One thing she is particular about is not paying a premium price for any such exposure. This is the rationale at the core of the distress fund launched by her company, Mayfair Wealth Management. The fund, REMNotes — Real Estate Musharakah Notes — aims to mop up $50 million from investors still interested in the UAE property story.
“Distress funds are always looking for a deal and certainly would not look into paying market rates,” Choudhry says. “As more stock becomes available in the market, the true value of these units will be forged.”
Guaranteed appreciation of asset
“One thing to remember when investing in this asset class is that, unlike stocks, a carefully selected property investment is sure to go up in the long-term. In mature markets such as the UK, we often see prices doubling every seven years on average,” she says.
For those who have been used to the turbo-driven property value gains in Dubai and Abu Dhabi until the last quarter of 2008, seven years may seem an eternity. For them, seven days would be more like it. But as everyone knows well enough by now, those days are long gone. “The industry itself realises the perils of a very superficial, over-hyped market that shows abnormal increases that cannot possibly be sustained,” says Choudhry.
REMNotes, for one, makes no bones about the fact that it is looking for investors willing to stay the course of three years, which is the lifecycle of the fund as well.
“We expect the market will see an upswing over the next 36 months,” Choudhry adds. “We will be actively trading the properties to maximise returns for our fund, and shall start to liquidate the assets approximately four
to six months prior to the closure.”
If it were left to them alone, those cash-strapped developers and those with considerable existing exposures in the local market are only too willing to cosy up to distress funds and offload their holdings. But, Choudhry is not willing to play along these lines.
“Our business involves going into the open market and actively purchasing properties at the best prices — this gives us a financial edge as we are not handicapped by owning stock or plots that need to go into this fund,” the CEO explains.
No trading in off-plan units
REMNotes’ focus will completely eschew the off-plan market and go for the ready-built ones, of which there will be lots to choose from in the coming months. So, who will do the choosing for the fund?
The advisory panel includes E-Valuations, a firm comprising British chartered surveyors. This input will be the basis for any offer made by REMNotes on a property. In addition, the Fund has called in help from those who have had experience of the UAE market from its inception to its correction and are, therefore, capable of offering impartial advice.
“We are still confident in the potential of the UAE property market. We have highlighted areas of interest and have been observing these for over ten months now.” So what is her prediction for the sector? “Mostly, the market has almost bottomed out and now values are being sustained.”