Trump launches $1b Indian hedge fund

Donald Trump Jr. - the son of the brash American real estate tycoon and reality-TV star - appeared at the high-profile Cityscape India 2007 real estate conference in Mumbai to give a speech on the subcontinent's booming property market. Trump, the executive vice president of development and acquisitions at New York-based Trump Organization USA LLC, said India's red-hot economy has fueled demand for more residential development, particularly luxury housing, but also hotels and resorts for the country's flourishing tourism industry. Before he departed, Trump indicated his desire to invest in India's real estate sector, and hinted that he wouldn't wait long to do so. "We feel it is now time to invest in Indian realty projects as the quality has moved up and we see emergence of some high-end developers with a product level that will support our brand," he said in his speech.

It appears that time is now: Trump announced in late July that he intends to set up a hedge fund worth up to $1 billion to invest in Indian real estate. Accordingly, the privately held fund would initially target property in Mumbai and also include an Indian family as investors. Thirty year-old Trump did not give specific details about the fund, such as how he plans to raise the money, or where the first investment would be made. But in an interview with New York-based media company Bloomberg LP, he did say that it would start conservatively and expand as the opportunities presented themselves."The fund will be for acquisitions of real estate in the high end and across the spectrum," Trump said. "We'll start it off relatively small and grow it as we get more familiar with the Indian market. Our entry has to be in Mumbai, and that's where everything is going on right now in terms of the high-end real estate. That's the place where one is going to achieve the highest prices per square foot. It sets the tone for all of the other future developments."Trump eschews investing in India's smaller and less-affluent cities - he stated publicly at Cityscape India 2007 that he has no intention of entering the middle- or low-income segment because "the best is in the high-end sector." When asked at the conference which cities Trump Organization would consider for business deals, Trump responded, "Certainly, the city I'm standing on (Mumbai), Delhi, Hyderabad and Bangalore, where the IT sector has witnessed a boom."

FAST FACTS

Trump Organization USA announced plans to launch a $1 billion hedge fund to invest in Indian real estate. Donald Trump Jr.'s interest in the Indian real estate market was sparked in 2007 when he visited the subcontinent for the Cityscape real-estate conference in Mumbai.

Quote: "We'll start it off relatively small and grow it as we get more familiar with the Indian market," Trump Jr. said. India's personal wealth has exploded in recent years. According to the World Wealth Report 2008, issued June 24 by New York-based financial giant Merrill Lynch & Co. and Paris-based consulting firm Cap Gemini SA, the number of Indians with financial assets in excess of $1 million grew by nearly 23 percent in 2007 alone, surpassing China's 20 percent growth and Brazil's 19 percent increase."India led the world in [high-net-wealth individuals] population growth at 22.7 percent, driven by market capitalization growth of 118 percent and real [gross domestic product] growth of 7.9 percent. Although India's real GDP growth decelerated from 9.4 percent in 2006, current levels are considered more stable and sustainable. India's two largest exchanges - the Bombay Stock Exchange and the National Stock Exchange - ranked among the world's top 12 exchanges by end of 2007, boosted by initial public offering markets and heightened international interest," the report stated. In an effort to tap this local wealth, Trump Organization is moving forward with plans to build a luxury residential and hotel project in Mumbai, announced last year. The company picked this west-central coastal city of 13 million because of its

status as an international center of commerce and India's commercial and entertainment center: Mumbai generates some 5 percent of India's gross domestic product and accounts for nearly one-quarter of its industrial output. It is also home to such important financial institutions as the Reserve Bank of India, the Bombay Stock Exchange, the National Stock Exchange of India and the corporate headquarters of many of India's largest companies and numerous multinational corporations.Yet, Trump will also be entering India at a time when rising inflation has nudged borrowing costs to their highest levels since 2002, effectively curbing the country's five-year property boom and sending valuations for many projects downward. Nationwide, inflation rose 11.98 percent in the year ending July 19, which prompted the Reserve Bank of India to issue new policies aimed at curbing the trend. Still, interest rates on home loans have continued to creep upward by 1-to-1.5 percentage points, from around 10.5 percent to 12 percent annually. Many analysts expect inflation to remain at current levels, if not higher.

"We expect headline inflation to possibly cross 13 percent levels. With inflation likely to remain in the double-digit range for the next few months and supply-side measures not really being effective in bringing inflation down, we expect the Reserve Bank of India to continue to raise rates to temper demand-side pressure," Citigroup India economists Rohini Malkani and Anushka Shah said in a July research note.The younger Trump's plans to launch the $1 billion Indian real estate fund reflects Trump Organization's push to expand globally. The privately held company - which does business in a variety of real estate sectors, including residential properties, hotels, office, golf clubs, as well as gaming and merchandising entertainment - plans to develop a pair of mixed-use projects in Istanbul, Turkey, and Dubai. The Istanbul project, which Trump Organization announced in April, will

consist of two towers and a luxury shopping center, while in Dubai, the company has partnered with local developer Al Nakheel Properties to build the $600 million, 62-story Palm Trump International Hotel & Tower on the trunk of the Palm Jumeirah.One of the world's most recognizable manmade landmarks, Palm Jumeirah, an artificial island shaped like a palm tree off the Dubai coast. It was built by Nakheel and is owned by the Emirate government. Trump Organization already has properties in Dominion Republic, Seoul, Toronto, Panama, and Mexico.If the company succeeds with its plans for India, it will joint various other real estate and financial-services firms that in recent years have invested vast sums of money in the Indian property market. The list includes:

*Lehman Brothers Real Estate Partners LP, which recently invested $175 million in a Mumbai real estate development that is being built by Gurgaon-based construction firm Unitech Ltd., and is in talks with Unitech to invest an additional $525 million in the project.

*RREEF India Advisors Pvt. Ltd., an India-specific alternative-investments business launched in April by Deutsche Bank AG's New York-based alt-investments subsidiary, RREEF Alternative Investments. Headquartered in Mumbai, RREEF India Advisors plans to invest $1 billion in Indian real estate and infrastructure projects over the next three years, beginning with a 31-acre, $400 million mixed-use development outside of Hyderabad.

*JPMorgan Chase & Co., which acquired a 4-percent stake in New Delhi-based real estate developer BPTP Ltd. earlier this month for $60 million. The New York-based financial giant previously invested in Lodha Group, a Mumbai-based commercial real estate developer.