London-based River Crossing debuts with Islamic Real Estate Fund

 London-based RiverCrossing Capital Partners, a new Islamic investment firm, has launched its first product, a U.S. real estate fund, as part of a plan to offer non-traditional asset classes to institutional investors in the Gulf.

The firm will develop asset-based funds with a non-cyclical nature, a departure from other sharia-compliant real estate funds which have focused on more traditional commercial and residential properties that perform in line with the economic cycle, chairman Mohammed Abdulmalik said.

"The dynamics of investment banking in the Gulf have been evolving - investors are opening up to new ideas," Abdulmalik, former chief executive of Bahrain Islamic lender Capivest, told Reuters.

RiverCrossing's first fund will have a target investment horizon of five years and focus on medical offices, self-storage facilities and senior and student housing in the United States, he added.

"The next product might be in a different geography or a different asset class. We have capacity to launch two to three funds every year."

The management-owned firm is headed by chief executive Asim Zafar, former chief strategy officer of Bahrain's Arcapita Bank [ARCAB.UL]. Arcapita emerged from Chapter 11 bankruptcy protection in the United States last September after being hit by the global financial crisis.

RiverCrossing aims to raise $45 million in the first tranche of its Alternative Real Estate U.S. Fund this quarter, reaching a total of $125 million with a second tranche in the next 12 to 18 months, Abdulmalik said.

Co-Investment

The Cayman-domiciled fund was established in cooperation with Texas-based Virtus Real Estate Capital, which has launched 35 real estate funds since 2003 acquiring a combined $2.3 billion worth of properties.

RiverCrossing plans to launch other funds through the same co-investment approach, using London as a base to source fund managers and conduct due diligence on them, Abdulmalik said.

The firm is also applying to open a branch in the Dubai International Financial Centre.

The last few years have been difficult for Islamic funds with 105 closures since 2011, a study by Lipper and Thomson Reuters found, but investor interest is gradually returning. Last year saw the highest number of Islamic fund launches in four years and the lowest number of liquidations since 2007.