Bahrain’s Investcorp spends $300m on US residential properties

Bahrain-based alternative investment firm Investcorp has acquired real estate in US gateway cities as appetite grows for non-European assets with a recovering US economy.

The company has splurged US$300 million on four residential properties in Washington DC, Orlando, San Diego and Baltimore. That is around a third of what the company spent on US properties last year.

While Middle Eastern investors still prefer Europe for real estate investment, the share of the United States is on the rise.

This year, Middle Eastern investors are expected to invest between US$10 billion and US$12 billion in overseas commercial real estate. Of that, the US market is expected to attract between 25 and 30 per cent as the US dollar appreciates against the euro and most currencies globally, according to Fadi Moussalli, the regional director at JLL International Capital Group based in Dubai.

Last year, the US share of Middle Eastern investment in the same asset class was around 15 to 20 per cent. One euro today fetches 1.06 US dollar, down from 1.39 US dollars a year ago.

“The [Middle Eastern investors] are looking to rebalance their portfolio towards America away from Europe as the US is recovering and the investors want to pick up a chunk of that recovery,” Mr Moussalli said. “While the investors from dollar-pegged economies are better placed to acquire assets in the US, those from Germany, Australia and China are also chasing these.”

While the sovereign wealth funds of the Arabian Gulf countries are the majority of the investors, interest among the private investors and ultra high net worth individuals is also quite high, he said.

Over the next 10 years, Middle Eastern investors are expected to spend $180 billion in real estate abroad. Of that amount, around 80 per cent will go to Europe, according to CBRE in a report last year. Close to $85 billion will flow into the UK, with $60 billion directed at continental Europe such as France, Germany, Italy and Spain.

Investcorp, however, bucks the trend by focusing solely on the US property market.

“Investors continue to have a strong appetite for investment opportunities in US real estate as a way to gain exposure to the solid growth of the US economy,” according to its 2014-2015 half year financial statement last month.

Its four recent US properties have a total of 2.1 million square feet featuring about 1,900 multifamily and student housing units, with an average occupancy rate of 96 per cent.

It focuses on commercial, office and residential real estate assets in the US.

The private equity company has also invested in well-known US brands such as Tiffany & Co, Gucci, Saks Fifth Ave and Circle K convenience stores.

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Sananda Sahoo

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