Accord on RM689mil Islamic real estate fund

Accord on RM689mil Islamic real estate fund
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By Susan Tam

KUALA LUMPUR: AmanahRaya Investment Bank Ltd and Kuwait Finance House (Labuan) Bhd will set up a US$200mil (RM688.95mil) Islamic real estate fund called Al-NIBRAS to tap into the lucrative property and infrastructure sector.

Kuwait Finance House (M) Bhd managing director K. Salman Younis said the fund would invest in properties in Malaysia and foreign markets such as Singapore, Indonesia and China to achieve an attractive return for investors.

He said Al-NIBRAS, which was not a home-financing fund, would purchase syariah-compliant properties and the rental would act as income for the fund.

Speaking to reporters after the two companies signed a memorandum of understanding yesterday, Salman said other investment structures for the fund could include sale and leaseback opportunities, underwriting work for real estate projects, or investing in projects that were in their infancy stage.

Datuk Mohamed Azahari Kamil (left) exchanging documents with K. Salman Younis.
“For instance, the current owners of the completed property can sell the property to the fund and lease it back for a number of years,” he said, adding that the bulk of the investment would come from properties in Malaysia.

Salman said the internal rate of return from the fund could range from 12% to 20%, depending on the real estate market prices.

“In similar funds in Malaysia, there are two components to the yield.

“One is distributing the rental from the properties bought by the fund back to the investors, and the other is capital appreciation,” he said, adding that details were being worked out for the Al-NIBRAS launch next month.

AmanahRaya Investment Bank director Datuk Mohamed Azahari Kamil said the parties were conducting due diligence and would be able to make initial investments next month.

He said the two banks would be initial subscribers to the fund, but there was a possibility of a “sell down” to other institutional investors.

Azahari said it was also possible that properties from Al-NIBRAS could be injected into the AmanahRaya real estate investment trust (REIT) on fair valuation, adding that this would allow a ready pool of assets ready for injection (into REITs).

Salman also said roadshows would be conducted in Malaysia and Gulf Cooperation Council (GCC) countries to market this fund and other investment opportunities in Malaysia and the region to attract local and high net worth retail investors from the GCC.