Saudi Arabia's first Shariah-compliant real estate investment trust (REIT) is expected to be launched in June, an asset manager involved in preparing the product told Reuters on Wednesday. John Sandwick, managing director of wealth manager Encore Management, said the REIT will invest only in domestic Saudi real estate and is expected to raise at least SR1 billion ($266.7 million). “The fund will have complete local credibility because investors will be able to see the assets they are investing in, and they like that,” Sandwick said. The trust will hold 5 percent in cash with a bank standby credit facility on a conventional Islamic credit facility, which will allow it to guarantee monthly liquidity even if redemptions exceed 5 percent of assets. Sandwick said the product is sponsored by a very well-known Saudi real estate product provider. There will be no lock up period, although investors withdrawing their assets within the first year will pay a 5 percent penalty. “For the first time we are bringing real estate investment trust technology to Saudi Arabia,” Sandwick said. “I'm actually puzzled as to why nobody else has created a similar product for the Islamic asset management market in Saudi Arabia. There's a huge demand.” Sandwick said current market conditions had created a “window of opportunity where you can buy a building with a 22-24 percent gross yield, while net yields, after operating and fund costs will be around 7 to 11 percent, closer to the latter than the former.”
