed on quarterly basis.
Fawaz Al Bader, Real Estate Manager, Investment Funds, Global, speaking about the MENA Real Estate, said that by implementing the Ijarah structure, the Fund hopes to fund the purchasing the assets, and maintaining full ownership throughout the Ijarah period. The Fund will then lease the assets by exchanging an advance Ijarah payment which is equivalent to nearly 30 percent of the property value.
By seeking advance rental payment, the Ijarah Fund, actually reduces the initial exposure of the asset to nearly 70 percent of its original value, maintaining a coverage ratio of nearly 140 percent. During the end of the Ijarah term, the Ijarah ends with a 'promise to Buy' which is more like a buy-back guarantee, implying that the asset will be sold out to the lessee for a purchase price, which equals the Fund's investment minus the Ijarah rental payment, received during the Ijarah tenor.
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