Author Archives: Charlotte Dennison

Press Release – Real Estate Investment Times – Ethical investment: Why it matters

Philip Churchill, co-founder of 90 North Real Estate Partners, and Theo Andrew discuss the advantages and complexities of Islamic finance, as well as the firm’s plans in Australia and how its year has gone so far.

What exactly is Islamic finance and how did 90 North come to specialise in it?

Succinctly put, Islamic finance is the process of selecting suitable real estate investments with tenants who comply with the shariah principles of Islam, and then structuring the legal documentation with respect to both finance and equity to also comply with these overarching values.

While the legal principles have been largely established for most global real estate markets now, applying them remains very much an art which can only come with experience. For an acquisition to be officially shariah-compliant, it must be signed-off by a shariah board. However,
the ultimate determinant are the investors and whether they are satisfied with the level of compliance.

My co-founder partner, Nick Judd, and I specialised in Islamic real estate investment for many years before establishing 90 North in 2011. We believed investors would have an appetite for a real estate investment manager, which was both a specialist in Islamic finance and completely
independent. Our judgement was vindicated and 90 North has grown from strength to strength over the last six years.

On a personal level, while not a Muslim myself, I have studied and applied the shariah principles over many years, beyond simply the technical matters of tenant compliance and not paying or receiving interest. I find the rules that are applied very similar to traditional good business ethics, which we at 90 North hold very highly.

Middle Eastern investment now stands at £1.93 billion, up 25 percent on last year. Are you noticing any patterns in investment from this region into London and the UK?

London continues to be a major draw for Middle Eastern investment. Its natural strengths as a global financial and cultural hub, combined with its first-class infrastructure, means the city is continuing to land some significant investments from the region. However, the capital is by no means the end of the story for the UK.

There is a tremendous amount of Middle East and North Africa region investment activity across the country. Indeed, the vast majority of 90 North’s investments have been conducted outside of London. Our investment partners in the Gulf and elsewhere in the Middle East are attracted by the higher yields available, alongside the fact they do not need to compromise on an asset’s covenant strength, age or lease length.

In addition, many have studied at university across the UK, and this helps build familiarity and recognition that there is a whole country of opportunities outside of London.

What effect will Brexit have on investor appetite?

For London, and more specifically the City of London, there is a little nervousness about the potentially negative impact on the financially driven economy there, but beyond that the issue is more one of currency than Brexit itself.

Almost none of our investors are on the fence about this issue. Half are nervous about the prospects, or, perhaps more accurately, the potential volatility, of sterling and are looking towards US dollar- or eurodenominated real estate. Meanwhile, the other half currently see sterling as great value and are very keen to get more exposure.

What did the start of the year look like for 90 North?

Highlights of the year so far have included two significant acquisitions in the US, the refinancing of two UK properties where our investment partners were keen to hold them for longer, and exiting one of our Norwegian properties, which realised a healthy profit.

The summer hasn’t slowed our activity. We have assets under exclusivity or contract to purchase in almost all our markets and one or two sales are being progressed as well.

90 North and its investment partners recently acquired the Mercy Health headquarters in Ohio for $84.5 million. In this volatile global climate, are there any assets that you see generating particularly strong yields, or are there more pressing concerns at play?

In the current volatile global climate, our investment partners are looking for safety and are willing to accept lower yields to achieve this. While Mercy Health is a great example of a new office building, with a long lease in a strong market, investors are also willing to consider a wide range of asset classes and locations.

Of course, this is as long as they are comfortable that their equity is safe, they will achieve a net cash yield materially above just leaving their money in the bank, and, ideally, there are opportunities to add value.

90 North recently opened an office in Australia. What attracted you to the market and are there any deals in the pipeline?

Our investors, predominantly in Asia but also the Middle East, had been asking for Australian real estate, so the partners and I thought we should take a look and form our own opinion.

I had a perception that the market was dominated by the local pension funds and that perhaps the economy was suffering from commodity prices coming down from their highs. The reality was very different, with an economy still going strong after 25 years without a technical recession and plenty of opportunities to invest.

