$500mn Sharia Russian property fund launches

Investment bank's new fund set to target sovereign wealth funds in Middle East.
By Soren Billing
Sun 18 Jan 2009 12:39 PM

Investment bank Fairfax Middle East is hoping there is still some appetite for real estate investment in the Gulf, as it plans to launch a $500 million Sharia compliant Russian property fund.

The new fund is targeting sovereign wealth funds (SWFs) and family trusts in the Middle East and will invest in large scale residential and commercial developments in the major cities of Russia, said James Hare, managing director of Vesta Capital, which conceived the idea and is responsible for promoting the fund in the Gulf.

“There is an endemic supply shortage, which has been there throughout the boom years and continues to be there for specific types of real estate, whether that be residential or commercial in both Moscow and St Petersburg,” he said.

The Shariah Russian Property Fund has entered into a partnership with Sistema-Hals, the LSE-listed property subsidiary of Russian industrial conglomerate Sistema, to co-develop some of its major projects, most of which are in Moscow and St Petersburg.

Sistema will be investing $200 million in the new fund, which is targeting an internal rate of return (IRR) of 30 percent.

The weak ruble and the distressed state of real estate assets in the country will enable the fund to employ its capital very effectively, Hare said.

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