UK £100 million fund has closed its first real estate deal with a property acquisition in the Cambridge cluster for £23.55m.
Sidra Capital, a CMA regulated Shariah compliant financial services company based in Saudi Arabia and Gatehouse Bank, an FSA regulated UK-based Shariah compliant bank specialising in UK real estate, have formed The Sterling United Kingdom Real Estate Fund (SURF).
SURF aims to complete purchases in the Shariah compliant commercial real estate in the UK. The fund will acquire a diverse real estate portfolio which covers the office, retail, logistics, student accommodation and light industrial sectors, to reach its target equity size of £100m.
SURF’s first property acquisition islocated in Huntingdon, near Cambridge.
The property will produce an average annual distribution yield of circa 8.40 per cent over five years and has been fully let to Somerfield Property for a 35-year term from 1990.
The 23,844 sq m property was secured at a discount to the original quoting price and will provide SURF investors with a significant surplus over the fund’s target annual distribution of 6.50 per cent.
Hani Othman Baothman, managing director and CEO, Sidra emphasised the low-risk profile of the first asset acquired for the fund. “The Cooperative Group Distribution Centre was selected for acquisition due to its attractive lease profile and strong tenant.
“Having secured the asset below the original quoting price, the property compares favourably to the wider UK logistics market. We project to deliver an average annual distribution yield of 8.40 per cent and an expected IRR in excess of 9.50 per cent for our investors.
“As one of the most mature, transparent, well regulated and liquid markets in the world, the UK are considered superior to other markets. By diversifying our risk across multiple asset classes, SURF’s mixed portfolio will provide an effective hedge against inflation.”
Richard Thomas, CEO of Gatehouse added: “The Sterling United Kingdom Real Estate is a shining example of Saudi Arabian-United Kingdom collaboration. With SURF, Gatehouse and Sidra expect to deliver an outstanding opportunity for investors pursuing income producing real estate investment with sustainable returns in the UK.
“Taking advantage of our expertise in the UK real estate sector and their experience in alternative investment fund activities around this region, SURF’s first acquisition highlights our prudent investment methodology and the potential returns that are currently achievable.
“The UK real estate sector provides a compelling investment opportunity, which has arisen following heavy falls in commercial property values due to the impact of the financial crisis. As yields return to the long-term historical average and rental growth establishes itself, SURF’s real estate investments should generate solid returns for its investors.”
Gatehouse continues to excel at delivering Shariah-compliant real estate investment solutions. This is reflected in its track record of performance, delivering over $500m in real estate acquisitions in two years and new investor uptake in transactions by GCC high-net worth and institutional investors.