The recent increase in domestic infrastructure investments by GCC nations and several Islamic nations in Asia points to premium earning potentials for property investments, according to alternative asset manager Rasmala.
Head of Real Estate Funds at Rasmala Investment Bank Ruggiero Lomonaco told IFN Investor this trend has caused the company to pivot away from its mainstay of investing in mainly European property, a strategy established to counter the US subprime mortgage crisis of 2008.
“We have been investing mainly in the UK, The Netherlands and Germany because those property values have remained stable during the difficult years that followed and continue to be steady. But we see a higher profit potential in Islamic nations now.”
Among the more noticeable domestic infrastructure spending increases in Islamic nations recently are those seen in the UAE with flashy developments like the Burj Khalifa tower and the Deira Islands, plus FIFA World Cup 2022-associated projects in Qatar and Saudi Arabia Vision 2030 initiatives catalyzed by the NEOM region.
Ruggiero said there can be three approaches to tap such vast potential, with the easiest strategy based on the price earnings (PE) ratio for listed stocks. Noting that the PE ratio for many property firms in the US and Europe can go up to the high 30s and more, this ratio is often below 10 for GCC property stocks.
“It’s almost a no-brainer to give some focus to these lower PE ratios as the earnings potential is far higher. There are many such stocks ripe for the picking not only in the GCC, but in emerging Islamic nations too.”
The second approach is focused on buying entire properties based on thematic prospects. Acting on behalf of its clientele, Rasmala has invested in warehouses, hospitals, schools, residences, manufacturing facilities and more – due to the catalytic and multiplier effect of these assets, which causes their intrinsic values to surge as well.
Ruggiero said this second strategy is driven by the demand of its mainly high net-worth individual (HNWI) clients, who have varied ambitions and interests beyond just a profit motive to grow their funds. Such HNWI clientele comprise the bulk of the current US$1.6 billion asset value managed by Rasmala.
Aiming to expand the clientele base to include institutional investors, Rasmala’s third strategy is underpinned by expertise not easily available elsewhere. Ruggiero explained that specialization has to be offered due to the extensive resources that institutional investors already possess.
“An example is when you want to attract funds into building a data center. You need to buy a data center developer and gain full control. That is a specialization that you can bring to the institutional investor.”
By attracting institutional investors into its client base, Rasmala aims to grow its funds under management to at least US$5 billion in the medium term and double that figure to at least US$10 billion eventually to achieve better economies of scale.
While declining to reveal the variety of specialization offerings that Rasmala will be deploying to woo institutional investors, Ruggiero shared that some of the attractive property investment destinations in the near future would be the GCC and Southeast Asian nations of Brunei, Indonesia and Malaysia.
“We were also looking at Bangladesh and Pakistan, but the uneasy political situations there are not very reassuring. Similarly with Africa, and I expect these to become more attractive investment potentials in the longer term.”
