Dubai Investments (DIC) is considering making investments in health care and education as demand for assets in the space grows.
It plans to set up two funds in partnership with Al Mal Capital worth Dh1 billion each to acquire real estate assets in the space. Dubai Investments will support the funds with seed capital of up to 10 per cent.
DIC owns 60.86 per cent of Al Mal Capital.
“The funds will be structured to provide cash yield of around 8 per cent per annum with attractive [internal rate of return] on exit,” said Khalid bin Kalban, the managing director and chief executive of Dubai Investments, in a statement to the Dubai stock market.
Al Mal Capital and DIC were not available for comment.
The first fund is expected to launch in October with a focus on acquiring real estate assets in the healthcare sector. The second fund, expected six months later, will acquire assets in the education sector.
Al Mal Capital said yesterday it was entering direct investments as well as corporate advisory and investments management services. Al Mal Capital said it would focus on alternative asset management and target real estate and private equity transactions in the US and Europe.
“This also includes clubbing of regional deals across the [Arabian Gulf], combining strategic and financial equity partners,” it said.
Demand for healthcare and education services in the region is attracting private sector investment in new hospitals, clinics and schools. But experts say that funding greenfield projects is a challenge given the massive investments needed and long-term outlook for such investments.
A sale-and-leaseback model is more attractive for investors and established healthcare and education players than bank funding, for example, according to consultants Colliers International.
“There is a lot of focus on acquiring ready assets in the healthcare and education sectors compared to offices, hotels and residences as [healthcare and education sectors] are typically less risky assets, and they can be given on long-term lease for around 25 years,” said Mansoor Ahmed, the director for healthcare practices at Colliers.
“But the issue is that there are too many funds, private equity and individuals that are now looking at acquiring assets and there are not too many assets available.”
As such, the assets available are not available at a reasonable price, he said. “There are less than 10 assets in the UAE in the healthcare and education space where the landlord is seriously interested in selling,” he said.
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