Staying on Track


I had the genuine pleasure of recently attending the Abu Dhabi Formula 1 Grand Prix. As a complete car nut I guess I wasn’t surprised that I enjoyed it, but it was great to see Abu Dhabi at play, with a fantastic atmosphere throughout the whole event.

The event also gave me an opportunity to speak to a number of investors and their representatives, reflecting on the less positive mood of the region, unsettled by the geopolitical environment and stock market volatility.

Whilst the Formula 1 cars were pushing themselves to the limit, the mood of investors was to seek steadier real estate investments where Shari’ah compliant leverage is at a modest level and cash yield is secured on investment grade tenants.

Focus was on investing into properties outside of the GCC region and capital preservation, in contrast to some of the gung-ho investment strategies of the past. Definitely a case of staying on track.

As is traditional at this time of year, we think on what the next will bring. With such a risk averse approach and forecast for rising finance costs, whilst net cash yields to investors on new transactions may reduce slightly, it would seem that investors will be minded to accept this on the basis that such returns remain materially better than can be achieved in the bank.

Against this trend of conservatism is a realisation amongst investors that they may have to look further afield to achieve their desired objectives, and whilst they may not be quite as adventurous in their chosen countries as the full Formula 1 tour, as I’ve reported previously, they are certainly willing to look beyond the usual suspects of the US, UK and Germany.

Just as the world of Formula 1 is working on upgrades for 2016, so should the Islamic real estate industry to best serve our clients’ wants and needs. I am optimistic for 2016 and wish everyone a peaceful and enjoyable end to the year.