European real estate-focused asset manager Patron Capital is aiming to launch a Shariah compliant fund in early 2025, Founder and Managing Director Keith Breslauer told IFN Investor. “Shariah compliance will be part of the main series as our natural investment dynamic is quite diverse.”
Charting successes with seven funds so far, each garnering around US$800–900 million, Keith said going the Shariah route was a natural evolution for the UK-based firm — which recently hired Islamic experts to structure this new product.
Noting that its investor pool — which were mainly American since its founding in 1999 — has diversified over the past two fund launches to include those from Canada, Germany, Japan and the Middle East, Keith said the Shariah focus was to accommodate rising demand from other potentials, including Indonesia.
Patron Capital is in the business of finding undervalued property assets, predominantly in Western Europe, where the owners have trouble upgrading to comply with newer energy performance certifications. Such certifications are important to woo and retain commercial tenants.
What Patron Capital does is buy over such distressed buildings and refurbishes them to meet the higher standard, gets fresh tenants and then sells these assets for a profit. Keith said this venture generates a 17–20% gross internal rate of return on invested capital over a four-year investment horizon.
Acknowledging some constraints will apply to the Shariah fund, Keith said such capital raised will be used to co-invest in fund products that Patron Capital is doing with its usual operations. “We are not selling assets to the Shariah fund,” he stressed.
While there is no issue with real estate acquisitions of hotels, offices or properties for residential and commercial usage, a clear line will be drawn as “years ago, we got around 1,500 pubs and taverns for upgrading and we made a lot of money on it”.
With its specific focus, the asset manager has no intention to become a giant fund. “We don’t want to be a supermarket. We are not in the business of having hundreds of products. We invest in properties that are opportunities to make good money.” As such, Patron Capital’s funds may not attract bigger sovereign funds — despite having secured clients like the Arizona State Pension Plan, the World Bank and Johnson & Johnson. Keith anticipates the same trend with large Middle Eastern groups and expects to draw mainly family offices with the new Shariah fund.
