Author Archives: Clara Bailey

Viewpoint – Time for TARA

2022 can safely be described as a year of two halves with respect to Islamic real estate investment.

Scanning the IFN news database may be relatively unscientific, but it does support what we have seen on the ground that international real estate investment dropped substantially from the end of June, as investors paused to monitor the markets.

Triggered by Russia’s invasion of Ukraine, record-high inflation and rapidly increasing benchmark interest rates, purchasers stopped and prices started to adjust, led by the US, along with the EU and the UK.

Market expectations for projected benchmark interest rates shot up in reaction to this uncertainty, but have since been drifting down, with the three-year swap now ranging from 4% in the UK, through 3.8% in the US and 2.9% in the EU. Interestingly, while this anticipates further increases from the current 3.5% in the UK and 2.5% in the EU, at least as an average rate for the next three years the market is expecting a reduction from the US Fed’s current 4.25–4.5% range.

So, with the likely peak in interest rates starting to become more visible and importantly, at least at the time of writing, no significant worldwide political or financial market shocks for the last quarter of 2022, investors are starting to anticipate an inflection point.

Financial markets love an acronym, and so while TANA (‘There Are No Alternatives’) supports continued equity and Sukuk investing, it is time for TARA (‘There Are Real Alternatives’).

With inflation far from beat, and both real estate and infrastructure investments historically providing a good hedge for price rises, attention is building and opportunities will present themselves, with the start of a new year providing an opportune moment to get back on the horse.

While it may be best for those holding real estate to wait for prices to recover, with prices down say 10–20% across the board, purchase yields look rather more favorable compared with the heady days pre-summer.

We at 90 North continue to favor the residential sectors, with one of the Islamic investors’ favored asset classes of multifamily now offering better returns in the US, while student accommodation in the UK offers a premium return over the private rented sector and is locking in inflation-beating rental increases of 10–12% for the forthcoming 2023/24 academic year.

Meanwhile, European commercial leases typically have annual inflation-linked rental increases. As we have been saying for a while “Make inflation your friend”, and with unsold stock building up, we can safely conclude that ‘There Are Real Alternatives’.

Wishing everyone a successful 2023.

Written by Philip Churchill, first published in Islamic Finance news Volume 20, Issue 2 dated 11th January 2023. 

Viewpoint – Property and politics

The opportunity recently to present to a room of Kuwaiti investors on the outlook for UK real estate was a first for me, as I felt obliged to open with a slide or two on politics.

Reflecting on former chancellor of the Exchequer Kwasi Kwarteng’s so-called ‘mini budget’, which would, if it had been implemented, have been the largest tax giveaway in 50 years, I took as a positive that the debacle had been dealt with in less than a month. However, the interim impact was substantial and reminds us that overseas investors into the UK, Islamic or otherwise, are expecting stability, not a soap opera played out in the press.

As readers will be very familiar, the pound sterling looked dangerously close to reaching parity with the US dollar at one stage, but has at the time of writing, recovered to its pre-‘Kami-Kwasi’ budget level of US$1.15. Meanwhile, taking another benchmark, the FTSE 100, this is back to within touching distance of before the Liz [Truss] and Kwasi show.

The UK is forecast to do remarkably well this year, the Economist Intelligence Unit predicting 4.4% GDP growth, comfortably ahead of both the US at 1.5% and the EU at 3%. But all are battling largely the same inflation, with projected year-end inflation across the US, the UK and the EU all at around 8%.

With interest rates the tool of choice to tackle such rising prices, usually with the government not undermining such efforts, the increase in benchmark three year interest rate swaps is remarkable, with both the US and the UK up around 350bps, and the EU up 300bps.

Shariah compliant investors having been spoilt by low rates for so long, with the previous toughest decision being whether to fix for three or five years, this has all come as a bit of a shock, with plenty of my time being spent recently talking to investors about how best to react to this.

