Author Archives: Charlotte Dennison

Press Release – CoStar – Malaysia’s KWAP teams up with 90 North for drive into UK student homes

Malaysian fund Kumpulan Wang Persaraan (KWAP) has teamed up with 90 North Real Estate Partners to build a platform in the UK student housing market with the initial acquisition of a portfolio from IP Investment Management and Maven Capital Partners for £39.8m.

The portfolio of two newly developed purpose-built student accommodation assets totals 360 beds.
The Mill House in Edinburgh and 800 Bristol Road in Selly Oak, Birmingham are both fully operational and will offer a day one running yield.

It is KWAP’s first acquisition of a student housing portfolio in the UK and will it said provide a “platform for further investment in the rapidly growing sector”.

The Mill House was sold for £25.1m or £97.8k per bed which represented a net initial yield of 5.84%. 800 Bristol Road was sold for £14.6m or £141.9k per bed which represented a net initial yield of 5.69%.

Dato’ Wan Kamaruzaman Bin Wan Ahmad, Chief Executive Officer, KWAP, said: “I am excited by this exceptional opportunity to invest in the UK’s attractive student accommodation sector. The UK is a global leader in higher education, attracting students from Malaysia and around the world. Acquiring these assets from IPIM and Maven meets KWAP real estate investment objectives for targeting strategic, diversified portfolios in foreign markets with a focus on revenue generating portfolios. KWAP is pleased to be working with a UK-headquartered investment partner, 90 North, a company with a global reputation for its ethical investment approach.”

Selina Williams, Executive Director at IPIM, said: “KWAP’s acquisition shows the ongoing institutional demand for high quality operational assets such as the Mill House and 800 Bristol Road. IPIM will continue to work with Maven to develop UK PBSA schemes following this successful exit of our first developments together.”

Philip Churchill, Founder and Managing Partner at 90 North, said: “We’re excited to have created this opportunity for KWAP to enter the UK’s attractive student accommodation sector. The two properties forming part of this deal are low-risk, incoming generating assets, that have been developed by the current owner IPIM and the asset manager, Maven. Our extensive knowledge of the sector, underpinned by an outstanding investment track record, means we’re in an excellent position to help KWAP acquire steady income assets with rental and capital value growth potential.”

Andrew Whiteley, Investment Director at Maven, said: “We are delighted with the return on investment these high quality student properties have achieved for investors. The PBSA sector continues to offer excellent opportunities for institutional and overseas investors, such as KWAP and 90 North to acquire income generating assets and following the success of the first exits we have completed with IPIM, we look forward to continuing our relationship to identify new sites for development.”

The Mill House at 396-400 Gorgie Road, is a 257-bed student accommodation asset located west of the Edinburgh city centre between Edinburgh University and Edinburgh Napier University. The building comprises 227 en-suite clusters, 30 studios, and 1 ground floor retail unit. The property is managed by Fresh Student Living.

800 Bristol Road is a 103-bed studio student accommodation asset located within walking distance to the University of Birmingham. The property is managed by Collegiate AC. Both assets are 100% pre-let for the 2018/19 academic year.

Bidwells acted for the vendor while both Robert Irving Burns and MacLaren & Partners acted for the buyer.

Press Release – Zawya – Middle East investment expert joins 90 North advisory team

International real estate investor 90 North has appointed Middle East expert Richard Banks as Board Adviser. He will support 90 North on further developing strategic partnerships in the Middle East with organisations sharing 90 North’s business focus on socially responsible real estate investments.

Banks has an international reputation as a Middle East expert and GCC (Cooperation Council for the Arab States of the Gulf) regional insider with over 15 years of experience working with government ministries, companies and investors.

Nick Judd, Founder and Head of Investment at 90 North said: “Richard is highly respected in the Middle East for his deep knowledge of the region and appreciation for its unique character. As our new ambassador in the Middle East, he’s a very welcome addition to our team and he’ll play an important role in further developing 90 North activity in the region.”

Richard Banks, Board Adviser at 90 North, commented: “I’m very happy to be joining 90 North and to be advising the company’s Board on the development of business partnerships in the region. The economic, political and regulatory landscape continues to evolve and for companies such as 90 North with a long history in the Middle East, this is an exciting time with considerable opportunities.”

