Business | Property
ETA Star plans to raise $400m for drive into Asian markets
Dubai's ETA Star Property Developers plans to raise $400 million through a fund and Islamic bonds for a drive into Asian markets as diverse as India and Laos, but rising costs are deterring the firm in Turkey and Egypt.
- Reuters
- Published: 23:33 June 23, 2008
- Abid Junaid says Western markets do not interest him because they are unlikely to deliver the high returns found when building property in Asia.
- Image Credit: Reuters
Singapore: Dubai's ETA Star Property Developers plans to raise $400 million through a fund and Islamic bonds for a drive into Asian markets as diverse as India and Laos, but rising costs are deterring the firm in Turkey and Egypt.
The company, part of privately held ETA-Ascon Group, is looking to supplement its own funds to develop 120 million square feet of land in India, and enter other markets in Asia. It has also just snapped up land in Vietnam and Malaysia.
The new fund will be aimed at Middle East investors, said ETA Star Property's executive director Abid Junaid.
"We're talking to institutional investors to raise $250 million in a first tranche," Junaid said at the Reuters Global Real Estate Summit in Singapore.
He added that ETA Star also wanted to raise $100 million to $150 million in Islamic bonds, or sukuk: "Sharia-compliant products are very much in demand in the Middle East".
ETA Star is one of several Middle East firms, including Emaar Properties and Nakheel, that have joined a wave of foreign investment in Indian property since the country eased rules on inward investment in the construction industry in 2005.
Junaid, who is from the southern Indian city of Chennai, said the firm had bought about a fifth of its land in India before the boom of the last three years, which has seen values in many areas quadruple.
ETA Star is building housing, information technology parks and shopping centres in Chennai and Bangalore.
Although internal rates of return for property investment in India are still above 20 per cent, Junaid was worried that soaring construction costs were making property more expensive, and slowing sales of housing.
"Overall sales are down, they've dropped 40 per cent" from last year, he said. "That's our experience."
Inflation, stoked by soaring fuel and raw material prices, had also persuaded ETA Star to scale back its plans for investment in Egypt and Turkey.
"They're not producers of oil and the economies are affected," Junaid said.
Dubai projects
ETA Star is building several projects in Dubai, including its "green" Verde Residences and Offices twin towers, which touts its use of wind, natural light and energy-efficient systems.
ETA Star's push into Asia began in India, Pakistan and Sri Lanka. But Junaid said he was now "scouting for opportunities" in China, talking to the Singapore tourism board about investing in hotels in the city-state, and wanted to invest in Cambodia and Laos from the firm's new office in Vietnam.
"The petrodollar-based economies are very exciting for us, but in the long term we're looking at Asian markets," said Junaid, who has personally bought several homes in Dubai, including at "the World" and "Palm" island developments.
ETA Star is building up a portfolio of commercial and hotel properties that it would like to spin off into a real estate investment trust (REIT), probably listed in Singapore in a couple of years, Junaid said.
"It'll be an ETA Star REIT," he said, explaining that the property trust could contain assets from Dubai as well as in Asia. "The assets will be delivered by 2010, so we're looking at it post-2010."
Junaid said Western markets mostly did not interest him, because they were unlikely to deliver the high returns found when building property in Asia. But ETA Star could buy US office blocks if prices fall further.
"We might be interested in acquiring US assets, but now the market has not come down enough to justify returns we're looking for," he said.
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