Islamic China India Real Estate Fund In the Spotlight - June 2009

Islamic China India Real Estate Fund
In the Spotlight - June 2009
NAV
USD 1,000.00
since inception
Fund Objective
The objective of the Fund is to invest in the Wafra China
India Property Fund (WCIPF), an opportunity fund that
intends to make Shariah compliant real estate investment
throughout Asia with a special focus on China and India.
The Fund is a long-term investment vehicle designed to
achieve an expected IRR of 14-16% with an expected
annualized net quarterly distribution of 6.5% during the first
two years following the offering period and 7-8% thereafter.
Summary of Activity
The Islamic China India Real Estate Fund, ltd. (the"Fund") was captalized on June
19, 2007 in the amount of $296,066,000. An additional $40 million was invested in
the Fund for a total capitalization of $336,066,000. As of June 30, 2009 the Fund
invested approximately $239 million directly and indirectly in various properties
across China, India and other Asian markets. The Fund has been distributing 6.5%
per annum to investors.
As of June 30, 2009 the Fund strategically invested approximately $239 million
through partnerships and co-investments with 4 different local managers. The table
below breaks out the amount invested by the Fund through each local manager:
Property Advisor
Amount (USD)
Percentage
Landmark
116,000,000
49%
Fund Features
• Focused investment on China and India.
• All investment are according to Islamic Shariah principles.
• US Dollar denominated.
• Quarterly income distribution.
• Managed by one of the world's top real estate managers.
Fund Facts
Legal Structure:
A closed-ended Fund.
Offering Price:
USD 1,000 per unit.
Min. Investment: USD 250,000.
Placement Fee:
A one time fee up to 2.25% upon
subscription.
Management Fee: 1.95% per annum.
Fund Distributor: National Bank of Kuwait S.A.K.
Fund Manager:
Wafra Capital Partners LP.
Fund Advisor:
Pramerica.
Auditor:
Eisner LLP
Reporting:
Quarterly performance reports and
annual audited financial statements.
Pramerica
CITIC
61,009,303
40,940,406
25%
17%
Beekman Helix 20,710,660 9%
Total
238,660,369
100%
Distributions (As of June 30, 2009)
Cumulative Distributions Since Inception
13.22%
Annualized Distributions Since Inception
6.50%
Annualized Quarterly Distribution*
6.50%
Annualized YTD Distributions
6.50%
1- Year Distribution 6.50%
* 2Q Distribution
Income Distributions
Fund Distributions
3 Months LIBOR
7.00%
6.00%
5.00%
4.00%
3.00%
6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50%
5.36% 5.23%
4.70%
4.05%
2.69% 2.78%
2.00%
1.00%
0.00%
1.43% 1.19%
0.60%
2Q 07 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09
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Islamic China India Real Estate Fund
In the Spotlight - June 2009
Allocation per Property
Property
Tirupur 1st drawdown
Tirupur 2nd drawdown*
Pune
Ghaziabad
Project YH
Location
India
India
India
India
China
Equity (USD)
4,761,905
6,857,143
25,000,000
18,000,000
4,702,841
Minhang - Project Stratford
China 2,911,558
Kolkata India 21,460,999
Changfeng Project
China 6,935,204
Mezz Deals (Gurgaon I, Mohali)
Akruti (Co-Investment)
Akruti (2nd injection)
Yongsan
Serangoon
Serangoon (2nd Injection)
Qualification Portfolio
Dalian Qiange
Marathon, Serangon
Ananda
India
India
India
South Korea
Singapore
Singapore
Japan
China
Various
Thailand
12,022,500
20,710,660
2,475,346
8,656,322
5,110,681
7,118,828
5,639,314
20,000,000
4,195,456
6,185,859
Project SRE China
5,361,053
Kawasaki Japan
193,943
Project Sapphire
China 1,018,199
Serangoon Mall Singapore 364,011
Shin Yokohama
Total Acquired Properties and Investments
Japan
311,334
189,993,156
Total Reserve funds and Future Investment & Fees and Expenses
48,667,213
Total** 238,660,369
* In october 2008, an additional $857,143 wad drawn from Landmark's reserve funds for further investment in Tirupur.
** Total of amount invested in properties, excluding cash.
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Islamic China India Real Estate Fund
In the Spotlight - June 2009
Various
2%
Country Allocation
Thailand
3%
China
22%
South Korea
Japan
5%
3%
Singapore
7%
Sector Allocation
Retail
10% Pre-IPO
2% Commercial
Residential
Development
25%
11%
Other
9%
India
58%
Mixed use
Development
43%
Fund Cash, if any, has been excluded from all allocation tables and charts provided herein.
