Dubai: After a long gap, GCC investors – both institutions and individuals – are starting to buy into real estate assets in the US helped by the still muted property values. The investor interest is also extending to the Caribbean.
Bahrain-based investment bank Investcorp has been steadily adding to its assets in the US, one of the more recent ones being for a mixed-use development in the northern San Francisco Bay Area for a substantial $65 million. It follows an earlier $200 million commitment on prime US property.
Meanwhile, in late July Gatehouse Bank, a Kuwaiti-owned Sharia-compliant institution, acquired 20 industrial properties in the US, which has a combined value at $155 million. This was done in partnership with Brennan Investment Group. “The Portfolio is a major achievement that has been secured in the US real estate market, as the availability of high quality investment opportunities remains scarce,” said Fahed Boodai, chairman of Gatehouse Bank.
So, what is with the gradual return of interest by GCC entities in US properties after preferring London or opportunities in the Far East for the better part of the last three years? The still depressed property values in the US are one reason, as could be the concerns over the situation in the euro-zone. This has helped propel investors to go for dollar-specific investments. (Incidentally, there have also been asset disposals, with Dubai Investment Group selling the Essex House in New York for $362.3 million last month.)
Paul Preston, director at the real estate consultancy IP Global, reckons that this interest in the US is still quite selective.
“Certain countries in North America offer value on a domestic level, but Middle East investors are either going into prime New York or prime London, which have historical track records showing continued growth with strong yields. But North America (as a whole) is not seen by most ‘savvy’ Middle East investors as their primary property asset investment market.”
This could be why the recent wave of property buys in the US has been led by GCC institutions rather than individuals. “Despite the difficult economic conditions, Investcorp continues to secure investments driven by its focus on strong fundamentals and concrete knowledge of the US real estate market,” Khalid Al Rumaihi, managing director at Investcorp and regional head for UAE, had said in a statement.
Outside of the US, individual GCC investors are taking a keen interest in the Caribbean. Saudi buyers recently picked up half of the first 50 upscale homes sold at the Baha Mar, an expansive mixed-use resort development in the Bahamas.
“The Bahamas is a safe, yet exotic, location for Middle Eastern buyers and owning a home carries a jet-set appeal,” said Rick English, senior vice-president for sales and marketing at Baha Mar. “Direct flights from London to the Bahamas and proximity to the US also make it easily accessible to Middle Eastern guests.”
While London still reigns as the favoured property hotspot for GCC buyers, they are now starting to look at other options in the Western Hemisphere.
