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Wed 26 Oct 2011 12:29 PM

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Dubai’s ICD, Brookfield to launch $1bn real estate fund

Fund will buy up residential, commercial property assets in Dubai’s struggling real estate market

Dubai’s ICD, Brookfield to launch $1bn real estate fund
The fund will be capped at $1bn, the two companies said
Dubai’s ICD, Brookfield to launch $1bn real estate fund
Dubai Marina

Investment Corporation of Dubai (ICD), a state-controlled company, and Canada’s Brookfield Asset Management plan to start a $1bn fund to buy up assets in Dubai's battered real estate market.

The fund will be jointly backed by the two companies, which will each seed the fund with $100m, the Dubai Media Office said in an emailed statement on Wednesday.

The fund will be capped at $1bn. The pair will anchor the fund, with a limited number of local and international parties invited to invest in the scheme, the statement said.

“The investment strategy of the fund will target opportunities currently available in the Dubai real estate sector, with a focus on a wide class of assets in both freehold and non-freehold areas,” the statement said. “The fund will have a life of 8 to 10 years.”

Mohammed Ibrahim Al Shaibani, CEO of ICD, said the company was “looking forward to participating in the recovery of the Dubai real estate market.”

“This venture with Brookfield is the first 'Dubai-only' investment fund that is sponsored by a leading international investor,” he said.

ICD holds about $70bn in assets and its portfolio includes airline Emirates and stakes in Dubai's largest bank, Emirates NBD, developer Emaar Properties and Borse Dubai.

Brookfields, a global asset manager with interests in property and infrastructure, plans to relocate employees to Dubai to oversee the fund, alongside “qualified UAE nationals”, the statement said.

The company has 2,000 staff in Dubai through its construction arm, Brookfield Multiplex.

Sheikh Ahmed bin Saeed al-Maktoum, chairman of Dubai's Supreme Fiscal Committee, said the signing was “another big step” in the Gulf emirate’s economic growth.

“It once more affirms Dubai's attractiveness as a premier investment destination in this region,” he said.

Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments.

From start-2007 to mid-2008, prices rallied almost 80 percent, Morgan Stanley estimates showed, with billions of dollars worth of new projects launched by local developers.

But home prices in Dubai, the Gulf property market that had the biggest reversal because of the financial crisis, fell more than 60 percent in the wake of the global credit crunch.

House prices in Dubai showed signs of recovery in the third quarter, with slight rises in prime projects such as Palm Jumeirah and Arabian Ranches, Jones Lang LaSalle said in September.

But analysts remain concerned that the estimated 33,000 new homes scheduled to hit Dubai’s market by end-2012 could cause fresh declines in rental and sale prices. Rating agency Moody's said this week that house prices are unlikely to recover until 2016.

Dubai has unveiled a slate of government-backed financing schemes aimed at resuscitating its property market. The emirate’s Land Department last month signed a deal to identify suspended or offplan residential developments and offer them for sale or long-term lease to investors.

In May, the agency unveiled a scheme to offer low-interest bank loans to developers with partially-constructed projects.

Paul King 8 years ago

Good move by Brookfield - invest into a fund that can buy up projects your construction arm is owed money on.

Red Snappa 8 years ago

Well try it, but at what level of value will these assets be bought up at it will have involve avery thrifty purchasing policy, if the fund is to realise a decent return. Might as well take the predicted 20% fall in values into account immediately. Bearing in mind buying up property assets at low value immediately sets a lower market price benchmark.

Also considering the overall value of completed properties and ongoing to handover units, a 1 billion dollars is not very much. Does this mean that the units acquired by the fund are out of circulation for 8 to 10 years or rented at low rents if possible?

The 8 to 10 years longevity of the fund is quite scary in that it implies that it will take that long to realise any decent return on real estate capital value. Plus wear and tear depreciation. Also is this aimed at institutional investors who undoubtedly take a more jaundiced view of market sentiment?

Hey ho we shall see.

Birdie 8 years ago

This news item highlights the thawing of UAE's relations with Canada- a G-7 country with immense potential for attracting investments.

The proposed US$ 1 Billion Fund coupled with private Saudi consortia buying Downtown apartments only underlines the attractiveness of the Dubai property sector to the savvy investor.
It will also give an added impetus to to the rising Capital values of villas in Emirates Living, Ranches , Jumeirah and Palm Islands.

However I am not sure about the authenticity of the 33,000 new supply number. This year less than 10,000 units will be delivered despite estimations of 38,000 at the beginning of the year.

And why does no one talk about the demand figures ? After all Dubai"s population is rising at 5% p.a .

John Thomas 8 years ago

Birdie, are you sure you are not Omar?
I thought you were taking care of your rose tinted lenses problem...?
Shall I send you the name of a good "reality" optician?

procan 8 years ago

Brookfield is about making money Dubai is a vulnerable market and is ripe for the picking why would you not take a chance? Billion dollar ceiling and defined shelf life makes for good opportunity for both parties.

procan 8 years ago

Birdie.... Brookfield is an outstanding Canadian organization and will help Dubai achieve her goals in investment and real estate no doubt on that issue. As far a thawing relations politically speaking, not so much, one must remember we separate Government and private Business, unless of course it is a strategic to the Country interest ie. oil, uranium, state-supported airlines which you are already aware of. But that being said, every little bit helps.

Rajan 8 years ago

If one wishes to invest in Dubai it should be in a prime location like the Greens/Views, Palm, some part of Marina or Burj Khalifah, these location are popular and prices been stable for last five months. Despite all these daily negative news published on this site about Dubai property prices I don't believe there will be more falls on Dubai house prices, Dubai government has been working hard to bring confidence back to Dubai.