Mouflon Real Estate Investment Fund Ltd held a Press Conference on Friday 15th of December. The occasion is the successful completion of its first investment compartment. Mouflon was incorporated as an Umbrella Fund under the Alternative Investment Fund (AIF) Law of 2014, having obtained its license from the Cyprus Securities and Exchange Commission (CySEC).
Mr. George Mouskides, managing director of Fox Smart Estate Agency and Director of the Fund, started by introducing the Fund and the collaboration with two Lebanese companies for its creation under the regulatory framework of the CySEC. This collaboration was the fruit of a joint belief in the opportunity offered by the real estate sector of Cyprus, based on the successful implementation of the Cyprus adjustment program, and the recovery of the economy in general and the market in particular. The Fund recently closed its first compartment, which focuses on revenue-generating commercial assets in Nicosia and Limassol.
Mr. Mouskides emphasized the fact that property prices have started to recover, and that demand in the market is increasing, both from local and international buyers. This increase is expected to continue in the medium term, which creates an opportunity for investment funds to enter the market and benefit from the growth of the sector.
Mr. Jad Wakil, co-founder and Executive Director of the Fund, discussed the advantages of the AIF law which provides a safe, flexible, transparent, and efficient structure for investment, while implementing European directives within an EU harmonized legislation.
Various investment options for different investors according to risk profile
Given the flexibility of the regulatory framework, funds are able to offer both private and institutional investors the possibility of investing through a number of Investment Compartments, each of which is authorised as an independent entity, with its own specific investment strategy and specific risk-return profile, in order to achieve superior return on the capital invested into it.
This structure creates a transparent and regulated vehicle which simplifies investment in the real estate sector for foreign investors, while having a professional team managing the operational aspects of the investment, thus minimizing risks and optimizing the strategy. The structure also allows for leveraging of acquisitions, provides clear exit strategies and defined investment horizons, and investments into such funds are eligible for the Citizenship by Investment program offered by the Cypriot government.
All of these benefits encourage foreign capital to take on the Cyprus risk, which is perceived to be high compared to that of other countries, due to the limited size of the economy, the aftermath of the 2013 crisis, and the non-performing loans issue that still plagues the banking sector.
According to Dr. Samir Nasr, Executive Director of Mouflon, who is handling the fundraising for the Fund, international investors look for competitive yields and capital appreciation potential. The objectives of the Fund are to identify investment opportunities which can be seen as competitive with other European markets, and which can assist investors in diversifying their portfolios while generating comparable returns. Dr. Nasr pointed out that Cyprus suffers from higher than average cost of leverage, which can put it at a disadvantage when compared with other EU countries, but this can be compensated by a higher potential for capital appreciation brought about by the recovery of the real estate sector. In addition, the fund structure is a major factor in the institutilization of real estate investments in Cyprus, moving from the traditional model of having wealthy families or private developers directly own large number of assets, and therefore concentrating risks, to a more modern framework whereby a much broader range of investors can enter the market, directly benefiting the sector as well as the overall economy.
Ms Lynn Khoury, Executive Director of Mouflon in charge of compliance and internal auditor of the Fund, emphasized the importance of such funds for Cyprus. Unlike most of the rest of the AIFs, Mouflon Fund invests directly in the real estate sector of Cyprus. This injection of foreign capital profits the entire sector, from owners to developers to contractors, across all of the value chain. Mouflon Fund also taps into local expertise through collaboration with professional and qualified advisers, including real estate experts, surveyors, engineers, as well as bankers, accountants, and legal experts, all to the benefit of the local economy
Ms. Khoury also explained that investment through funds allows local investors access to the real estate sector, through an asset-backed vehicle that provides better returns compared with traditional bank savings, and which can further fuel the recovery and growth of the sector and the economy as a whole.
Based on all of the above, the Mouflon team has launched its second compartment, and is looking to further grow in the near future with the introduction of a more aggressive strategy which will focus on developmental project and turnaround assets.