In addition to his new role at 90 North, Banks holds several directorships and non-executive positions, including as a regional advisor at Euromoney, the specialist publisher and global conference organiser, and as a partner at Soling Partners, the Middle East investment advisory firm. Richard is a non-executive board director of Lincoln College International, a British education services provider with substantial operations in Saudi Arabia and China.

Richard has a BA (MA) Hons in Politics, Philosophy and Economics from Christ Church, Oxford University.

Viewpoint – Summer slowdown?

As we are now in the holy month of Ramadan and with the thermometer and thoughts of summer starting to rise in the Middle East, we would normally expect investor interest in Islamic real estate investments to have started waning by now, which is certainly what I have seen in previous years. However, we seem to be getting more enquiries than ever, with no let-up in sight.

My theory, supported by client conversations, is that investors have not deployed the level of capital they wanted and so cannot take their foot off the gas just yet. A third of the year has already passed, and while data on the level of Islamic real estate investments is very hard to come by, anecdotally I do not recall seeing the same level of property acquisition announcements in the pages of Islamic Finance news compared with previous years.

I am sure that this is not through a lack of appetite or indeed effort among Shariah compliant investors, so the issue may be one of supply. Are the deals there to be done?

Working through the research paints a slightly mixed picture. CBRE reported that the overall volume of US real estate investments in the first quarter of 2018 fell 14% compared with the fourth quarter of 2017, but it rightly pointed out that fourth quarters tend to be among the busiest anyway and that the fall was not as much as could reasonably have been expected. Interestingly, multifamily residential overtook offices as the largest sector for investment, and cross-border investment was actually up.

For the UK, CoStar reported the biggest quarterly drop in acquisition activity in 10 years. It would be easy to blame Brexit, but while some are put off by this, most investors I speak to are more than happy to continue to invest. From our own experience, we believe this is due to a lack of opportunities. Existing landlords are holding on to their investments, so the turnover is materially down. CoStar reported that such investment volumes would have been down even further were it not for activity in the student accommodation and hotel sectors, both materially up.

For Europe, the position is somewhat in the middle. Real Capital Analytics is of the opinion that there was a 27% decline compared with the same quarter in 2017, resulting in the weakest quarter for four years, and that all of the main real estate sectors fell.

The summer tends to provide quiet months when it comes to finding new opportunities, so perhaps it will be a few months before a flurry of activity is witnessed, but I do not believe that this will stop investors looking. Waiting another four months is not an option for many and I hope that the Islamic real estate industry can continue to source these ever rarer opportunities. No summer slowdown this year.

Original article appeared in Islamic Finance News.

In the Media – UK Islamic Finance – 90 North: A year in review

The allure of real estate for Islamic investors goes back a long way. Whilst equities and Sukuk will always be a significant part of a Shariah compliant investment portfolio, there is something about the bricks and mortar of real estate that eternally appeals. PHILIP CHURCHILL of 90 NORTH takes us through the past 12 months in the UK market, and looks ahead to the coming year.

Introduction
Whilst tenant use of course needs to be monitored, the basics of real estate investment suit Shariah principles well, with a genuine business being undertaken, either to build and let or sell new property or hold existing properties for their rental income.

So, whilst the requirements of demand and potential supply were there, what was needed were the professionals to put the two sides together. Thankfully the UK took a lead on that, with lawyers, accountants, tax advisers and of course real estate specialists working with Shariah scholars to establish the basic principals that built into a significant business.

Much of this work was done around 15 years ago, with the UK establishing itself as the European capital for Islamic finance and by default Islamic real estate investment.

The clutch of dedicated Shariah compliant banks in London also helped that position, with most of them supporting real investment in one way or another.

2017: A review
2017 saw the first impact from Brexit, or rather, there wasn’t. Whilst this could have reasonably have been assumed to at least delay investment decisions amongst Islamic investors, this didn’t turn out to the case. CBRE recently identified London as being the most favoured city for Middle East outward investment, overtaking New York. The weakening of sterling helped to seal the deal.

