Dubai-based real estate crowdfunding platform Stake raised $4 million in an initial funding round to expand its operations.
The company, which was launched in December 2020, will use the funds to scale and introduce new products and features, invest in sales and marketing and grow the current 15-member team, it said in a statement on Sunday.
A consortium of investors participated in the funding round, led by Combined Growth Real Estate, a company helmed by Amer Hammour, who is the founder and chairman of US-based real estate investment management company Madison Marquette.
Other investors include Vivium Capital, a Dubai-based private family office, Verve Ventures, Lama Holding from Riyadh and shareholders of the UK's Chalgrove Properties.
Based in DIFC’s Fintech Hive and regulated by the Dubai Financial Services Authority, Stake allows users to browse through pre-vetted selections of properties and invest from as little as Dh2,000 ($545).
This fundraise allows us to build the go-to digital real estate investment platform for Dubai property and eventually the region
“Our shareholders believe that in today’s world there is a much better way of investing in real estate. Through Stake, we will enable anyone to participate in this asset class in an easy, transparent and digital way,” Rami Tabbara, co-founder of Stake, said.
“This fundraise allows us to build the go-to digital real estate investment platform for Dubai property and eventually the region.”
Venture capital investments in early-stage start-ups that are using technology to solve major pain points in business are growing in the Middle East and North Africa.
Despite the pandemic-related challenges, Mena start-ups secured $1.03 billion in funding last year, up 13 per cent compared with 2019, according to data platform Magnitt.
However, the number of transactions was down by 13 per cent to 496. FinTech and e-commerce retained the top spots by number of funding agreements, together accounting for 24 per cent of the total.
Stake’s portfolio consists of ready units in Downtown Dubai, Dubai Marina and will soon include properties in the DIFC and City Walk, the statement said. The company distributes profits generated from rental income to users every month.
“The Dubai residential property investment market offers very attractive opportunities to investors for growth in value and strong current income, as the current high supply gets absorbed by the very strong demand,” Mr Hammour said.
“Stake allows investors to participate directly in this market and make diversified bets on properties through partial ownership deals.”
Since its launch last year, the property crowd funding platform has attracted more than 4,000 registered users and achieved 30 per cent increase in sales every month, the company said.
“When we launched Stake, we made clear our goal to democratise real estate investment and [provide a] remedy to ills of Dubai’s property market, which prevented the young from participating and delivered unattractive returns for experienced investors,” Manar Mahmassani, co-founder of Stake, said.
“With this fund raise, we can accelerate our journey to radically improve the real estate investment market and bring this tangible asset into the new digital age.”
The company is also in discussions with partners and regulators in Saudi Arabia and intends to expand into the UK, too, the statement added.
Stake’s advisers include Daniel Miller, co-founder of Fundrise, the largest real estate crowd-investing platform in the US, as well as Gaurav Shivpuri and Fadi Moussali, senior executives at global real estate advisory JLL, the company said.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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