For despite the best efforts of the UK government to undermine confidence, the appetite of investors to invest into the UK remains largely undiminished. Familiarity and the solid property laws underpinned by the Land Registry help a great deal, and for some the lower level of the pound sterling provides an opportunity.

While many are switching from levered transactions to all cash, our advice remains unchanged for the last 12 months or so, being to seek investment strategies that capture inflation. To coin a phrase, inflation can be your friend, not just the foe that drives finance costs up.

Numerous studies over the years have identified that real estate provides an effective hedge for inflation, but some opportunities are better than others. The residential sector continues to get our attention in that regard, both the private rented sector and student accommodation, particularly when rising mortgage costs are likely to encourage or force would-be home purchasers to stay in the rental sector.

So, every cloud has a silver lining, every challenge provides an opportunity. But if the UK government can stay out of it, that would please me greatly. For politics, boring is best. Fingers crossed!

Written by Philip Churchill, first published in Islamic Finance news Volume 19, Issue 46 dated 16th November 2022. 

Viewpoint – Rising residential

Investment into the rented residential sector has long been one of the preferred real estate sectors for Islamic investors, with recent research from UBS providing a global perspective, an explanation for the sector’s robustness and some interesting projections for the future.

Firstly, rented residential volumes have grown significantly in recent years, most notably in the US where numerous Shariah investors have undertaken multifamily investments in the past, and Germany, with the volume in both countries now representing more than a third of all transactions.

These were already significant residential markets, with others down the pecking order showing accelerated growth in transaction volume, with Spain and the UK identified as having noticeably increased their share of activity in recent years.

Regrettably for those looking to get on the housing ladder, decreasing affordability of homebuying is a major factor, with the price to rent ratio (comparing the relative cost of buying to renting) having increased more than 50% in France, Germany and the UK over the last 20 years, with recent interest rate increases doing nothing to help.

Looking forward, driven largely by immigration, UBS is projecting 10%-plus increases in population for Australia, Canada and Switzerland by 2035, as well as 5%-plus decreases in average household sizes in France, Italy and Japan as these nations’ populations age.

But it is not all about country level demand, with the report highlighting migration within Germany itself, largely to the west and south, but also toward the larger cities in the east. This reminds me of 90 North’s own analysis in California, a significant population of around 40 million, with movement out of the dense central business districts toward the beaches and mountains as hybrid office working allowed greater location flexibility.

With supply having been limited by tighter financing terms post-global financial crisis, increasing scarcity and cost of building plots in dense urban areas and more recent elevated construction costs, the demand versus supply imbalance stage is set.

UBS’s analysis supports this, with rental growth exceeding inflation in the majority of the countries analysed, with outperformance in the US (>2% per annum above inflation), Netherlands (>1.5%) and Canada (>1%) — increasingly important with inflation where it is now.

From this, I see no reason for Islamic investors’ appreciation of residential to end.

Written by Philip Churchill, first published in Islamic Finance news Volume 19, Issue 41 dated 12th October 2022. 

Viewpoint – Euro vision

Currency is not always the first consideration when selecting real estate investment strategies, but when the euro reaches parity with the US dollar for the first time in 20 years, it warrants a closer look, particularly when the challenges of rising energy costs, wider inflation and increasing benchmark interest rates are impacting all western markets.

I do not pretend to be a currency expert, but I am told by those in the know that currency exchange rates are all about current and anticipated interest rates, with capital swirling round the world looking for the best returns. With a European base rate of just 0.5%, this sets the tone for low returns and so a weak euro, but it also provides an opportunity for real estate investors.

The benchmark euro three-year interest rate swap is currently just a smidge over 2%, compared with 3.4% for the US dollar and 3.7% for the pound sterling. For the levered Islamic investor, who may also be US dollar-denominated, this provides a double win. Bolt on the ability to lock in a 5% appreciation of the euro against the US dollar in three years’ time and it looks even better. But let’s not forget the real estate markets themselves, and aren’t we all headed for recession?

