Saudi – UK GBP 100 million Fund first close

London, UK: Sidra Capital (Sidra), a CMA regulated Shariah compliant financial services company based in Saudi Arabia and Gatehouse Bank (Gatehouse), an FSA regulated UK-based Shariah compliant bank specialising in UK real estate, have announced the first closing of The Sterling United Kingdom Real Estate Fund (SURF) and their first property acquisition in Cambridge, UK at GBP23.55m.

SURF aims to complete purchases in the Shariah compliant commercial real estate in the UK. The Fund will acquire a diverse real estate portfolio which covers the office, retail, logistics, student accommodation and light industrial sectors, to reach its target equity size of GBP 100 million.

SURF has successfully deployed its fund capital with their first property acquisition in The Cooperative Group Distribution Centre (property) located in Huntingdon, near Cambridge, UK for GBP 23.55 million. The property will produce an average annual distribution yield of circa 8.40% over 5 years and has been fully let to Somerfield Property for a 35 year term from 1990. The 23,844 square meter property was secured at a discount to the original quoting price and will provide SURF investors with a significant surplus over the fund’s target annual distribution of 6.50%.

Hani Othman Baothman, Managing Director and CEO, Sidra emphasized the low-risk profile of the first asset acquired for the fund. “The Cooperative Group Distribution Centre was selected for acquisition due to its attractive lease profile and strong tenant. Having secured the asset below the original quoting price, the property compares favourably to the wider UK logistics market. We project to deliver an average annual distribution yield of 8.40% and an expected IRR in excess of 9.50% for our investors,” said Baothman.

“As one of the most mature, transparent, well regulated and liquid markets in the world, the UK is considered superior to other markets. By diversifying our risk across multiple asset classes, SURF’s mixed portfolio will provide an effective hedge against inflation,” added Baothman.

Richard Thomas, CEO, Gatehouse said, “The Sterling United Kingdom Real Estate is a shining example of Saudi Arabian – United Kingdom collaboration. With SURF Gatehouse and Sidra expect to deliver an outstanding opportunity for investors pursuing income producing real estate investment with sustainable returns in the UK. Taking advantage of our expertise in the UK real estate sector and their experience in alternative investment fund activities around this region, SURF’s first acquisition highlights our prudent investment methodology and the potential returns that are currently achievable.”

“The UK real estate sector provides a compelling investment opportunity, which has arisen following heavy falls in commercial property values due to the impact of the financial crisis. As yields return to the long-term historical average and rental growth establishes itself, SURF's real estate investments should generate solid returns for its investors,” added Thomas.

Gatehouse continues to excel at delivering Shariah compliant real estate investment solutions. This is reflected in its track record of performance, delivering over $500 million in real estate acquisitions in two years and new investor uptake in transactions by GCC high-net worth and institutional investors.

Established in 2009, as Aayan Capital the company recently changed its name to Sidra Capital and is licensed by the Capital Market Authority of Saudi Arabia (CMA) to carry out investment banking and asset management activities.