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Tue 16 Dec 2008 01:40 PM

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Bank plans JV for $500mn real estate fund

National Bank of Abu Dhabi eyes investment opportunities in UK and German markets.

UAE's National Bank of Abu Dhabi said on Tuesday it plans to set up a joint venture fund with a target size of $500 million with London-based Evans Randall to offer mezzanine investments in European real estate.

The joint venture will focus on the British and German markets and seek to capitalise on the growing gap in the capital structure of property investments between senior debt and common equity, NBAD said in a statement.

The joint venture will aim to pay annual cash returns of between 8-12 percent to investors with projected internal rate of returns of 15-20 percent, it said.

"With Evans Randall as an active property investor and borrower in the European real estate market, the joint venture will have considerable knowledge of what other borrowers require," Akram Mark Yassin, Senior General Manager of NBAD's Corporate & Investment Banking said.

Due to the credit crisis, banks are lending only about 50 to 60 percent of the property value, forcing borrowers to bring in equity which in most cases could be up to 20 or 30 percent.

"That gap, which is the mezzanine, between equity and senior debt will be filled by us," said Yassin.

"We plan to go to the market shortly to raise capital from investors," he added.

Evans Randall, an investment banking and private equity group specialising in alternative investments is an investor in real estate in Britain and Western Europe with a portfolio in excess of $8 billion.

"With increased conservatism on the part of banks in the short- to medium-term and the longer term shift in regulatory capital aspects of such investments, ongoing opportunities are available for investors able to originate and provide such financing," said Michael Evans, chairman and chief executive of Evans Randall. (Reuters)

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