Finding fortune in funds

As uncertainty surrounds real estate in the UAE, those who wish to invest may now find safety in numbers. Phil Wombwell, director of Eventus Capital explains the benefits of real estate investment funds.

Property prices in the UAE have risen and fallen in equally dramatic measure over the past 12 months, resulting in some foreign and local buyers being left out in the cold. The number of sellers, however, is on the rise, though buyers remain few and far between, in part due to the lack of willing lenders and lingering uncertainty among investors.

One alternative, for the wary but keen investor, is to place money into a real estate investment fund, one such example being the UAE real estate fund operated by Eventus Capital Limited. According to Eventus Capital director, Phil Wombwell, these funds can boast benefits beyond the wildest dreams of lone investors.

"Obviously, with US$30m, US$40m or US$50m at [our] disposal, we have considerable buying power, over and above an individual, who may have a couple of million dirhams," he says. With a far-from-imminent end to the global financial crisis, Wombwell believes these investment funds are gaining influence in the market.

"Some of the banks just aren't offering mortgages at the moment and, as such, the buying power of the fund is quite powerful," he explains.

However, these collective investment schemes have a host of benefits stretching beyond the confines of just taking advantage of the current market. As part of an investment fund, Wombwell claims an individual would have far more security than if they were to go solo, not to mention projected returns of 15% per annum with the company's UAE real estate fund.

Reaping rewards

"Additionally, another positive, is we have in-house analysts and we have external analysts. The due diligence on any particular deal, large or small, is done by Colliers International, and we also receive analysis from Asteco," he explains. Even the smaller things an investor might encounter are removed from the equation.

"Obvious benefits are that an individual going into an individual purchase on their own might have agency fees, commission fees, transfer fees, land registration stuff in his country, if they're overseas they might have to travel for the transfers and all the rest of it."

But just what is the investor trading traditional hassles for?

Structured investment

"In this particular investment scheme, an individual just places their money into the fund and then forgets about it for three years," says Wombwell.

Indeed, Ahmet Kayhan, CEO of REIDIN.com - a website which provides a wealth of information on real estate industries in emerging markets - believes investment funds are a sound alternative to going solo.

"Even during hard times, like the ongoing economic crisis, it's always a smart move when you decide on investing your money into a fund. The benefits introduce you to a professional and structured way of investment that allows for diversification, limited risk exposure, liquidity and access to better deals," he says.

Eventus Capital currently has one fund under subscription, its UAE real estate investment fund, which was launched in the fourth quarter of 2008.

"The company was established in the summer [of 2008] and with all the legalities involved with the administrators. The subscription period for this particular fund started just recently, and will continue right through to the end of February," explains Wombwell. Three more funds will also go live during 2009.

"The actual fund will go live in the early part of March, 2009. Then we'll have three additional funds which we'll be launching in the first half of 2009. This will consist of a GCC real estate fund, a European distressed real estate fund, and an energy fund." Taking into account the effect of the global credit crisis in the fourth quarter of 2008, Wombwell decided to take action in a move to furthersecure the company's UAE fund.

"Taking into consideration the lack of investor confidence from existing and potential clients, I have restructured the product with a 90% Capital Protection, structured trough a Zero Coupon Bond. I have not seen any other real estate fund offering such protection for their investor deposits," he says. Remarking on the number of distressed deals available in the UAE market as a result of the crisis, Wombwell notes.

"An astute investor should indeed be excited at the current market potential!"

Product accessibility

The entry level for the UAE real estate fund rests at just US$100,000, leaving the fund accessible to a wider range of investors.

"In totality, they are institutional investors and retail investors," he says. Perhaps indicative of current market sentiment, a large proportion of retail investors have entered the first fund.

"Retail investors are most notable in the first fund, which is why we have the entry level at just US$100,000. That attracts a lot of retail investors, and those retail investors could consist of individuals who have traditional financial products, who invest in lump-sum investment schemes or high deposit accounts with banks, or it could be real estate investors because it's a real estate fund," he explains. Wombwell also notes these investors are not strictly residents in the UAE. In fact, the bulk of investors are from abroad.

"The bulk of our funds come from overseas. We have investors and agents representing our funds in 29 countries," he says. Furthermore, Wombwell expects approximately 90% of funding for the company's initial fund - which has a target value of between US$30m and US$40m - to come from outside the UAE.

Despite having investors from around the world, the company cannot so freely market its products.

"You have to understand that we're a Cayman Island registered fund, and as such, we're restricted on what activity we can do in certain jurisdictions and we have to respect that.

There are certain places where we can and can't market our product, and because of the jurisdictional, financial restrictions we can't openly market our funds because we're an offshore fund," he explains. According to Wombwell, the company thrives by making its services available to "astute investors" and invites such individuals to presentations.

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