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A shari’a real estate fund in Paris, courtesy of an anonymous Kuwaiti bank, has all the trappings of a queer yet interesting partnership in a market with fair potential.
July 13, 2012 4:30 by kippreport
Since the party, with its roots in the region, has chosen to remain unidentified, it was time to quiz Marc Bertrand, CEO of La Française Real Estate Managers. The most obvious questions were: With which Kuwaiti bank have you partnered? Can we talk to them? The answer was not a surprise at all: “No, the investor wishes to remain anonymous.”What is the corpus of the fund? Answer: “The OPCI is a dedicated fund. The real estate investment was financed through 50 percent equity and 50 percent Murabaha loan.”
“The OPCI, given its structure, governance and tax efficiency, was quickly identified as the optimum structure for the lodging of the co-investment and the shari’a board of the Kuwaiti bank, co-investor, certified the shari’a-compliance of the structure, asset and the tenant,” Bertrand quips.
According to Bertrand, the shari’a finance market is rapidly developing in France with experienced shari’a professionals, including banks, asset managers, notaries and lawyers. “The market is favorable to shari’a structures given that the French administration has integrated shari’a compliant loans into its doctrine. Tax policy of shari’a structures is now identical to that of comparable traditional loans. For example, Ijara loans are comparable to the French crédit bail (lease and buy),” he says. The market is certainly ripe and the situation tailor-made for money to flow from the Gulf.
As an investment, the French market, especially the Paris region, offers quality and diversity, as well as an attractive risk return profile. According to Bertrand, the market is also developing within continental Europe. Historically, the UK market has attracted more foreign investors, including Islamic investors, he says. La Française appears well-positioned to reap the benefits. To position the company in the context of its international ambitions, UFG-LFP (asset management group resulting from the merger of Union Française de Gestion and La Française des Placements) was re-branded La Française AM in September 2011.
Interestingly for Bertrand, the real estate funds managed by La Française AM have little debt and are hence insulated from the European debt crisis. In fact, it has been an opportunity worth grabbing. “We are in a more comfortable position that offers our investors better perspectives and lower volatility. La Française AM is seizing the opportunity provided by current market conditions to launch a commercial real estate debt fund, reserved for institutional investors,” he says.
The crisis may have renewed partnerships such as these, but Bertrand says Middle Eastern businesses have been interested and present on the French real estate market for roughly 15 years. They are particularly interested in prime Parisian office real estate. “Fuelled by petroleum dollars, Middle Eastern investors are pouring into the French real estate market in greater number. Simultaneously, other foreign investors, mainly German and Spanish, are pulling out. The end effect being a larger proportion of Middle Eastern investors,” says Bertrand.
Needless to add, the La Française fund appears to be a response to this stimulus. The firm seeks to capitalize on this and offer similar asset and investment management services to other Islamic investors. According to Bertrand, La Française AM is actively prospecting in the Middle East a limited and select number of investors with whom the company can commit to long-term partnerships. “La Française AM’s shari’a expertise is a key factor in its future development in the Middle East,” he says.
-By E. Shahid
*First published on Trends
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