Gatehouse eyes local funds

KUALA LUMPUR: London-based Gatehouse Bank Plc is looking to raise £50 million (RM246 million) to invest in high-end residential property in Central London, and is hoping to attract Malaysian funds.

It is currently in talks with institutional investors from Malaysia, including the Employees Provident Fund and Permodalan Nasional Bhd, about investing in the real estate investment fund, its vice-president, real estate, Adam Cavanagh told The Edge Financial Daily.

He added that the wholesale syariah-compliant bank is also looking at investors from the Middle East to the fund that invests in residential property in Central London.

“Generally, the UK housing market has gone up 40% (in value) since the economic crisis, while the Central London is up 20%. So we expect more upside for properties in Central London. Furthermore, no new buildings were built in London during the recent financial crisis so there is a pent-up demand for good quality space. It is a very good opportunity to buy property in London as it will see strong growth in two to three years,” said Cavanagh.

Gatehouse hopes to increase its assets under management to £300 million by this year-end, from £160 million currently.

“We should close another deal this month, bringing our assets under management to £200 million. Potentially, the fund will reach £300 million by end of this year,” Cavanagh noted.

All the properties under its real estate portfolio of £160 million are located in the UK but not yet in Central London. The real estate division of the bank was set up in December 2009. Among its assets under management are Procter & Gamble’s UK headquarters in southeast England; Watkin Jones Student accommodation in Liverpool and Loughborough; British Telecom’s regional headquarters in Leeds; and InterContinental Hotels Group’s global headquarters in London. The bank is currently completing due diligence to acquire Rolls-Royce’s manufacturing and logistics facility in Scotland for £51.7 million, representing a 6.6% net initial yield.

“We are not in Central London yet because prices there are quite aggressive, so we find good value properties outside London first. They are mostly commercial with strong tenants.

“We are there to help and advise investors on the best opportunities. We are also working with (real estate consultancy) Knight Frank in looking out for opportunities,” said Cavanagh.

Beyond London, the bank is planning to acquire properties in Paris this year as its investors are keen to invest there. It is also venturing into the US property market these two years and ultimately the Asian market.

“We are looking for good quality buildings and we are going to replicate this concept in other countries. We may also buy some buildings where we can reposition and refurnish, but now we are keeping the risk as low as possible because the market now is still unstable and the economy is still fragile, while at the same time we must meet the requirements of being syariah-compliant,” Cavanagh added.

Gatehouse Bank received approval from the Financial Services Authority in April 2008 to act as a wholesale deposit-taking banking entity operating within the UK regulatory environment, with businesses in capital markets, syariah advisory, real estate and treasury. Its parent company is Global Securities House in Kuwait.

“We offer Islamic financial solutions to both Islamic and non-Islamic investors, and give them access to the UK and US,” he added.

He noted that there is an increasing demand from Asia for investments in the UK market and with £52 billion worth of equity from Asia, the region is poised to overtake Middle East as UK’s main investors.

Gatehouse bank plans by year-end to set up its maiden Asia office in Kuala Lumpur to serve Asian investors who are keen to invest in the UK. It will provide full services to investors, find and structure suitable products for them in compliance with Islamic finance. It is also looking at strategic partnerships with Malaysian banks.

This article appeared on the Property page, The Edge Financial Daily, March 25, 2011.