WP Carey Mulls Sharia Compliant Sale Leaseback Fund

Reuters - June 23, 2009

U.S. real estate financing company W.P. Carey (WPC.N: Quote, Profile, Research, Stock Buzz) is mulling a plan to launch an Islamic compliant fund, a plan first spawned in 1997, as part of its global fundraising efforts, its president said on Tuesday.

Edward LaPuma told the Reuters Global Real Estate Summit the company had set up an Islamic-compliant fund in the late 1990s, which had attracted interest in the Middle East. The company eventually abandoned the launch because the amount of money committed outweighed the opportunities available in the market at that time, LaPuma said. However, as the volume of exciting deals carved out of the deep property market correction continues to grow, LaPuma said a new fund launch was now a much more appealing prospect.

"I think there is a possibility (to launch the fund), and the possibility is better than 50-50," he said. The firm, which has about $600 million in cash, is looking to raise $1 billion to fully exploit a wealth of new market opportunities. Inflows from U.S. investors remain healthy, but the firm is keen to broaden its capital base, LaPuma said, and bolster the $2 million to $3 million generated each day from wealth management companies.

Islamic finance avoids sectors such as alcohol, pornography and weapons, which it regards as forbidden. It also rules out unnecessary risk-taking and demands low leverage. W.P. Carey's business model, which specializes in sale and lease-back activities, potentially conforms to the Islamic principle that demands business transactions be backed or based by tangible assets, such as real estate.

The fund idea proposed in 1997 would have deployed the investors' cash in the U.S., although a new fund would deploy cash in other countries, LaPuma said.
"The Middle East is an area we would like to be, governments are solvent and companies there are very financially stable companies. So for our business are a lot of opportunities," he said. W.P. Carey, however, would be selective in its acquisitions. "The Middle East seems to be getting lumped together as a group, which does a disservice to the region because there certainly are areas that would be much more interesting than ours.

"One thing I have on my agenda is to spend more time trying to understand those various markets and being able to drill down to country level," LaPuma said. Sphere: Related Content