After digging deeper, we also found a rich vein of Islamic finance knowledge among the lawyers, tax advisers and banks, which is what we need to make our product work at 90 North.

Our head of Australia, Michael Dowling, has made a terrific start and we are already working on our first investments, with a strong pipeline as well. I’m sure we will be announcing our first acquisitions soon and be building our Sydney office further.

 

 

Press Release – Property Week – 90 North sets up new Australia office

London headquartered 90 North has opened a new office in Sydney, Australia, Property Week can reveal.

The office is 90 North’s fourth globally and its first in Australia. It sits in the heart of Sydney’s commercial business district, on the famous Circular Quay waterfront overlooking the city’s most iconic attractions – Sydney Harbour Bridge and Sydney Opera House.

The office will be headed up by Michael Dowling, a real estate professional with over 30 years’ experience in funds management, finance, investment and development.

The firm has closed transactions worth a total of $214m (£168m) since January 2017, having sold Feilden House, a UK industrial site, to Siemens in January for £34.6m, as well as acquiring two assets in the US, one of which was the 338,647 sq ft Mercy Medical Centre in Ohio for £133.5m.

Philip Churchill, founder and managing partner at 90 North, said: “We’re delighted to announce the opening of our downtown Sydney office.

“It will provide on-the-ground insight and access to the opportunities in the Australian real estate market that our investors have long been asking for.

“With a strong and robust economy and fast-growing population, we’re excited about the investment opportunities that Australia will provide.”

Michael Dowling, partner and head of Australia, added:  “We are already working hard on a number of well-positioned opportunities in the Australian market for our investors and are looking forward to contributing towards making the second half of 2017 even more successful for 90 North than the first.”

Press Release – Property Week – JV acquires Mercy Health for $84.5m

London-based 90 North Group and strategic partners Sidra Capital have acquired the Mercy Health headquarters building in Cincinnati for $84.5m (£65.3m).

The acquisition brings 90 North’s total transactions completed this year to $1.66bn. Mercy Health’s 368,447 sq ft corporate headquarters at 1701 Mercy Health Place in Ohio, was acquired by the JV from original developers Verus Partners.

“This acquisition, like other recently completed transactions in our portfolio, embraces an investment philosophy of acquiring newly developed or remodelled Class A office properties that are 100 percent leased on a long-term basis to a strong, investment grade tenant,” said Nick Judd, co-founder of 90 North.

Viewpoint – Multi multifamily

Providing an explanation of the term multifamily for those not familiar with the US real estate market, as it was a phrase that flummoxed me when I first heard it, multifamily refers to the rental of apartments and houses to individuals within the same complex, for example, an apartment block with shared amenities.

Explanation behind us, multifamily in the US is the most developed private rented residential market globally, with many countries, including the UK, trying to replicate it. With CBRE reporting nearly US$150 billion-worth of transactions in the last 12 months alone, it is no wonder that Islamic investors have participated. The sector suits Islamic investors well with Shariah compliant activity, familiarity with many of the investment locations across the US and the ability to leverage as part of a Shariah compliant structure.

We are aware of multi multifamily investment opportunities being considered by Islamic investors at the moment. QInvest recently announced their acquisitions in Charlotte, North Carolina and Denver, Colorado, both markets that our own 90 North is familiar with from a commercial real estate perspective, with dynamic local economies and growing populations.

A purchase into the multifamily sector is largely a purchase into the US economy, that is, as an operational asset with fairly short occupational lease contracts, its success relies on a healthy US economy and growth in jobs, both of which are doing well at the moment.

Not wishing to put a dampener on a market which delivered 3.8% rental growth last year according to JLL, but investors (Islamic or otherwise) need to keep an eye on the volume of new developments being completed. One of the joys of investing in the US market is the availability of data, which reveals that for the previous three years the number of newly finished residential units was below or within 10,000 units of net absorption (new lettings less expired lettings), but for 2016 completions exceeded net absorption by more than 40,000 units, with the first quarter of 2017 looking to be following a similar pattern.

