Abu Dhabi Islamic Bank UK closes another real estate deal as weaker pound attracts foreign investors

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UK: Against the backdrop of a weaker pound sterling due to the ongoing quagmire of Brexit negotiations making the UK’s real estate market particularly appealing to foreign investors, Abu Dhabi Islamic Bank (ADIB) UK has partially funded the acquisition of the Travelodge Hotel at London’s Heathrow Airport by a Saudi client. 

The GBP40.3 million (US$52.38 million) deal, in which ADIB UK provided financing amounting to GBP26 million (US$33.8 million), is yet another sign of strong appetite for the UK’s real estate assets from investors in general, particularly from the Muslim-majority Gulf.

“We are seeing a rise in demand for UK commercial property from the Middle East, specifically the GCC,” said Paul Maisfield, the head of real estate at ADIB UK. Earlier this year, ADIB, the parent company of ADIB UK, arranged and structured Islamic financing transactions to fund the purchase of two office buildings on behalf of an Abu Dhabi-based client and a Saudi Arabian investor. 

Besides ADIB, other Islamic financiers also closed real estate deals in the UK recently. Shariah compliant Rosette Merchant Bank, in partnership with a Qatar-based investment house, acquired in February the Tesco Extra supermarket and an accompanying retail parade in Manchester. A few months before, it had acquired the Debenhams department store in Swansea, Wales on behalf of a private client. In early 2018, Gatehouse Bank, on behalf of investors, concluded the sale of Omega’s manufacturing and distribution facility at Capitol Park in Thorne, Doncaster. 

Overall, in 2017, investment volumes across the UK’s six biggest regional office markets, namely Manchester, Birmingham, Edinburgh, Glasgow, Leeds and Bristol, were the highest for over a decade with office investment volumes reaching AED14.3 billion (US$3.89 billion) and representing a 49% increase in comparison with 2016, according to data from JLL, a US-based professional services and investment management company specializing in real estate. 

In 2018, prospects are also positive with investment volumes likely to remain robust at around GBP60 billion (US$77.99 billion), according to a CBRE report. As an example, Islamic investment manager Rasmala aims to deploy over US$500 million into commercial real estate in the second half of 2018 with a focus on the UK, Ireland and Germany, among other markets.

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