Focusing on the office market as the largest component of the investment market, recent research from Savills paints a positive picture. Office lettings continue a strong recovery and are projected to reach the five-year average this year. As you’d imagine, with hybrid working having become well established, demand for flexible office space has seen considerable growth, as well as a continued flight to quality. With environmental legislation and tenant expectations rising, many markets are seeing both strong rental growth and rising vacancy rates, as secondary stock fails to find a home.

We at 90 North have already seen the repricing of assets in Europe, which we believe will become more established over the next quarter. Adding in typically inflation-linked annual rent reviews on leases, and a long-leased property to a secure tenant able to weather some economic uncertainty, might look like a smart move come exit in three to five years’ time.

My customary search of the IFN database could not identify any recent European real estate activity among Islamic investors, but I have a hunch that that is about to change.

Written by Philip Churchill, first published in Islamic Finance news Volume 19, Issue 38 dated 21st September 2022. 

90 North supports RNLI 911 Challenge

We are delighted to be one of the sponsors for the RNLI (Royal National Lifeboat Institution) 911 Challenge 2022.

Their challenge is to drive anti-clockwise around the whole of Ireland both North & South, visiting all 75 RNLI Lifeboat Stations (past & present) and we’ve sponsored their visit to Enniskillen.

They will be travelling over 2,000 miles within 20 days!

We are delighted that we could support them in this great challenge for a wonderful cause.

Their website with further details is or if you’d like to follow their progress via Instagram, they are “rnli_911_challenge”.

Viewpoint – Onwards and upwards

It has been great to see the university graduation photos across LinkedIn and social media over the last few weeks. Joy for a job well done, and justified optimism for the future. Hoping not to detract from the endeavours of so many students, we feel the same here at 90 North, having recently closed our Academy Investment Fund of UK student accommodation, in association with Rasameel in Kuwait.

I can still just about remember my university finals, putting every last ounce of time and energy into achieving the best outcome. For while the press releases make it sound all too easy, those who have been involved with closing a fund will know the multitude of challenges, both anticipated and not, that hit you and for which overcoming them makes the success all the sweeter.

And for optimism for the future, I fall back on the demographic fundamentals and international dynamic of student accommodation in the UK. The number of young adults of university age is set to increase by 25% by 2030, compared with just 2% for EU countries. I would suggest that this alone should provide good reason to at least take a look at student accommodation as an investment strategy, but there is more.

The Universities and Colleges Admissions Service or UCAS, which operates the application process for universities in the UK, is projecting a 46% increase in applications from international students over the next five years. This is not some wildly optimistic judgment call, but a continuation of the trend. While China still dominates, its growth is starting to slow slightly, with India and other nations accelerating. And for the universities themselves, such international students paying full fees are a godsend to compensate for the domestic students for which they at best break even.

We are certainly not alone in favoring student accommodation as an investment strategy, with Tadhamon Capital having a very successful development program in the UK, and GFH, also from Bahrain, selecting the US and recently announcing a US$300 million portfolio acquisition with its local asset manager.

For while the world wrestles with inflation, interest rates, COVID-19 and conflicts, a multitude of students across the globe are dreaming of their graduation day and the future success they can build upon it. So, while the universities themselves take a well deserved summer break, we and many others will be pushing on with acquisition opportunities in this sector. Onwards and upwards.

Written by Philip Churchill, first published in Islamic Finance news Volume 19, Issue 29 dated 20th July 2022. 

Press Release – Academy Investment Fund Closed

90 North and Rasameel are delighted to announce the first closing of the Academy Investment Fund of student accommodation across the United Kingdom.

With a combined value of £90,000,000, the five assets are located in prime student cities servicing the best, highly ranked and well-known universities across England, Scotland and Wales comprising:

  • Exeter One, Exeter.
  • The Union, Royal Leamington Spa.
  • Goods Corner, Edinburgh.
  • Dover Street, Leicester.
  • City Heights, Cardiff.

