Brave new frontiers

PERE moves beyond the BRIC countries to discover real estate investors at work in less heralded developing nations.

At the recent PERE Forum in New York, the word uttered most often, trailing the words “real,” “estate,” and “fund,” may well have been “Libya.”

The country managed by Muammar Gaddafi and son is not yet a destination for very much capital from the private equity real estate industry but, novelty factor notwithstanding, the fact that it is being discussed at industry conferences without delegates falling out of their chairs speaks volumes about investor attitudes in today's saturated market.

The real estate ride in developed markets like the United States and Western Europe has been a good one, but returns-hungry investors suspect that the next decade will bring disappointments both absolute and relative. The pace of change being what it is, many of the no-brainer markets in Brazil, Russia, India and China are already home to an incredible level of investment. Some GPs, either out of savvy or necessity, have decided to go further afield.

Over the following pages, PERE presents snapshots of several countries to have received relatively little attention from the global capital markets, although they differ significantly from each other. Panama, for example, has been a hotbed compared to Albania. And Vietnam presents a very different set of opportunities than does Libya. Columbia and Kazakhstan round out our sampling of “frontier” markets. As serious chroniclers of the global real estate investment market, we are certain that we'll be covering these markets with greater frequency going forward, and we're also certain that the term “frontier” will eventually fade from the investment lexicon as gross national product numbers swell and investor perceptions shift.

Groups targeting investment in Vietnam

Name of Firm Snapshot
Pacific Alliance Group The Vietnam-based private equity firm's $407 million AIM-listed Vinaland fund is
targeting real estate in the country's most populated areas.
AIG The fnancial group's real estate investment arm has pledged to build a large
complex with a luxury hotel, commercial and apartment buildings in
Ho Chi Minh City.
Lotus Hotel Fund The new $1 billion private equity fund is targeting hotel development
opportunities across Asia and is including Vietnam as a main focus.
Istithmar The private equity arm of government-owned Dubai World has said it is
interested in luxury hotel development in Vietnam.

Groups targeting investment in Kazakhstan

Name of Firm Snapshot
Sarava The Middle East real estate asset management company is constructing a mixed-use resort called Sarava Aktau on the Caspian Sea.
Aureos Capital The firm's first Central Asia fund is targeting $100m for a fnal close in June, and will commit 70 percent to Kazakhstan.
Renaissance Group The investment bank operates in Kazakhstan as well as Russia and Ukraine.
Aldar Properties The Middle East investor is teaming up with Al Qudra Real Estate, Sorouh Real Estate and Al Reem Investments to build in Astana.

Groups targeting investment in Libya

Name of Firm Snapshot
Corinthia Group Through listed entity International Hotel Investments plc, Malta-based
Corinthia has developed a hotel in Tripoli.
Emaar Properties The Dubai-based developer recently inked a joint venture with the Libyan
government to develop the Zowara-Abou Kemash area on the Mediterranean coast.
Equity International No investments to date, but the Chicago-based firm's senior partners,
including Sam Zell, are very vocal about their interest in Libya.
Phoenicia Group The consulting firm this year announced a Libyan private equity fund through
its Libu Capital division.

Speculation on the Mediterranean
Much of the world knows Libya as an international pariah that sponsored the downing of Pan Am flight 103 and, more recently, locked up five Bulgarian nurses on charges of intentionally infecting 426 Libyan children with HIV. But the small number of property investors beginning to target Libya think the country, going forward, has the potential to be known for its pristine Mediterranean beaches, incredible ruins and as a hub for a booming international energy business.

In 2004, Saif Al Islam Muammar Al Gaddafi, the son of long-time Libyan leader Colonel Muammar Gaddafi, told the BBC: “Now we are in the middle of the transformation process in Libya. We want to transform Libya. In ten years we will be at a different stage. That's why we are doing all those initiatives, in order to transform ourselves…”

Some Western investors see evidence of this change. For the first time in more than 20 years, Libya is awarding licenses to international oil companies to explore and develop the country's oil reserves – the largest in Africa. These moves followed Libya being taken off a US list of state sponsors of terror in 2004. All this “will transform the country” says Gary Garrabrant, chief executive officer and co-founder of Chicago-based Equity International, which has famed investor Sam Zell as its chairman.

Garrabrant has made several trips to Libya in recent years to assess the investment opportunity, although Equity International has not yet inked a deal. As business activity increases in Libya, and especially in Tripoli, it will need infrastructure common in countries nearby. “Libya has virtually no decent housing, hotels or retail,” notes Garrabrant.

What Libya does have are natural charms that, were the country not perceived as a dangerous place, would make it a top tourist destination. Garrabrant is particularly enthused by Libya's proximity to Europe, its dramatic and undeveloped coastline, as well as its numerous and important historic ruins. “Libya has a spectacular, undeveloped 2,000 kilometer coastline,” raves Garrabrant, noting that “the presence of Hurcules is felt in the world-class collection of ruins.”

Libya's Law Number five, updated in 2002, provides a legal framework for foreign direct investment. Central to this law are rules that allow foreign investors to repatriate profits and hire non-locals. Simon Naudi, a director at Corinthia Group, which has made a significant hotel investment in Tripoli in the form of the five-star Corinthia Bab Africa, says of the Libyan government's commitment to liberalization: “The direction is there. We see it every day.”

Groups targeting investment in Albania

Name of Firm Snapshot
Edil Al-It Part of Albanian conglomerate INNER. Active in construction and infrastructure
projects, including the Mall of Albania and Eyes of Tirana, the latter being a
24-story commercial scheme at the heart of the planned French city master plan.
Tirana International Development The Albanian group is behind plans for the T.I.D. Tower in Tirana. Again, this is
part of the city's planned makeover. The high-rise T.I.D. Tower will have offces
and housing with restaurants and shopping at the base and the top.
Lura A local company that is building tourist villages in locations such as Lalzi Bay.
Tris A construction company that is involved in some large infrastructure projects
such as a 33 kilometer stretch of motorway in the north of the country.
Marfn Investment Group The Greek private equity firm has listed Albania among its target countries.
Equest Balkan Properties The AIM-listed property investor has declared Albania as part of its investment strategy.

Groups targeting investment in Colombia

Name of Firm Snapshot
Aureos Capital No investments to date, but the private equity fund manager is expecting to
close on a new fund late this year which will invest in Colombia and is
planning on opening an offce in the country.
GEM-Fiduciaria Bogota The Global Emerging Markets Group and Fiduciaria Bogota have jointly
launched a $220 million private equity fund to invest in Colombia.
Tribeca Partners Bogotá, Colombia-based Tribeca Capital Partners raised $115 million dollars
for its Tribeca Fund I, a private investment fund focused on Colombia and
Latin America.

Groups targeting investment in Panama

Name of Firm Snapshot
Aureos Capital The private equity fund manager has invested in aluminum extrusion company
Aluminio de Panama through its Aureos Central America Fund.
Conduit Capital Partners The New York-based firm's third Latin America energy fund includes a focus
on Costa Rica and Panama.
The Trump Organization Donald Trump has announced plans to build the Trump Ocean Club in Panama
City at a cost of $220 million.
Leucadia National US corporation paid $56.5 million for current site of the Bay County Airport,
which will be relocated.