Why A Gulf Fund Chose Birmingham For A £140M Debut

If anyone had any doubts that British real estate in general, and Birmingham offices in particular, were regarded as a gold-plated investment class, then sale of the Lewis Building should blow that doubt away.

Gulf Islamic Investments acquired the 113K SF Lewis Building and neighbouring Priory Court at Bull Street, Birmingham, in what has been described as the largest UK office transaction outside London so far this year.

The blocks were offered at a quoting price of £136.3M, equivalent to a 5.75% yield. It is this yield, generous compared to London yields closer to 4%, that brings investors like GII to the Midlands.

The Birmingham market also offers liquidity. In May Knight Frank listed the major office assets on the market, providing investors with choice and a degree of flexibility most regional cities cannot match. Potential summer sales included:

• The Colmore Building (quoting £178M, 5.18% yield)
• Eleven Brindleyplace (under offer, quoting £40.3M, 6.5% yield)
• Bank House (under offer, quoting circa £20M)
• No.1 Colmore Square (quoting £100M, 5.38% yield)
• 10 Colmore Row / The Great Western Arcade (quoting £18.4M, 7% yield)
• 120 Edmund St. (quoting £51.7M, 5.75% yield)

Knight Frank reported prime office yields in Birmingham at 4.75% and anticipates this level will be maintained for the remainder of 2019.

Gulf Islamic Investments, whose task it is to advise on private investments by the Abu Dhabi royal family, acquired the multi-let office property from UK insurer Legal & General’s real assets investment arm.

LGIM Real Assets acquired the buildings in 2014 for its UK Property Income Fund II.

Since completing a refurbishment, Legal & General has let space to the Ministry of Justice, Spaces, Business Growth Fund and most recently Freightliner. The top rent achieved at the property was £32/SF and the aforementioned lettings delivered significant additional income to the property and fund.

GII was formed when the Union National Financial Consultancy merged with Allied Investment Partners, both of whom already advised on the private investments of the Abu Dhabi royal family.

The move massively inflates Gulf Islamic Investments’ as-yet modest UK holdings. The GII property portfolio in the UK is reported to be approximately £330M.

“Despite the challenging times and the uncertainty surrounding Brexit, GII is immensely delighted to expand its investment portfolio in the UK through another high-quality, long income yielding asset for its clients endorsing our strong belief in the UK real estate market,” GII Chief Excecutive Pankaj Gupta said, according to IPE Real Assets.

Earlier this year GII entered into a joint venture with a U.S.-based asset manager, FD Stonewater, as it pursues the strategy of expanding in the U.S., UK and Germany.

GII manages US$2.5B in assets, securing US$5.5B in debt and in excess of US$1B in equity and M&A financing.

Legal & General was advised by CBRE and GII was advised by Rasmala Investment Bank Ltd.