Gulf Islamic Investments targets $1bn of European property investments

What Gulf Islamic Investments is looking to double the size of its European real estate portfolio by investing $800m-$1bn across the continent this year

Why Gulf-based investors remain committed to European real estate amid low interest rates

What next GII will invest in senior care real estate

Gulf Islamic Investments, the Shari’ah-compliant global financial services firm, is looking to double the size of its European real estate portfolio by investing $800m-$1bn across the continent this year, with a focus on offices, logistics and senior housing, according to founding partner and co-CEO Pankaj Gupta.

“Our curated pipeline looks very healthy,” Gupta, who founded and heads GII with Mohammed Alhassan, told React News in an interview. “We have good partners to help us accelerate our European development by finding assets at the right price in the right location.”

Last week, the UAE-based rm announced that it had bought the Altaïs Towers offce complex in Montreuil, in the eastern suburbs of Paris, for €250m ($300m), bringing the value of its investments in Europe, including the UK, to nearly $800m.

“The demographic of the workforce is changing – nobody wants a two-hour daily commute anymore – so this asset made sense as it is in a part of Paris that is very densely populated from a residential perspective and it is surrounded by very good amenities. The rent is also very reasonable compared to the western parts of Paris.”

The 37,500 sq m complex, which includes a 28-storey building and a 16-storey building, is fully occupied following a major refurbishment. It was sold by a consortium including Arpent Capital, Maple Knoll Capital and funds managed by Oaktree Capital Management. GII has appointed L’Etoile Properties as local property manager.

European & UK footprint

GII, which typically invests with a five-year horizon, is targeting capital cities and large metropolises across Western Europe, including Frankfurt, Amsterdam, Berlin, Paris, Vienna and Brussels – but it would also consider Eastern European cities, especially Warsaw. The investment manager, which has offces in Abu Dhabi and Dubai, expects to close a deal in Germany’s senior assisted living market soon but its co-CEO declined to provide more details at this stage.

“Germany, the Netherlands, Austria, Italy, France will continue to be growth engines but our investments very much depend on the price and the location. Berlin is a great city but it is expensive and so is Vienna,” notes Gupta.

Last year, GII sealed a deal with Luxembourg-based investment group Co lux/Secufund to accelerate its development in Europe. The company manages about €3bn of assets through multiple Luxembourg vehicles.

GII is also an active investor in the UK and is currently working on the 2 Lucan Place development in London’s Chelsea district. The luxury mixed-use, residential-led development is slated for completion in Q4 2022 and has already received signi cant investor interest, according to GII. Further north, the investment manager owns the Lewis Building and Priory Court in Birmingham, which it bought for £140m three years after the Brexit referendum.

“The sale was oversubscribed at the time, which underscores the strong appetite for the UK real estate market despite Brexit.
Investors from the Gulf are very comfortable with the UK.”

Cautious approach on pricing

Amid fierce competition and compressing yields, GII has taken a very cautious approach on pricing, especially in the logistics sector. The co-CEO tells React News that it has become a challenge to nd logistics assets at the right price, with cap rates having fallen below 4%.
“We bought an Amazon fulfilment centre in Dortmund, Germany in 2017 and sold it in January 2020 with a good pro t. With the amount of liquidity chasing assets now, we are a little sceptical about prices staying in this range. In Spain and Italy, pricing is also much tighter than you would expect,” says Gupta.

Investment in the Dortmund asset, which offers 1 million sq ft of leasable space, generated total returns of 30% over two years, according to GII. The company sold the logistics centre for $155m.

Gupta notes: “I would be happy to enter the Polish or the Czech markets at the right pricing. Portugal is also an interesting logistics market that we haven’t explored yet.”

GII is considering investments across the logistics value chain, including cold storage, fulfillment centres, urban logistics and data centres, worldwide. It is also not ruling out investing in build-to-suit assets at a client’s request.

Investors’ commitment to real estate

Founded in 2014, GII invests across real estate, private equity and venture capital on behalf of ultra-high-net-worth individuals, family offces, banks, institutional investors and sovereign wealth funds in the Gulf and Asia. Gulf-based investors have been investing in private markets since the 1960s-1970s and follow a very diversified portfolio approach, according to Gupta.

“They love income-generating assets. So in the zero to negative interest rates environment across Europe, real estate is a compelling option to generate stable returns – especially with low borrowing costs,” the co-CEO says.

As a Shari’ah-compliant investment manager, GII is keeping its LTV ratio below a 60% threshold. In August 2019, the rm recruited German real estate lending expert Anni Hoenicke, the former global head of real estate lending at Deka, as senior advisor. Following the appointment, the company has received strong support from Europe’s largest real estate lenders, according to Gupta.

“Financing is not a challenge for us and real estate remains a very sensible option. Despite the pandemic, o ce assets will always stay relevant because we are social animals. Senior care and logistics also make sense from a long-term perspective.”

While investors have been asking their real estate manager to be presented with more distressed deals since the beginning of the pandemic, these assets haven’t come to the market due to the amount of liquidity available, the co-CEO points out. Investors are also reluctant to allocate capital to the hospitality sector but this is an asset class GII has not been investing in as it is not considered Shari’ah compliant.

GII, which also bought an o ce property in the state of New York in February and is currently finalising its second India- focused investment portfolio, is aiming to reach $3bn in AuM by the end of the year.