However, Islamic investment into the UK isn’t all about London, with a larger number of transactions (if not value) conducted across the UK and across a very wide range of sectors from offices and retail to care homes and student accommodation.

These were almost exclusively undertaken as individual transactions rather than true multi-asset fund structures, but as the year draws to a close there is a growing voice towards such funds that hasn’t been heard for more than ten years. Risk aversion remains key, with income producing assets vastly preferred, although investors have had to learn to live with a slightly lower net cash yield than previous years as asset prices and finance costs rose, and the ability to make tax deductions continued to diminish.

Speaking of which, the UK Government’s decision to start implementation of tax upon the sale of UK real estate held offshore came as a shock to some, but it’s amazing that this tax break has remained available for so long. All part of levelling the playing field.

The UK has also led the field with Islamic fintech, with a number of crowd-funding initiatives being launched or growing to more substantial levels, as well as more innovative ways to finance acquisition of homes. Such innovation is to be applauded and I’m sure will go from strength to strength.

2018: A Preview
I suspect that funds may be grabbing the headlines in 2018. Investor sentiment seems to be warming towards them, with the benefits of diversification and even some appetite for blind-funds where assets have not been identified in advance, at least where the investment manager can show previous competence in a specific sector.

With respect to the UK real estate markets themselves, pauses or even falls in value for certain sectors were blamed on Brexit in 2017, when in truth these sectors were due to at least slow down anyway. Focus on demand versus supply fundamentals and relative value should remain paramount during 2018.

Risk aversion will not subside, but investors will continue to need to get used to lower net cash yields, unless they are willing to move up the risk spectrum.

Dare I say, it should now be stable on the tax rules front, with the anticipated changes now in place, bringing the UK in line with the international norm in most regards.

Press Release – Property Week – 90 North adds Leamington scheme to student offering

90 North Real Estate Partners has acquired a student accommodation scheme in Leamington Spa.

 

It acquired The Union for £17.2m from Alumno Developments. The 64,000 sq ft building was completed in September 2017 and has 187 bedrooms – a mix of ensuite rooms and studio flats – used to house Warwick University students. It is managed and operated by Homes for Students.

The acquisition is the second under 90 North’s Academy UK student housing programme and takes the number of beds that it owns more than 2,200.

John Yeend, partner at 90 North, said: “With 5,000 Warwick University students living in Leamington Spa but fewer than 500 purpose-built student accommodation units for them, the town is severely undersupplied. Alumno has created superb accommodation that will be attractive to students for many years to come.”

Press Release – Property Week – 90 North outlines ambitious plans to hit $5bn in five years

90 North has set a target to grow its total deal volume to $5bn (£3.8bn) in five years as the firm expands in Europe with the acquisition of two office buildings for €91m (£81m).

Hoofddorp, Netherlands

Since 90 North was founded by Philip Churchill and Nick Judd in 2011, it has closed nearly $1.8bn of deals in the UK, continental Europe and the US.

To hit the target, dubbed ‘five in five’ by 90 North, the firm will expand its investment horizon even further. This summer, it opened an office in Sydney, which will pave the way for its first deals in the Australian market.

“We will only achieve it [the target] by being more global,” said Judd.

90 North specialises in Sharia-compliant investment and works with a number of investors in the Middle East. It is looking to grow its investor base further by working with other types of investor as well, particularly those with an ethical focus.

Judd said the firm was working on deals with Malaysian institutions through its office in Kuala Lumpur and also expected to begin working with South African investors.

Amsterdam deals

This week, 90 North continued its acquisition push with the purchase – in partnership with Dubai-based Audacia Capital – of two office buildings that are being developed by RED Company in Hoofddorp, near Amsterdam in the Netherlands. One will be the EMEA headquarters of sportswear company ASICS and the other the global headquarters for the baby food and medical nutrition division of dairy giant Danone. The combined purchase price is €91m.

“From 90 North’s perspective, we like new or nearly new offices that have been modelled on long leases to very strong global covenants,” said Judd.

He added that the firm was positive about the outlook for the office market in Amsterdam, which would “no doubt be a beneficiary of Brexit”.