Stating the obvious, the US is a large place, so national numbers and averages are always dangerous. From my experience, investors from the Middle East are rightly demanding a high level of due diligence from their local investment managers, so I hope and trust that only the most compelling opportunities are being pursued.

However, what is for sure is that this isn’t the last we’ve heard of US multifamily.

Original article appeared in Islamic Finance News.

Viewpoint – Fashionable Students

Islamic investor interest in student accommodation would appear to peak every two to three years; while our own 90 North’s first acquisition was in the student sector in 2012 and we were far from alone that year, I last wrote about Islamic investor activity in mid-2014 and find myself again putting fingers to the keyboard on the subject. Students are back in fashion at the moment.

One of the announcements that led me to this conclusion was that of Bahrain based Tadhamon Capital launching a new student accommodation joint venture with Future Generation in the UK. A development play, with plans for Sheffield, Colchester and co-incidentally my home town of Guildford, this is yet more evidence, if more was needed, that Islamic investor interest remains across the UK and not just the central zones of London.

This is the latest phase of Tadhamon’s focus on social infrastructure, having previously invested in education, home care, social housing and indeed student accommodation in the past.

Focusing on what is driving such investor interest are the student demand side observations that while the overall number of full-time students has been growing relatively modestly to around 1.7 million currently, two important factors have changed.

Firstly, Cushman & Wakefield reports that the number of students from outside the UK and continental Europe has grown by 69% over the last 10 years, now representing an amazing one in five students in the UK. Such global students are more likely to desire and remain in quality student accommodation.

Meanwhile, with the previous capping of student numbers at each university removed for the 2015/16 academic year, the most oversubscribed universities are now implementing expansion plans, leading to both more students overall and a further propensity for domestic students to travel outside of their home region.

Meanwhile, as I’ve highlighted before, I firmly believe that it’s the international studies of Islamic investors and their advisors in the first place that provides familiarity with this real estate sector, with former students able to reflect on both good and bad experiences in their previous student accommodation. Certainly, there are many with a soft spot for their previous university town…Bristol for me!

I’m delighted that student accommodation is back in vogue again, but as ever, would encourage caution on the selection of individual opportunities.

With the exception of long leases to universities which are becoming increasingly scarce and expensive, these are operational assets where rental growth, while nationally strong at 3.5% per annum for privately held assets last year, is achieved or lost at an individual property level each year.

If you get it right, there is strong capital appreciation to be achieved, but more than many other sectors, wise selection is critical.

Original article appeared in Islamic Finance News.

 

Viewpoint – Islamic real estate down under

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Never underestimate Australia. At least that’s what I’ve learnt since researching it further.

Firstly, it’s a lot bigger than you think. If it could be placed over Europe, if would completely block out the sun, all the way from Ireland and Portugal in the west to Romania in the east. Equally, it’s not far off the same land mass as the United States.

Secondly, the economy is strong. Challenged only by Holland, at least amongst developed countries, it hasn’t had a technical recession (defined as two quarters of negative GDP growth), for 25 years. Impressive. With unemployment at less than 6% and inflation at just 1.5%, it’s all under control.

The economy is dominated by mining, agriculture and education, with the latter bringing Australia to the attention of many Malaysian students who become investors later in life. Whilst the Malaysians love Melbourne with many owning apartment investments there, the institutions have acquisitions whilst not quite across Australia, are certainly wider spread, including Sydney and Brisbane.

So, whilst the Malaysian interest in Australia is fairly well known, the Middle East interest has been somewhat under the radar. That is until Islamic Finance News reported recently that Dubai based KBW Investments had invested in five Australian residential developments as part of a Shari’ah compliant structure through its Crestmount Capital initiative.

Further digging has revealed additional monies flowing from the Middle East to Australian real estate, but for some reason this hasn’t been publicised.

Whilst no doubt a newer entrant to Islamic real estate, Australia has developed the know-how and pockets of deep understanding.

The fundamentals of Australia deserve to get more attention from Islamic investors, so I would encourage real estate investors to take a look. As they say in Oz, “Fair dinkum”.

Original article appeared in Islamic Finance News.

