Azerbaijani State Oil Fund creates structure for investing in real estate

Business Materials 3 May 2012 19:03 (UTC +04:00)
The State Oil Fund of Azerbaijan (SOFAZ) plans to create a specialized structure for investing in real estate
Azerbaijani State Oil Fund creates structure for investing in real estate

Azerbaijan, Baku, May 3 / Trend A.Akhundov /

The State Oil Fund of Azerbaijan (SOFAZ) plans to create a specialized structure for investing in real estate, the head of department for managing SOFAZ funds, Israfil Mammadov, said in an interview with magazine Daşınmaz Əmlak (Real Estate), published by the State Committee on Property.

"Now it is important to create an efficient structure, which at a high level will ensure interests of the State Oil Fund when investing, transparently, and at a high level to carry out operations on purchase and sale. Now in this connection the Fund carries out a serious work in conjunction with the relevant foreign companies and institutions," Mammadov said.

He said that during the acquisition of real estate SOFAZ will resort to the services of brokers with extensive experience in this field, during the choice of which strict requirements will be put forward.

"State Oil Fund will begin investing in real estate within the next three-four months," Mammadov said.

He said investments in real estate will be made with extreme caution.

"At the first stage SOFAZ plans to invest in commercial real estate facilities located in the central parts of major cities in countries with a transparent market environment, and high liquidity. To this end, we have thoroughly studied a number of real estate markets of a number of cities in these countries," Mammadov said.

He said the liquidity of such assets should be high, the price and yield - stable.

"When investing SOFAZ funds in real estate presence of long-term agreement to lease, location in the downtown area, excellent condition, provision of modern technology, and other conditions will be taken as a basis," Mammadov said.

He said SOFAZ funds will primarily be invested in European real estate markets, then markets of other countries will be considered.

"SOFAZ has already held meetings with influential brokers operating on the markets, the major investment managers, large owners of real estate, legal and other companies, and considered their proposals," Mammadov said.

85 percent of the SOFAZ investment portfolio in 2012 will be formed at the expense of money market instruments and debt market. It is provided by the fund's investment policy for 2012, approved by the President of Azerbaijan.

Up to five percent of the investment portfolio may be invested in shares, fiveper cent - in real estate, five percent - in gold, the document says. For the first time this year the oil fund's investment policy determined the maximum amount of the portfolio in stocks, and gold and real estate at all are new areas for the fund's investment.

According to SOFAZ's investment strategy approved by Azerbaijani President Ilham Aliyev on December 29, 2011, up to five percent of SOFAZ's total investment portfolio may be invested in gold in 2012.

As of April 1, 2012, SOFAZ assets increased by 8.6 percent and amounted to $32.359,4 billion compared to early 2012 ($29.8 billion).

The total amount of SOFAZ investment portfolio amounted to about $32.3 billion as of the first quarter, or 99.79 percent of total volume of assets.

The State Oil Fund was established in 1999. Its assets hit $ 271 million at that time.

The official exchange rate is 0.786 AZN to $ 1 on May 3.