The deals follow other similar purchases by 90 North in the US and Europe of offices let to blue-chip tenants such as Saint-Gobain’s

North American headquarters in Philadelphia, the FBI headquarters in Denver, Colorado, and Siemens’ divisional headquarters in Leiden, the Netherlands.

In the UK, Judd said the firm would continue to seek investment opportunities despite Brexit. In particular, it was looking to grow its student housing portfolio, he said.

Earlier this year, it purchased Exeter One, a scheme next to the University of Exeter, for £18.6m, reflecting a 5.9% yield. Judd said it was the first deal in an investment programme to build a student portfolio of more than £200m of assets.

90 North also recently capitalised on strong demand for long-income property in the UK by selling a portfolio of 12 care homes leased to Prime Life in two separate deals to AEW UK Long Lease REIT and LXi REIT for £50.6m.

Press Release – 90 North confirms €91M purchase of two state-of-the-art Headquarter Office properties in The Netherlands, pre-leased respectively to ASICS and Danone

90 North Real Estate Partners LLP (“90 North”) has advised on the acquisition of two adjacent built-to-suit headquarter office (“HQ”) properties now under construction in Hoofddorp, The Netherlands.

The properties, being developed by RED Company, are both state-of-the-art office buildings with a strong focus on sustainability and health.

The ASICS EMEA and Benelux HQ is due for completion in October 2018. The new Danone Netherlands Global HQ building is due for completion in March 2019.

90 North’s Partner, Audacia Capital, acted as Strategic Advisors on the acquisition.

Lisa Amin, Senior Investment Manager at 90 North, commented:

“We are delighted to continue to grow our portfolio in the Dutch market. It was a great pleasure working with RED Company on both these transactions. Both investments will provide a secure long-term income stream from global blue-chip tenants.”

Nick Judd, Founder and Head of Investment at 90 North, commented:

“90 North has now completed its 30th acquisition with many of the properties having similar characteristics – brand new or modern constructions, long leased to strong, global tenants with the highest possible environmental accreditation. As companies seek to hire and retain the best talent from around the world, the quality and environment of the latest office buildings is now of paramount importance.”

RED Company, commented:
“We are very proud to partner with 90 North and Audacia on this unique development. It is our mission to create the best workplaces of the 21st century, and we feel that 90 North and Audacia are equally passionate about this ambition. The Hoofddorp area was already one of the most sustainable office development areas in Europe. We are now adding ‘health’ to this profile, as these two new, state-of-the-art offices will not only be very sustainable, but also among the most healthy office buildings in the Netherlands.”

Viewpoint – Time for Portland, Oregon?

It has been two years ago since my last article on Forbes’ “Best Places for Business and Careers” in the USA and given that they have just released their 19th annual comprehensive analysis, I thought it was prime time to revisit the topic and see what has changed.

This year’s top spot has been taken by Portland, Oregon for the first time ever, climbing four spots from last year thanks to strong growth prospects and a large influx of highly-educated millennials.

When I last wrote in 2015, Portland hadn’t attracted any attention from the Islamic Finance world and sadly seems to remain unchartered territory. Maybe Portland’s new-found fame will give it the recognition it deserves. Luckily, aside from Portland, 90 North’s research suggests that the Islamic Finance world has been extremely busy buying and selling in Forbes’ other top cities (with populations in excess of 1 million) over the past year.

Raleigh, North Carolina took 2nd place and I am still delighted that 90 North made the decision to invest here in the Lenovo Global Server Headquarters back in 2015.

Other top cities for acquisitions included Charlotte, North Carolina (ranked 5th) which saw QInvest purchase land in South Boulevard to develop an upscale 200-unit multifamily apartment complex; whilst Brennan Investment and a client of Arch Street Capital acquired significant industrial real estate across both Charlotte and Dallas, Texas (ranked 8th) and not to forget 90 North’s own Lash Group Headquarters.  Denver, Colorado (ranked 4th) also remained a popular choice and became home to QInvest’s first acquisition for their US multifamily residential fund earlier this year.

Sadly, for Atlantic City it remains in last place, unchanged from when I wrote in 2015.  We still haven’t heard of any Islamic Investors venturing there, hardly surprising given its reputation as the “Gambling Capital of the East Coast”.