Totalling 795 rooms of both ensuite and studio accommodation, the portfolio is currently 100% let for Academic Year (“AY”) 2021/2022, and thus far more than 90% let for the forthcoming AY 2022/2023.

Philip Churchill, Founder and Managing Partner at 90 North commented, “It’s very pleasing to see lettings performance of this portfolio going from strength to strength, which we believe shows the robustness of our proprietary top-down analysis for target cities, combined with the detailed bottom-up investigation to select the best opportunities.”

Mohammad Tareq Al-Thaqeb, Senior Vice President at Rasameel said, “The demographic fundamentals and international dynamics of UK student accommodation are extremely compelling, with a rapidly growing number of young adults in the UK and a projected near 50% increase in applications from international students over the next 5 years.”

With a strong pipeline of opportunities currently under consideration, we look forward to announcing further acquisitions in due course.

Ed Lowe completes Three Peaks Challenge

Congratulations to our Investment Analyst, Ed Lowe who over the weekend completed the Three Peaks Challenge.

Along with other volunteers, Ed climbed the UK’s three highest peaks – Ben Nevis, Scafell Pike and Snowdon in 23 hours 15 minutes.

The group have raised over £5,000 for Oxford & District Mencap, a charity which provides much needed support for people with learning disabilities and vital respite for their families and carers.

Well done to everyone who took part!

Press Release – Sval Energy sign new Stavanger lease

90 North is delighted to announce the completion of a new 10-year lease to Sval Energy AS, who have taken all 10,358 sq.m. of an office property on Stavanger’s coast, the capital of the oil and gas industry in Norway.

The lease coincided with Sval Energy’s $1.1 billion acquisition of the Norwegian business of Spirit Energy, the largest transaction in the North Sea since 2019.

Quentin Warner-Smith, Senior Asset Manager at 90 North commented, “We look forward to working with Sval Energy, who have shown a long-term commitment to the property, with further property improvements to be undertaken and all their employees consolidating into our property.”

Viewpoint – More from multifamily?

Investment into US multifamily properties has long been a favourite of Islamic investors, and for good reason it would seem, with Newmark reporting a 20% total return for this sector in the 12 months to the end of March, driven by valuation increases.

While it is tempting to suggest that such growth cannot continue and will start to reduce, and indeed should the US economy hit a rough patch then residential of all sorts will no doubt be impacted, there are signs that this may not occur.

With recent US interest rate increases, for the first time in recent years the average monthly mortgage payment is higher than the average monthly rental payment. For the would-be buyer considering whether to do so or continue renting, this will start to have an impact, as will the ever-increasing deposit needed as the price of homes to purchase continues its ascent.

The Economist recently conducted some fascinating research into what is driving local changes in house prices, providing more detail in its analysis than a perception that everyone in the US has moved to Florida and Texas.

The Economist’s findings were that population density was a major factor in determining price changes, with occupiers seeking less crowding and more space, particularly as hybrid working becomes the new norm. But this was largely seen in city dwellers favouring the suburbs rather than the rural existence beyond, with the relative ease of their commute into town two or three times a week being factored in.

And weather was also important, with avoiding a freezing winter being more important than maxing out on the summer temperature. In short, hybrid working is encouraging everyone to seek a better quality of life, but this is not necessarily a relocation south and east, with the Pacific coast states seeing strong price increases as well.

With US$63 billion of multifamily transactions between January and March this year, Newmark reported that this is the highest first quarter figure for more than 20 years, suggesting that investors are still feeling the love for the sector, even with interest rate increases. For while Qatar First Bank recently exited its Baltimore residential building, little doubt having performed very well over its five years of ownership, there are plenty more looking to enter or build their exposure to this sector.

My advice is to keep an open mind with respect to location; the US (to state the obvious) is a huge country, and my recent visit to Los Angeles confirmed that it is not a ghost town.

Written by Philip Churchill, first published in Islamic Finance news Volume 19, Issue 24 dated 15th June 2022.