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Wed 10 Mar 2010 07:08 AM

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US firm targets Gulf with $1bn property fund

Blumberg Capital Partners eyes distressed sales in GCC, US and Brazil - CEO.

US firm targets Gulf with $1bn property fund

Blumberg Capital Partners, a leading US-based investment firm, has launched a $1bn commercial real estate fund to capitalise on distressed properties in the US, the Gulf and Brazil, the firm’s CEO has said.

Almost a third of the capital will be ringfenced for possible investment in the Gulf and the equity fund has attracted interest from local sovereign wealth funds keen to diversify their real estate portfolio, said CEO and founder Philip Blumberg.

“We’re seeing very significant interest from the Gulf region in particular. We have both interest and some commitments from institutional and individual investors. The commitments, both soft and hard, are in excess of $100m,” he said. “Our first closing will be at $100m and we’re well on the way to that.”

The Blumberg Capital Partners Strategic Asset Fund is the group’s third equity fund, and the first to be open to investors outside the US.

Its primary target is office buildings in the US; a sector where prices have plunged some 60 percent as stressed banks rush to shed their commercial real estate assets.

“In the US, the volume of commercial properties coming online is enormous. And those are marked down sometime 60 percent or more. It’s one of the best buying opportunities for office building in the US, period,” said Blumberg, adding the fund would target returns of between 20 to 25 percent a year.

“Our average return over the last 16-years is a little over 17 percent, which as an annual return ranks No.1 in the US. We buy low and sell high.”

The firm plans to meet next week with fund managers and developers in Abu Dhabi to discuss possible investments. The group is also eyeing a mixed-use development in Oman, potentially in partnership with a hotel group.

Commenting on real estate opportunities in Dubai, Blumberg said reform of the emirate’s opaque property laws was urgently needed to tempt in fresh capital from wary investors.

“We’re pretty convinced there are opportunities here in the Gulf. [But] Dubai, I think hasn’t sorted itself out yet. Certainly on the residential side, there is a huge legal grey area. As an investor, it concerns me. I would clarify the legal situation importantly now, knowing that investors are the fuel, not the developers.

“Capital will flow in once the laws are clarified, which will help the down [trend] come back. It’s clear that in the long-term, Dubai will be fine. It just needs to seize the moment,” he said.

In February, Al Rajhi Capital, the investment arm of Saudi Arabia’s Al Rajhi Bank and Bahrain’s Arcapital Bank, said they were crafting a $500m property income fund to pursue opportunities in logistics, healthcare and education-related assets in Saudi Arabia and the wider Gulf.

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