Capital from the Middle East is more active in Europe than headline transactions might suggest, according to an investigation by EuroProperty correspondent, Jane Roberts.
While the total volume of Middle Eastern money channelling into European real estate has actually reduced in the last couple of years, the number of transactions attributable to Gulf-based investors has not.
The overall volume is down because Middle Eastern sovereign wealth funds – government-owned giants of the likes of ADIA, ADIC or Qatar Investment Authority – have been comparatively quiet recently after a period as active buyers of European property after the financial crisis. Middle Eastern private investors, on the other hand, are investing and new parties are checking out the market with a view to investing soon.
Example transactions cited include the British Gas HQ in Granton, Edinburgh. Nine of the bids for British Gas Scottish headquarters at 1 Waterfront Avenue are said to have come from investors from the Gulf. Darin Partners is tipped to be under offer to buy the 9,000 m2, 16-year-old building. The London-based investment manager which advises Middle Eastern clients was also the adviser to Bank of London & the Middle East on its acquisition last October of Moorfield’s 1 Atlantic Quay in Glasgow.
EuroProperty’s report lists 14 transactions by Middle Eastnern capital in the last 12 months, and quotes Fadi Moussalli, JLL’s Middle East & North Africa regional director and Hassan Farran, director of EMEA regional investment at Savills.
While Middle eastern investors do occasionally buy assets at initial yields below 5% they generally require over 5% and employ gearing to increase the cash-on-cash return. Moussalli says: ‘These investors are ready to compromise on the location and sometimes on the quality of the real estate. But what they will not compromise on is the tenant’s credit quality and the WAULT.’