So, it continues to encourage me that Islamic investors are frequently looking beyond perhaps the obvious choices of say New York, San Francisco and Los Angeles to seek out dynamic cities that show the economic and population growth frequently not seen in the big gateway cities.  But what’s wrong with Portland, Oregon?! Looks like an opportunity to me.

Original article appeared in Islamic Finance News.

Press Release – 90 North concludes profitable sale of £50.55 Million Care Home Portfolio in UK, Midlands

90 North, acting as Property & Investment Advisor, has advised on the sale of a UK based residential care portfolio originally acquired in November 2013 by way of a sale & lease back from operator Prime Life Limited (“Prime Life”).

An established care operator, Prime Life is a family-owned business, with over 30 years’ experience operating over 1,800 beds across 60 homes in the UK. The properties provide specialist facilities and services for elderly care, high dependency dementia and for younger residents with learning disabilities, mental illnesses and physical disabilities.

The portfolio comprises 12 properties leased to Prime Life on institutional leases with an unexpired term of 31 years (expiring November 2048, without break clauses) and subject to annual upward-only reviews index-linked to the Retail Prices Index.

The sale was structured in two parts:

  • A part property sale to AEW UK Real Return Fund and AEW Long Lease REIT plc for £22M (completed 30/10/17); and
  • The sale of the issued share capital of the Prop. Co. to LXi REIT for £28.5M for the  balance of the portfolio (completed 03/11/17).

Edward Gibbon, Senior Asset Manager of 90 North who advised on the sale commented:

“The sale of these assets has capitalised on a point in the investment cycle when demand for long let income to strong performing tenants is high. We are delighted that the investment has exceeded expectations, generating a net IRR of approximately 13.5% and total return on equity of approximately 55% over the four year hold period”.

Nick Judd, Founder and Head of investment at 90 North, commented:

“The sale of this portfolio concludes our fourth profitable exit in 2017. Previously this year, we have exited warehouse properties in the UK, Norway and Germany. To date, we have advised on the sale of approx. £176M producing a weighted average net IRR of approximately 13.5% including quarterly income distributions over the respective hold periods. Combined with acquisitions in the UK, US and Europe, 90 North has had a very busy year with further acquisitions and exits in progress”

90 North acted in partnership with Kuwait based Dimah Capital who acted as Strategic Advisers to the Seller. Gerald Eve acted as sell-side advisor and TLT Solicitors acted as legal advisors to the Seller.

Viewpoint – The REIT time for funds?

The success of REITs in the Saudi market has been remarkable. Since the legislation was issued just 12 months ago, there have been six listings and I wonder if this is contributing to a greater appetite for Islamic funds generally.

The Saudi REITs to date have a combined market value of around SAR3.36 billion (US$894.95 million), representing a 10% rise in value since their individual listings, and are being actively traded, which is clearly what you need to avoid zombie listings that quickly fall out of favor with everyone concerned. Combined with a further 30 listings being prepared in the wings, this is a clear success story.

While this is great for its own sake, including a liberation of real estate investment for many more people than was previously possible, coincidentally or not it has come at a time when more people are talking about Islamic funds, whether listed or not.

It’s been a decade since funds fell out of favor with the credit crunch leading many investors to want more control over their real estate investments, preferring to select individual transactions for themselves or participating as part of a small club of investors. However, this can often make it hard to get diversification or for large institutional investors to deploy the volume of capital they wish.

Meanwhile, as the cost of financing starts to rise, there can be savings by offering a pool of assets as collateral rather than stand-alone properties, further contributing to the attractiveness of funds.

Investor confidence will always vary, but I’m seeing appetite both for sector and geographic-specific funds where the seed assets have been identified, as well as much larger globally diversified initiatives where far greater trust is being placed with the fund manager, thanks in part to their co-investment.

This is all very encouraging for the Islamic finance world, and while some investors will always prefer their own assets, the success of REITs and the apparent appetite for funds would be a welcome return to the availability of choice for those seeing the attractions of bricks and mortar.

Original article appeared in Islamic Finance News.