iib to launch $65 million abu dhabi property fund
International Investment Bank, a globally focused investment bank based in Bahrain, has today announced the launch of a new $65 million property fund which will invest in the development of land located within the Danet Abu Dhabi Master Development Project in Abu Dhabi.
The new fund, IIB-Abu Dhabi Properties 1, will be 66.7% owned by IIB with the remaining 33.3% owned by United Friends Company (UFC), a UAE based company. The fund will purchase two plots of land at Danet Abu Dhabi and will develop the land into a mixed-use, 21-storey twin-tower building. One of the towers will comprise exclusively of office units, whilst the other will be a mix of office and residential units. The building will also include retail and entertainment units, as well as car parking for 632 cars. The office and residential units will be let initially and then sold. The fund will exit from the investment within four years and is targeting an Annual Internal Rate of Return (IRR) of 24%.
“Both residential and office property markets have seen significant growth in Abu Dhabi and both markets are set to deliver future growth due to a number of factors. Abu Dhabi’s population growth, which is expected to grow by 6.9% between 2006 and 2010, is driving a need for new housing units. Demand for state-of-the-art office units remains strong, and despite the upcoming supply, market projections indicate high demand and occupancy rates will continue in the coming years. Both office and residential markets have seen increases in property value as well as rent. Rental rates for the residential market in prime areas have increased by 22% from 2005 to 2006. It is projected that residential rents are likely to rise at around 10-12% annually for the next three years. Equally, it is expected that commercial rents will increase by 10-12% annually for the next two years.” Explained his Excellency, Mr. Saeed Abduljalil Alfahim, Chairman of the International Investment Bank.
The government of Abu Dhabi has also introduced new policies which will drive further growth. The Abu Dhabi Tourism Authority plans to double the number of tourists visiting Abu Dhabi to three million by 2015, which will encourage further expansion of real estate activity in the hotel industry and commercial sector in Abu Dhabi. The government has also relaxed real estate ownership restrictions over the past few years, which has fuelled significant real estate activity. Mega projects such as Al Raha Beach, Shams and Reem Island projects have already started, providing a much needed impetus for real estate activity in Abu Dhabi. This trend is likely to gain further momentum.
"We believe the Abu Dhabi real estate market offers the potential for superior returns for our investors,” said Aabed Al Zeera, CEO of IIB, commenting on the launch of the new fund. “With the recent strong trends in property valuations and rental growth in Abu Dhabi, and with these trends forecast to continue in both the office and residential markets, now is the right time to invest in a project such as Danet Abu Dhabi. Population growth, demand and government policy are creating an ideal environment for future growth. In addition, Danet Abu Dhabi will be one of region’s best-planned communities and will meet the growing demand for sophisticated mixed-use projects. Its location close to downtown Abu Dhabi will also make it a very attractive investment.”
“IIB has built a strong track record of real estate investment across the GCC and increasingly in Europe. Our investors can buy into the future growth of these markets whilst diversifying their portfolios across different markets,” concluded Aabed Al Zeera.
Khalifa Khoury, shareholder and director of UFC said “Our partnership with IIB created a synergy that benefits the project. Given our both our track records and geographic choice, the success of this project is inevitable. In fact, Danat Abu Dhabi is considered one of the prime master developments in Abu Dhabi.”
The news of the Danat Abu Dhabi fund follows IIB’s recent $98 million acquisition of three commercial properties in Munich, Germany, as well as its acquisition and management of a high quality real estate portfolio in France, valued at US$105 million. IIB also recently concluded a highly profitable exit from its first European real estate investment in an office building located at 33 Grosvenor Place in the prestigious Belgravia area of London. Sold just 18 months after its purchase by IIB and its partners for US$409 million, this property delivered a 100% return on investment for the Bank and its co-investors.
Mr. Mohammed Hadi Mejai, Executive Director of Investment & Business Development, “Our strategy of diversification in terms of products and geographic location is paying off. We always made it a point to deliver above our investors expectations. All these factors are helping us do even better deals over time”
In 2006, IIB also concluded two real estate investments totaling US$180 million in Dubai’s Business Bay development, which is being planned by the Dubai Government as the new dynamic ‘downtown’ area of Dubai. These included investments in West Bay Tower and One Business Bay. IIB also concluded its exit from One Business Bay well in advance of the initial projections and with an internal rate of return (IRR) of 25 percent. Other real estate investment in 2006 included the launch of Ewaan, a US$100 million company that will focus on investment in the Saudi Arabian real estate market. Based in Saudi Arabia, the new firm will seek to invest some SR2 billion (US$533 million) in the fast-developing Saudi property sector over the next three years.
