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First Group launches USD100m Sharia’h-compliant UAE property fund


The First Group, a British-owned, Dubai-based property development company that focuses specifically on emerging markets within the United Arab Emirates, will list the Emirates Opportunity

The First Group, a British-owned, Dubai-based property development company that focuses specifically on emerging markets within the United Arab Emirates, will list the Emirates Opportunity Fund on the Channel Island Stock Exchange next month.

The first Guernsey-domiciled Sharia’h-compliant closed-ended property fund investing in the UAE, the five-year fund seeks to take advantage of opportunities in Dubai presented by a chronic undersupply of housing amid a population boom, as well as opportunities in the northern emirates.

The company will be seeking to raise EUR100m from investors with a minimum investment requirement of USD25,000, and the first share issue will close on August 18. The fund is targeting an annual internal rate of return of between 17 and 20 per cent.

Portfolio selection will comply with Sharia’h principles, which forbid profiting from payment or receipt of interest as well as investments with links to certain products or activities such as gambling or alcohol.

While retaining an opportunity-based approach, the fund will focus on three distinct strategies. Between 40 and 60 per cent of the assets will be invested in new projects likely to benefit from transport and infrastructure advantages where a pre-determined exit is agreed.

A second tranche of between 15 and 25 per cent will be used to buy pre-construction property designed for sale immediately or held until after construction to meet the demands of the market.

A further 15 to 25 per cent will be invested in the northern UAE area, which the group says is being pulled rapidly into the fundamentals of the rest of the region. For example, the fund might buy a plot of land with an eye to selling it once planning permission is granted.

According to First Group commercial director David Scott, the fund’s domicile in Guernsey coupled with the booming property markets of the UAE offer a compelling proposition for direct investment or a zero-tax solution to UK investors within self-invested personal pensions.’The Fund presents investors with a unique opportunity to invest in a Sharia’h-compliant diversified property portfolio in Dubai and UAE,’ Scott says. ‘The population boom and the influx of international businesses into Dubai and the northern emirates are contributing to an undersupply of residential housing in the whole region. There is also a chronic undersupply of offices in Dubai, with a vacancy rate of just 2 per cent in 2007.

‘One of the strategies of the fund is land banking and development, especially in the northern emirates, which are real emerging markets with almost identical fundamentals as Dubai. For example, as the only emirate on the Indian Ocean, Fujairah does not need the Straits of Hormuz for marine transport of goods, most importantly oil.

‘Unknown to many people, it is the world’s third largest oil bunkering port, behind only Singapore and Rotterdam. A new oil pipeline nearing completion will deliver 1.5 million barrels of oil a day to Fujairah. New roads connecting Fujairah with tunnels through the mountains offer a trade supply route for the emirates of Dubai and Abu Dhabi.

‘Fujairah is currently largely undeveloped and offers a strategic investment opportunity. It is therefore an immediate target for the fund along with other opportunities presented by the economic overspill from Dubai.’

The First Group was established in 2005 by Danny Lubert and Gary Shepherd, who have experience in residential, commercial and resort property development and have produced more than USD2bn in revenue from property sales. The fund’s Shari’ah and investment adviser, Tabarak Partners, is regulated by the Dubai Financial Services Authority and has structured more than USD1.2bn in Islamic transactions.

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