Property Update
• India
Tirupur: In late 2007, Landmark made an investment in a 18.97-acre mixed-use development in Tirupur in the Indian state of Tamil Nadu. The
development consists of high-end villas, residential apartments, commercial offices, a retail mall and hotel. Marketing brochures were finalized in
October 2008 and the sale of 50 villas in Phase 1 commenced in December 2008. They are being marketed as a premium product targeting high
net-worth individuals, and are offered by invitation only. As of June 30, 2009, approximately $9.9 million of the total $12.2 million committed has
been invested in the Indian Project SPV. As reported in the Q1 report, the project timeline has been delayed by one year due to issues with
obtaining necessary approvals, as well as adverse market conditions.
Landmark’s Indian advisor has indicated that the IRR for this project is forecasted to be 30%, reflecting a shift from the 40% IRR projection made
at the time of investment. This revised IRR incorporates the following assumptions:
• Increased construction loan interest rate from 13.5% to 15.0%,
• Decreased percentage of debt financing on the project from 60% to 30%,
• Decrease in anticipated sales prices,
• Project timeline delay of 1 year.
As of June 30, 2009, the soft launch of the villa component has secured the booking and advances for a total of 8 villas. Verbal commitments
have been received for an additional 2 villas with advances expected by July 2009. Additionally, letters of intent for the retail and commercial
portions have been received from three tenants, including Raymonds Show Room, Godrej Show Room and Trigon Buying office.
Ghaziabad: In December 2007, Landmark made an investment in a 6.9 acres residential high rise apartment development in Shipra “SunCity” in
Indirapuram, Ghaziabad. The project is anticipated to last approximately 4.5 years (an increase from the original 3 year projection at the time of
investment) and yield a projected IRR of at least 20%. While there is expected to be a decrease from the estimated 46% IRR at the time of
investment, the fund has a put option to the developer at a 20% IRR after 36 months. This revised IRR incorporates the following assumptions:
• Decrease in sales prices,
• Project timeline delay of 1.5 years.
Approval from the Ghaziabad Development Authority (GDA) for 200,000 sq ft is currently pending but this approval is expected to come through
by August 2009. Construction and marketing components of the project plan have been revised to reflect a delay of 18 months. As a result of the
construction delay, the project launch has been pushed back to September 2009.
Pune: In June, 2008 Landmark committed to a project that would build a mixed-use development consisting of a residential component in
Hinjewadi, an IT area of Pune, Maharashtra. The project is expected to be built on a land parcel that spans approximately 124 acres, with the
possibility of increasing the project by an additional 15 acres. As of June 30, 2009 the entire amount committed and funded for this project has
been invested by the Indian SPV. The amounts funded by the fund and the Landmark Sponsor are $25 million and $980,000 respectively with
excess funds being placed in a Shari’ah compliant bank account and expected to be deployed to other future Fund obligations.
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Islamic China India Real Estate Fund
In the Spotlight - June 2009
Currently the project timeline is delayed by 1.5 years due to adverse market conditions and delays in obtaining necessary approvals. Additional
delays beyond the periods noted above are anticipated. As a result, the project IRR is forecasted to be 25%, reflecting a shift from the 37% IRR
projection made at the time of investment. The revised IRR incorporates the following assumptions:
• Decreases in sales prices
• Project timeline delay of 1.5 years
Kolkata: Due to variances from the initial project plan, Landmark Special Opportunities Company’s advisors have recommended that the Board
begin negotiations for an exit from this deal. In a meeting held between West Bengal Electronics Industry Development Corporation Limited
(WEBEL), a nodal agency of the Information Technology Department, Government of West Bengal, and the Forum Group, it was mutually
decided to put an end to the agreement dated June 2, 2008 for the development of the Kolkata Oorja Project. It has been agreed that WEBEL
shall refund INR 1.6 billion to the project SPV. Forum group received the first installment of INR 430 million from WEBEL on May 26, 2009 and
the remaining balance is to be paid no later than 12 months from the date of production of Board resolutions contemplating exit from the deal.
Forum Group has agreed in principle to compensate the investors with a certain IRR (currently under negotiation) for the investor’s funds utilized
in the purchase of project land. The exact amount and schedule of repayment is being negotiated with the Forum Group and the exact investment
repayment schedule is also contingent on WEBEL. A legally and regulatory compliant structure is being devised to facilitate the repatriation of
these funds in the most tax efficient manner.
