Cynics might assert that when foreign firms join with Middle Eastern sovereign entities, ostensibly to invest in the region, it is done so with one eye on raising future commingled funds.
The argument goes that the Middle East partner would be a shoe-in as a cornerstone investor or at least an entrée to a plentiful well of capital in the future.
Pramerica Real Estate Investors (PREI) tells a different story of its joint venture with state-owned investor Mubadala, at least in the short-term.
The real estate investment management arm of Prudential Financial said there was a near-term opportunity in the United Arab Emirates worth $5 billion alone – affordable housing.
That is the first target of Mubadala Pramerica Real Estate Investors, a 50/50 joint venture, which aims to raise capital to back developers in Abu Dhabi where an estimated 52,000 homes are needed by 2013 to quench a growing influx of workers to the emirate.
Of the $5 billion opportunity, Parisipanny, New Jersey-based PREI chief executive officer Allen Smith said: “I can’t put a firm number on our participation on that opportunity, but it’s a healthy subset of that, at least in the hundreds of millions [of dollars].”
PREI said Mubadala, set up in 2002 to strike up commercial partnerships with international organisations, could lend expertise in areas such as the funding of projects in the emirate as well as further afield. But there was a future capital raising element to the relationship. Phase two of the partnership, and the longer term objective, is to launch investment funds and, beyond that, Abu Dhabi capital committed to other PREI vehicles.
“There’s an opportunity there to the extent that we see a distinct demand from the investor base we intend to serve with this venture,” Smith said.
He added that Mubadala Pramerica Real Estate Investors would look to offer closed-ended commingled funds but could not confirm whether a debut effort would surface before the end of the year.
This is the first real estate investment management platform for Mubadala and, except for one investment in Dubai, PREI has no other direct exposure to the region, so they both walk an untested path.
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