Tuesday, March 24, 2009

Dh7.3bn sidelined for distressed property assets in GCC

About Dh.7.3bn worth of equity is awaiting to be invested in distressed property assets, across the GCC, particularly in Abu Dhabi, Saudi Arabia and Qatar, reveals Jones Lang LaSalle, leading property consultants.

The funds, which were raised during the initial three quarters of last year, was kept on hold, ever-since the collapse of Lehman Brothers in September, and the subsequent regional market downturn.

The Head of Investment Transactions at Jones Lang LaSalle, Ian Ohan, says that investment opportunities are now being sought for these funds and more capital will begin accumulating, once the investors regain their composure. Even investment funds that were previously focused on international market are now being directed regionally. The funds are now being pooled among high-net-worth individuals, investment banks, and institutional investors.

"Investors today are clearly focusing on taking advantage of the market downturn, by targeting prime distressed asset sales on an opportunity basis," said Ohan.

Investors are also seeking assets with long-term contractual income attached, such as the 10-year plus leases attached with strong covenants, he added.

Regional investors are good entrepreneurs, and unlike in other international markets, there is active real estate deals taking place, despite the very low volumes, compared to the peak witnessed in 2008, he pointed out.

Investors seem more cautious about investing in Dubai property market, and prefer Qatar, Abu Dhabi, and Saudi Arabia, where, the property cycle is at a less advanced stage.

However, there is no denying that Dubai investors are still actively cherry picking opportunities that could represent stand-out deals as the region's economies stabilize, Ohan said.
"The year 2009 will be a challenging year in all aspects, and the economic situation will get worse, before it gets better," Ohan said.

The company has commenced a two-month study to identify opportunities for taking over projects that offer long-term revenue.

The President of the company, James Tate, says that there is a two-year buying opportunity for property assets in downturn markets. The study would focus on opportunities in residential and commercial sectors, targeting projects that are half or fully completed.

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