• China
Minhang: The Fund, through a co-investment with CITIC Capital China Real Estate Investment Fund III, L.P. (“CCCREIF”), invested in Project
Stratford, a high end residential project that consists of 50 units in the Minhang district in Shanghai. This is one of Shanghai’s well-developed
high-end living areas consisting of villas, townhouses and luxury serviced apartments and related amenities. The leasing of Project Stratford was
active during the second quarter of 2009. By the end of 2Q 09, 21 units had been leased, bringing the occupancy rate to 42%, up by 10
percentage points Quarter on Quarter (QoQ) and ahead of 40% of our original target in the investment proposal. The rise in occupancy rate was
partly attributable to certain rental concessions offered to tenants. The average rental of the project had been approximately 17% lower than that
estimated in the investment proposal, though a significant rental premium over peers was witnessed. Due to improved sentiment in the residential
sales market, secondary transactions of comparable projects in this quarter exhibited higher prices than that in last quarter, which were
approximately 20%-30% above the average purchase price of our project. This is positive when looking at the overall Shanghai high-end
residential market. The market remained slow in 2Q 09 as the average vacancy rate rose to 24.2% up by 1.6% QoQ and 7% Year on Year (YoY),
respectively. Owing to improved sentiment in the asset market coupled with abundant liquidity, the high-end residential sale market began to pick
up in both sales volume and price in this quarter. The average sale price of high-end villas and overall high-end residential properties rose by
0.5% and 2.4% QoQ, respectively.
Chang Feng: The Fund through a co-investment with CCCREIF invested in a project that consists of two Grade A office buildings in the Chang
Feng Area located in the Putuo District of Shanghai. The project lies between the Inner Ring Road and Middle Ring Road, 1.5 km to Hongqiao
International Corporate Business District and 5 km to future Hongqiao transportation hubs. The site, once a traditional industrial area, has recently
become a part of the massive redevelopment project initiated by the district government with the aim of revitalizing this region to become one of
the city’s commercial areas. The project consists of the development of 2 blocks (Block G and E). In this quarter, an en-bloc occupier of Block G
has signed off on the leasing agreement and will start fit-out construction in 3Q 09, aiming at moving in by 4Q 09. The initial actual rental achieved
is approximately 14% lower than that estimated in the investment proposal. The due diligence and the handover inspection of Block E are in
progress and expected to be completed by 3Q 09.
Project YH: The Fund through a co-investment with CCCREIF invested in a means (through convertible/exchangeable bonds) to acquire ordinary
shares of Yihe Real Estate Holdings Ltd (the “Company”). The deal was structured in a Shariah-compliant manner. In this quarter, the payments
were received from the Company on schedule. Though the overall market environment improved, the Company recorded only slightly better
sales performance than in 1Q 09 as no new projects were launched for sale in this quarter. Thanks to favorable credit market, the Company
secured several project loans during this quarter, which enhanced the Company’s cash position and its repayment capabilities. CITIC is still in
discussions with the Company to work out a viable repayment plan to balance all parties’ benefits.
Dalian Qiange: In Q4 2008, CCCREIF invested in a residential co-developed project with China Vanke Co., Ltd. (“Vanke”), a leading developer in
China. The project is located in Qiange town of Gan Jing Zi district, the northwestern suburb area of Dalian City, Lianoning Province. As one of
the key planning areas of the city’s northwest and westward expansion, Gan Jing Zi District is expected to be transformed into comprehensive
living communities where Qiange Town, as the destination of office relocation of district government and institutions, is aiming to become a new
sub-center of the city. The project site was successfully bid in Q4 2008. CCCREIF and Vanke contributed 45% and 55% of the equity funds of the
project respectively. In Q2 09, construction progressed according to schedule. The actual cost incurred by the end of Q2 09 was within the
approved development budget. Pre-sale activities continue to gain momentum with about 240 units sold out of 560 units available for sale during
the reporting period at an average price in line with estimates. As of 30 June 2009, approximately 8% of the project’s saleable Gross Floor Area
had been sold.
