By Mike Phillips
Gulf Finance House aims to take advantage of fall in property values
A middle eastern investment bank has launched a property fund that aims to take advantage in the fall in value of UK property.
Gulf Finance House (GFH), which was set up by the Kingdom of Bahrain, has launched Gulf Atlantic Real Estate II, a sharia-compliant fund for Middle Eastern investors.
It is a sign that investors in the Middle East – cash rich because of the rising price of oil – are ready to take advantage of the severe fall in UK property values. It also shows that these investors are willing to build up portfolios of UK property, rather than simply focus on trophy assets and corporate deals.
The fund will have a core and ‘core-plus’ strategy and aim to buy prime property assets across the UK that have long-dated income and good-quality tenants. It will aim to provide capital growth as values recover. It also has the option to take positions in REITs.
It will be managed by Nick Judd, head of real estate fund management at GFH and a former director at Knight Frank, which will be providing strategic advice to the fund.
Properties bought by the fund will have to be approved by GFH’s sharia committee to ensure that purchases comply with Islamic financing laws. GFH said it had already identified several properties with which to seed the fund.
The fund will be marketed to institutions and wealthy individuals in Gulf Cooperation Council states.
Judd said that the UK was a good place to be buying property now.
‘A year ago, indiscriminate, highly geared buyers had driven prices far beyond any measure of fair value,’ he said. ‘Today, with UK commercial property values having fallen so dramatically, we have the opportunity to buy income-producing properties at prices well below their recent peaks. UK commercial property is the market of choice for many international investors who regard it as relatively low risk, transparent and liquid compared to many other markets.’
Alan Durant, head of asset management at GFH, said: ‘I don’t think you have to be too clever in the current market, and there is no need for complex structures or business plans.
‘We’ll be buying standing real estate with good tenants on long leases. If you can buy sensible buildings on a running yield of 8% then you can hold them until sentiment changes.’
Middle Eastern investors have been increasingly active in the UK over the past month, as institutions and sovereign wealth funds have started to exploit the value perceived to be available in the UK market.
St Martins, the property investment arm of the Kuwait Investment Authority, bought a City of London office building for £400m in May, and last week Economic Zones World, part of Dubai World, completed the purchase of developer Gazeley from Wal-Mart for more than £300m.