Islamic bank launches second UK real estate fund

Gulf Finance House (GFH), the Bahrain-based Islamic investment bank, has announced the launch of a second Shariah-compliant fund to take advantage of the 'rare, cyclical buying opportunity' in the UK commercial property market.

The bank said the creation of the new fund, Gulf Atlantic Real Estate II (GARE II) follows a study of the UK market carried out by GFH's real estate fund management team. The research established the opportunities afforded by the significant falls in commercial property values in the UK during the last six months.

Prices of many good quality buildings have fallen by 25% from their peak and the bank said this presents ‘astute investors’ with the opportunity to lock into compelling income yields. 'Twelve months ago, indiscriminate, highly geared buyers had driven prices far beyond any measure of fair value. Today, with UK commercial property values having fallen so dramatically, we have the opportunity to buy income producing properties at prices well below their recent peaks,' GARE II fund manger Nick Judd said.

'UK commercial property is the market of choice for many international investors who regard it as relatively low risk, transparent and liquid compared to many other markets,' Judd said.

The target size of the fund was not given, but the bank said in a statement that a number of properties have been identified to seed the fund's portfolio. The criteria for the fund is existing properties and the bank said speculative development would not be considered.

UK chartered surveyor Knight Frank is strategic adviser to the fund. 'Knight Frank was involved in more UK property transactions last year than anyone else and we are confident that their participation will add a great deal of value for our investors,' said Alan Durrant, head of asset management at GFH.

In keeping with GFH's Islamic philosophy, the fund is structured in accordance with Islamic banking principles and will only invest in properties which are approved by the fund’s Shariah Committee. The Shariah committee includes Sheikh Nidham Yaquby of Bahrain and Shaikh Haythim Tamim from the UK.

GFH's first UK property fund, Gulf Atlantic Real Estate (GARE), was successfully terminated in 2005.