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Islamic China India Real Estate Fund
In the Spotlight - June 2009
Project SRE: In December 2008, CCCREIF invested in convertible investment bonds issued by SRE Group Ltd. (“SRE”), a developer listed on
the Hong Kong Exchange. SRE has strong capabilities in developing residential and commercial properties. It currently holds some parcels of
land at prime locations and CCCREIF is exploring co-investment opportunities with SRE. The Company achieved excellent sales performance in
2Q 09. From January to June 2009, the contracted sold Groos Floor Area and sales amount of the SRE increased by 64% and 111%,
respectively, compared with the same period in 2008. SRE announced its latest fund raising activities including the issuance of new shares and
convertible bonds, the proceeds from which would be used to finance their purchase at a discount of its outstanding guaranteed senior notes due
2013. By doing so, SRE is expected to enhance its capital base, improve it’s liquidity and reduce overall financing costs. SRE's shares have been
performing well in this quarter and are trading at a significant price premium over the conversion price. By the end of 2Q 2009, approximately 45%
of the converted shares had been disposed of, which, coupled with the interest received, represents a realized capital of approximately USD14
million. CITIC will continue monitoring SRE's share price, its business operation and the stock market closely and seeking to dispose of the
remaining shares at an appropriate time in an effort to maximize the profit and investment return.
• Pan Asian
South Korea: On March 7, 2008, the Fund invested in the Yongsan International Business District Development located at Yongsan Ward in the
center of Seoul’s three traditional Corporate Business Districts. The property has a Net Leasable Area (“NLA”) of 3,170,000 sqm on which the
joint-venture consortium of ASPF II (including Samsung, Korail and Lotte Group) is expecting to develop several multi-use buildings comprising
various gross floor areas. Upon completion, the project will become the central landmark of Seoul with Korea’s tallest and the world’s 3rd tallest
buildings (after the completion of Burj Dubai and the proposed Tower of Russia). Given that the market environment is still challenging, the
development is progressing well. The negotiation between the consortium and Korail over the acquisition of the remaining land parcels is still
ongoing. An agreement is expected between the consortium and Korail as the majority land owner at the end of September.
Singapore: ASPF II and its joint venture partner won the land tender in March of 2008 for the development of the Serangoon Central Mall in
Singapore. Serangoon mall is a joint venture together with Pramerica Investment Management and spans a net leasable area of approximately
53,374 square meters and is expected to consist of a regional retail mall with a super market, cinema and various shops. Construction started in
Q3 2008 and is slightly ahead of schedule; piling work has already been completed and leasing is progressing well. So far, 14.7 % of the space
has been leased at rates at or above underwriting. Additionally, construction and interest costs are significantly below budget. Currently the
leasing activities are focused on signing agreements with anchor tenants. Pre-leasing continues to progress well; at the end of July, a lease was
signed with an important anchor tenant, Isetan, the third largest department store operator in Japan. At the end of July, 62% of the leasable area
was pre-leased at rates slightly above original underwriting. Additionally, it is anticipated that the site will be fully leased by the end of this year.
Thailand: In February of 2008, ASPF II made an equity injection in the Ananda II Condominium Projects; the investment is a 5-year multi-project
condominium development-for-sale joint venture with Ananda Development Co., Ltd. in Bangkok, Thailand. ASPF II will provide 95% of the total
equity required for this joint venture and Ananda will provide the remaining 5%. In addition, Ananda will administer the development management
expertise critical to the project. To date, ASPF II has injected EUR 79.1 million into the JV to fund the acquisition of twelve development sites. The
acquisition of additional development sites is currently being negotiated. The total equity to be invested is limited to EUR 95 million. The
investment committee of ASPF II decided to invest the remaining capital except for EUR 10 million which will be held in a reserve account.
Despite the current market crisis, these developments are in line with projections. The overall sales rate stands at approximately 71% for all
projects that are currently being marketed.
Japan: ASPF II invested in a commercial development site in Central Yokohama on which ASPF II will develop a pre-leased hotel & wedding
banquet hall with 14 floors above ground and 22 parking lots. The gross lettable area will be approximately 5,995 square meters and is fully preleased
to Escrit K.K., a wedding banquet operator that runs various wedding-related operations. Escrit K.K., is considered a credit worthy tenant
and signed a long term lease of 20 years. The development was completed on time and within the projected budget.
An additional equity
injection has already been approved by the Investment Committee to refinance the loan and it is anticipated that this money will be called at the
end of August.
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Islamic China India Real Estate Fund
In the Spotlight - June 2009
The Fund is currently assessing the investment feasibility of the following projects
Investment Focus Project Description Location Investment
Development
Retail with app. 80,000 000 sqm
Wuhan, Hubei Province
App. USD 45-60 million
Acquisition Retail with app. 54,000 sq m Hefei, Anhui Province App. USD 35-45 million
Acquisition Shopping mall with app. 70,000 sqm Beihing App. USD 40-50 million
Acquisition Shopping mall with app 36,000 sqm Dalian, Shenyang Province App USD 40-50 million
Development Complex with app. 140,000 sqm Tianjin App. USD 70 million
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