Kuwait-based Global Investment House has acquired the first asset for the Global GCC Real Estate Fund-II, a USD500m closed-ended fund launched in July that seeks to capitalise on investment opportunities in the Gulf Co-operation Council countries.

The acquisition is a Class A commercial building nearing completion known as the Mashreq Tower in Riyadh's Cairo Square. The USD30m purchase was made from USD50m in seed capital provided for the fund by Global.

 'Within two months of acquisition, we have received an expression of interest in buying the building for USD42m, a 40 per cent appreciation in value,' says Shailesh Dash, a senior vice-president and head of alternative investments at Global.

'We expect that the capital value of the asset will become much higher after the leasing of the property, rental stabilisation, and further value creation.' Global is currently in the process of appointing a property manager well known in the region.

Mashreq Tower was acquired from a Saudi business conglomerate that is the anchor tenant of the building, which consists of two basement levels, a ground floor, and nine upper floors with a total lettable area of 9,300 square metres. 'It is a well-designed modern structure with electrical and mechanical systems,' Dash says.

The launch of the GCC Real Estate Fund-II was prompted by the success of Global's first Gulf real estate fund, which has a target internal rate of return of 11 to 12 per cent but currently has an IRR of around 20 per cent.

The new fund targets a diversified portfolio of opportunistic and value added real estate properties in the Gulf region, through investment structures designed to achieve short- to medium-term capital appreciation in accordance with Shari'a principles. The fund is currently being marketed to regional and international clients.

'The Global Real Estate Fund-II offers regional and international investors an opportunity to capitalise on the region's flourishing real estate sector and to diversify their portfolios,' says Rakesh Patnaik, a Global vice-president and head of real estate funds.

'The fund intends to generate a gross return of around 25 per cent. We have a strong pipeline of transactions that include private equity real estate opportunities in Saudi Arabia, Qatar and the United Arab Emirates.

'We are also evaluating land transactions in Jumeirah Village and Dubai Waterfront in the UAE, as well as commercial and residential development prospects in Saudi Arabia and Bahrain. The fund has allocated 20 per cent of its capital to transactions outside the GCC, where we have a pipeline of real estate opportunities in Jordan, Egypt and North Africa.'

The fund has received interest and is currently undergoing due diligence from regional and international financial institutions, pension funds and sovereign wealth funds. Global's fund team is conducting a roadshow in the US, UK and continental Europe in September and October.

Founded in 1998, Global Investment House is an investment company listed on the Kuwait, Bahrain, Dubai and London stock exchanges, with assets under management of KWD2.5bn (USD9.4bn) at the end of June.