Middle Eastern UK property assets hit record high

For the first time exceeds the entire portfolio of Land Securities (£8.8 billion), the UK's largest property company, reveals research produced for Trowers & Hamlins, the international law firm.

According to data from DTZ, the international property consultancy, the value of UK commercial property held by Middle Eastern investors has almost trebled in 5 years (£3.34 billion in 2001) and now stands at £8.9 billion. The average lot size for Middle Eastern investors is £59 million, which is amongst the largest compared to other principal sources of capital targeting UK property.

Trowers & Hamlins, which advises many Gulf based funds, says that the UK property market is viewed as an attractive place for Gulf oil money, and Middle Eastern investors are now looking to diversify away from passive investment and are taking a more active role in actually financing property development in the UK.

Nick Edmondes, Partner, Trowers & Hamlins, comments: "Middle Eastern investors have come from being relatively small players in the UK property market five years ago to serious deal makers today. They are now moving away from being simply passive investors to taking on more risk as actual developers by investing in property companies."

"Middle Eastern investors are still building up their UK commercial property assets despite capital values already being high. They are confident that there is more capital growth to come and the prospects for rental growth in the City are good."

According to Trowers & Hamlins, in the last year Middle Eastern investors have become the principal backers of several of the largest developments in Central London.

Two major skyscrapers planned for the City - the 288 metre 'Helter Skelter' and the 242 metre Heron Tower - have recently secured backing from Middle East investors and are due to begin construction shortly. One Hyde Park, a £1.5bn residential scheme, at which an apartment was recently sold for £84 million, is being financed by the Foreign Minister of Qatar.

Nick Edmondes says: "There is a real shortage of big ticket property assets on the market in London at the moment, so Middle Eastern investors are seeking out different opportunities, such as refurbishments or speculative development. The potential returns can far exceed the returns from passive investment."

Trowers and Hamlins points out that continuing uncertainty of treatment in the US - the traditional haven for Middle Eastern oil money - and the adaptability of the UK's financial and legal system to Islamic financial structures, are two additional factors driving Middle Eastern investment in UK commercial property.

Nick Edmondes says: "The UK market is seen as a safe haven for Gulf oil money. Low political risk, high liquidity, and a legal system favourable to Islamically compliant investment structures are important considerations for Middle Eastern investors."

Trowers & Hamlins recently acted on the purchase and refinancing of the Grosvenor House Apartments on Park Lane, on behalf of a Middle Eastern investor, using what is believed to be the UK's largest ever Murabaha, a £100 m contract of sale compliant with Islamic law. The residential block is to be converted into a deluxe apart-hotel.