K. Raveendran, Special to Gulf News
When Dubai Islamic Bank announced the launch of its first property development in Dubai Marina in January last year, there was only a hint that the world’s first Islamic bank might be looking at the emirate’s booming real estate sector somewhat more seriously than the rest of the banks.
But in less than a couple of years, DIB has emerged as the country’s leading bank in the property business, not only consolidating its domestic role, but extending its scope to the wider international arena. No other bank has achieved a comparable position in the comparatively new, but booming business.
DIB’s foray into the real estate sector, represented by the Dubai Marina project, was meant to create new investment opportunities for its customers. The huge response that the project drew prompted the bank to attempt a similar project in Beirut, which found synergy with the activities in the domestic market.
The operations soon achieved increasing sophistication as the bank entered into real estate financing as well as investment in a big way. In April this year, a joint venture of the bank, along with Istithmar, the investment arm of the Ports, Customs and Free Zone Corp, made an exceptionally grand entry into the mortgage and home finance market, hitting the Dh250 million mark within just two months. Tamweel launched into action with a Dh1 billion-strong fund in its kitty.
Recently, DIB sealed an agreement with Nakheel to lead manage and arrange a record $350 million Ijara syndication, the biggest in the UAE, with three of the world’s leading financial institutions that included Citigroup, HSBC and Standard Chartered Bank. The syndication will provide the capital injection for Nakheel for its rapidly expanding portfolio of developments, such as The World, Palm Jumeirah, Palm Jebel Ali, International City, Jumeirah Islands, Jumeirah Lake Towers, Discovery Gardens, The Gardens and The Gardens Shopping Mall.
The bank’s property involvement, meanwhile, found a major overseas expression, with the asset managers picking up the US and France as two markets providing promising investment opportunities. This led to the creation of the US Commercial Property Fund and the Al Islami French Property Fund.
DIB has just sold two of its $121 million, five-property portfolio of commercial properties in the American office market and achieved an annualized 21 per cent return to investors within 11 months of the acquisition of the properties. The original investment holding period had been set at three to five years with a forecast a 7.4 per cent net annual cash-on-cash return.
The 179 million euro Al Islami French property fund, consisting of four high-quality commercial real estate entities as well as development properties strategically located in the Parisian office market has only targeted an annual return of 8 per cent, which, going by the American experience, appears by no means to be a tall order.
It was rather crowning glory for the property business when recently the bank joined hands with Hong Kong tycoon Li Ka-shing to launch a $450 million Islamic real estate fund. The Al Islamic Fare Eastern Real Estate Fund, said to be the first of its kind in Asia, will invest in real estate in key cities in China and in Singapore, Hong Kong, Kuala Lumpur and Seoul. Lee Ka-shing’s Cheung Kong Holdings will take 30 per cent equity in the fund, with 70 per cent remaining with DIB and others.
The Al Islamic fund had its first closing in July for $75 million. The second closing for another $75 million is expected at the end of the year.
There is talk of another DIB real estate fund hitting the market in the next few months, further reinforcing the bank’s role as a leading real estate player.
Also published on Medium.
