Ex-SHCBA chief says SKMT invested $3m funds in its trustee's real estate project.

KARACHI -- The CEO of HBG Investment - whose project Shaukat Khanum Memorial Trust (SKMT) had invested $3 million in 2008 - is also a trustee of the SKMT, media reported Tuesday.

This was revealed in the SKMT's records shared online. It also said that the project essentially got a seven-year interest-free loan from Shaukat Khanum.

In a Twitter thread shared on Monday, former president of the Sindh High Court Bar Association Barrister Salahuddin Ahmed broke down the details of the investment, raising some questions regarding the role of the trustee and the prudence of such an investment.

Ahmed said that the Trust invested $3 million in a 'real-estate project in Oman in 2008 and exited [the] investment in 2015 after seven years only getting [its] original $3 million back. Bad investment? Sure. But is it bad faith?'

Saying that what intrigued him was the reason SKMT invested in Omani real estate in the first place - given its speculative nature - Ahmed tweeted that 'charitable endowments are not private equity firms. Their investments are usually (and should be) held in safe government bonds and bonds/shares of blue-chip companies and not speculative real-estate projects'. To understand the reason, Ahmed says that the Trust's statements shed some light: 'A [company] called Sugarland launched a real-estate project in Oman. Sugarland, in turn, was owned by HBG Investment based in Dubai along with an Arab partner who contributed the land for the project. SKMT decided to invest $3 million in the project'.

According to the details Ahmed went through, he said SKMT did this 'by buying all the Class B (non-voting) shares of Cinnabar (a British Virgin Islands company owned by HBG). So while SKMT shared in risk/reward of any investments of Cinnabar, it would not have any voting rights/control over Cinnabar which would stay with HBG'.

There is, however, limited information on the exact arrangement between SKMT, HBG and Cinnabar - since Cinnabar is in the British Virgin Islands. Ahmed explains though that 'to be fair, such arrangements/investments are not uncommon among private equity funds investing money of millionaires ready to take high risks for high returns'. However, he asked: 'But for a Pakistani charity to invest thus in Omani real estate in 2008 during a global financial crisis?'

Per the records being referred to by Ahmed, 'the total value of land in [the] project collapsed from $28 million to only $10 million. We don't know if this was due to...