Pan-European Islamic RE fund launched

The European Islamic Investment Bank (EIIB) has announced the launch of a Sharia-compliant fund that will directly purchase office, retail and industrial real estate in and around major cities across Europe. EIIB appointed Knight Frank Investment Management as the fund advisor with responsibility for sourcing real estate deals and managing purchased properties.

The fund is structured as a tax-efficient, closed-ended fund with a fixed term of five years, plus up to two years wind down, Trade Arabia's website reported on Sunday after EIIB issued a press release. The fund will have a target of EUR 200 mln to EUR 250 mln at the launch and may consider listing on the stock exchange after the initial capital is invested. EIIB will be a co-investor in the fund.

The bank's Sharia supervisory board - an independent body of scholars specialised in Islamic commercial jurisprudence - will advise the fund's investment committee to ensure its decisions do not violate Islamic law, which forbids the charging and receiving of interest.

EIIB said the fund's target return is more than 11% internal rate of return (IRR) per annum, net of fees and expenses, and it will be targeting an income of more than 7%, after costs. Approximately 25% of the fund will be invested in high-quality 'core' properties in the UK with yields of 5-8% per annum. The rest will be invested in 'valued-added' properties yielding 12-15% IRR per annum in continental Europe.

The launch of the fund is part of the roll-out of EIIB's own Sharia compliant investment fund range, covering the real estate, hedge funds and private equity asset classes.

EIIB is the first independent, Sharia-compliant Islamic investment bank to be licensed by the UK's Financial Services Authority.