China Sharia REIT eyes $250 mln

By Sebastian Tong

LONDON (Reuters) - An Arab Emirates-linked fund is raising $250 million from Middle East investors for what would be the first Sharia-compliant property trust based entirely on shopping malls in China.

The trust manager said the real estate investment trust (REIT) would bring together interests from two of the fastest growing regions, giving Middle East investors exposure to China's red-hot retail sector within their religious strictures.

"China is a constant story (of investment interest) for the Middle East, and for the Chinese the Middle East is a relatively untapped source of capital," Willy Ng, managing director of the trust manager, Emirates Tarian Real Estate Management, told Reuters

The initial portfolio of three malls in Beijing, Tianjin and Changchun, is valued at around $350 million, he said in an interview from Singapore on Wednesday.

Demand for Islamic financial products has surged as more of the world's 1.3 billion Muslims seek investments that comply with their beliefs, and the oil-rich Middle East is shaping up to be a key source of capital as Western financial institutions grapple with a credit crunch.

The REIT, ETCM Real Assets Investment Trust, will be listed in Singapore in the second half of the year to raise a further $400-500 million, Ng said.

He said Islamic scholars in Bahrain and Malaysia would vet the properties to ensure that they adhere to Islamic principles which prohibit association with businesses involved in industries such as alcohol, pornography and gambling.

NON-SHARIA THRESHOLD  Continued...