Podcast – Islamic Finance News – How have Shariah real estate investors reacted to the Brexit vote and election of Donald Trump?

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How have Shariah real estate investors reacted to the Brexit vote and election of Donald Trump? Philip Churchill, Founder and Managing Partner of 90 North Real Estate Partners LLP, shares his thoughts with Vineeta Tan at Islamic Finance News.

Press Release – 90 North supports JPA-BMCC Management Programme 2017

90 North is delighted to be working with the British Malaysian Chamber of Commerce in supporting the 22nd series of the JPA-BMCC Management Programme 2017. The programme (a bi-annual initiative) aims at providing Malaysian senior government officers with an opportunity to gain hands-on experience and exposure to the dynamism of modern-day business management systems through training and working with British organisations both in Malaysia and their parent companies in the United Kingdom. 90 North welcomes Marina Maaris, Deputy Chief Accountant from the Ministry of Natural Resources & Environment to our Kuala Lumpur office for six (6) weeks.

This programme is also supported by British Airways, The University of Nottingham (Malaysia Campus), Crops For The Future, Tesco Stores, Holiday Villa Hotels & Resorts, TMF Administrative Services, International SOS and PWB Services, all keen to cultivate a culture of closer working between the public sector in Malaysia and the private sector in the UK.

 

Viewpoint – Real estate: Malaysian harvesting of London profits

As the plans of Islamic investors for 2017 have been finalized and, in many cases, shared with the world, I’ve picked up on a noticeable trend of what could be interpreted as Malaysian investors choosing to exit the London real estate market.

First to share with the Malaysian press was the intention of the Federal Land Development Authority, better known as Felda, to sell its Park City Grand Plaza Hotel in London’s Kensington for an amount in excess of GBP90 million (US$112.53 million).

This was fairly quickly followed by an announcement from the Employees Provident Fund (EPF) that it intended to sell its St James Square property in the prime West End of London, as well as its Tower Bridge House office property in St Katherine Docks on the edge of the financial City of London. With a combined value reportedly of around GBP400 million (US$500.14 million), this is even more significant.

While material, both institutions are reporting that the moves are motivated by a desire to harvest a profit, not from any fundamental change of strategy or sudden dislike for what London has to offer. Felda bought its hotel in 2014 and if it achieves the targeted price, will realize a 50% profit, which would be impressive.

Meanwhile, EPF was among the first Malaysian institutions to come to London in 2010/2011. The sale of these two assets would be at yields materially below 5%, allowing a very healthy profit and the capital to be redeployed elsewhere, with EPF confirming that the capital would be retained for new overseas investments.

Supporting this theory that Malaysians aren’t running from the UK was Tabung Haji’s announcement recently of its allocation of RM2 billion (US$449.34 million), to new investments in the UK, as well as Australia. All very positive.

So, while the Malaysian institutions are looking to reinvest, the big question is what to purchase next? With the pound relatively weak at the moment, but the UK having the strongest GDP growth of any G7 country, this combination is proving to be attractive for many overseas investors, with London yields remaining very low.

Perhaps it’s time for a major acquisition outside London?

Original article appeared in Islamic Finance News.

Viewpoint – Driving Ahead

90 North has had a very busy start to 2017 following a frenetic Christmas and New Year holiday period. We have contracted $140Million of new acquisitions, are progressing new purchases and exits and we have kicked off the year with a major new hire for our London office.
 
In light of the recent election of US President Trump, imminent triggering of Article 50 (to commence the UK’s Brexit negotiations) and upcoming elections in Europe, 90 North is naturally very cautious. However we are delighted with the 27 acquisitions contracted to date and are totally focused on asset managing the current $1.5Billion real estate portfolio across the US, UK and Europe.
 
90 North has recently hired John Yeend, previously a Chartered Surveyor at LaSalle, as a Partner. With an extensive track record and proven transactional ability, particularly in the student housing, development joint ventures and broader real estate alternatives sector in UK, he will perfectly complement our team.
 
Notwithstanding our market caution, we continue to gather momentum as we appraise new opportunities with our international partners.