Ramadan and real estate

Lasting for 29-30 days, the period – observed by more than one billion practicing Muslims worldwide – is regarded as one of the five mandatory “pillars” of Islam. During this period, members of the faith are expected to fast (from dawn until sunset), pray, read the Qur’an, engage in charity and generally abstain from acts of vice or hubris. The purpose of the period is to encourage both self-discipline and self-reflection, thus bringing the practitioner closer to God.

Given that, at 90 North, we often partner with Shari’ah-compliant funds when seeking to co-invest in a property asset, those unfamiliar with Islam might reasonably expect our activity levels to take a hit during this period, with Muslims refraining from business practices out of concern for not engaging in vain or conceited acts.

In fact, almost the reverse is true – business activity goes on very much as normal, and even experiences a slight bump. In 2011, a research paper by several prominent world finance academics entitled Fast profits: Investor sentiments and stock returns during Ramadan revealed that during the holy period market liquidity remained unchanged relative to the rest of the year and stock returns actually increased.

The paper’s authors attributed the results to the increased positive sentiment Ramadan engenders, stating, “Ramadan brings about a sense of solidarity among Muslims, enhances their satisfaction with life and encourages optimistic beliefs. This optimism affects investor sentiment and decisions leading to price run-ups”.

Remaining respectful

At 90 North, we see a similar trend. During Ramadan last year, we partnered with Dubai-based investment advisory firm Arzan Wealth to purchase the international HQ of Heerema Marine Contractors in the Netherlands for €70m. Also, this year, we will be working through the religious period to close $250m worth of transactions across the UK, Europe and North America, again with our co-investors in the MENA region. Work is in no way discouraged over this time.

However, that is not to say business activity is completely unaffected. We will not, for example, seek investment decisions on new transactions. We also take into account adjusted working hours at Islamic institutions and will accept that key investment decisions may be delayed. This is not just a business imperative. Travelling constantly to the Middle East and working with partners in the region (I also lived in the GCC for 5 years), I recognise the social and spiritual importance of remaining deeply respectful of our clients and staffs’ religious devotions during Ramadan.

Ironically, the “real” drop in transaction activity we are expecting will come after Ramadan, when summer period begins. Investors use this time to take stock and evaluate and will not generally start new transactions. This summer the period of inactivity and reflection may be even more protracted as the UK’s Brexit negotiations with the EU begin and various financial bodies will be waiting to see what the scope and potential outcomes of these will be.

In the meantime, may I take this opportunity to wish our staff and partners observing the holy period ramadan Mubarak.

Nick Judd, co-founder and head of investment at 90 North