The First Investor (TFI), the investment banking division of Barwa Bank Group (BBG) and Investra Investments LLC (Investra) are pleased to announce the first two property acquisitions of the United Kingdom (UK) distribution, logistics and light-industrial income generating fund, which was launched in April 2013.

TFI has partnered with Investra for what is TFI and Barwa Bank Group’s first UK based investment initiative and the first major Shariaa compliant fund in the region of its kind that invests in income-generating property in the distribution, logistics and light-industrial sector of the UK targeting net quarterly dividends of 7-9% per annum and capital appreciation over three years.  Both TFI and Investra have seeded the fund with GBP 10 million (approximately QAR56 million) capital from their respective balance sheets.

Despite a slow economic recovery of the neighboring Euro zone countries, the UK industrial property market has been driven by increased online retail demand requiring a specialist network of parcel delivery centres close to urban markets and increased demand for supply chain efficiencies, for faster delivery of online orders.  The low supply and virtually no new construction in the last five years of light-industrial and warehousing property has buoyed rental rates and reduced tenant incentives.

The industrial property sector in the UK uniquely offers triple net leases where maintenance, repair and insurance are the responsibility of the tenants, with long lease terms with five yearly upward only rent escalations and typically leases backed by credit covenants from the tenants or their holding companies.

Investors in the EMEA are increasingly seeking to include distribution and warehousing property within their logistics portfolios and fundamental market conditions in this sector of the UK are allowing for enhancements to their overall return profiles.  US based institutions are increasingly seeing opportunity in this sector of the UK with large sovereign wealth funds acquiring large portfolios of suburban warehouses in the UK.

The Fund’s first property acquisition is a manufacturing warehouse located in Bilston, Wolverhampton, leased to one of the largest manufacturers of highway and road railing and barriers, for an unexpired lease term of at least 10 years and a gross yield of 9.1%. The second property acquisition is a distribution warehouse located near Glasgow in Scotland, leased to one of the largest parcel distribution companies in Europe, for an unexpired lease term of at least 11 years and a gross yield of 9.9%.

Khalid Al Subeai, Director of the TFI Investra UK Property Income Fund and Chief Executive Officer of TFI commented on the venture, “The UK distribution, logistics and light-industrial property sector has historically outperformed the office and retail sector in generating income yield over the past 30 years and we believe this is the right time to enter the market for three to five year investment horizon.  I am confident that through TFI’s investment expertise and Investra’s specialised knowledge of the UK real estate market, we will be able to capitalize on this unique opportunity”. 

TFI and Investra have put together an institutional grade investment program in collaboration with Pelham Associates, a long standing property management firm based in the UK, and internationally renowned lawyers, tax advisors and administrators to deliver best in class governance, investment management and risk management. TFI and Investra will be continuing their investment program in the UK distribution, logistics and light-industrial sector until Q1 2014.

Zaid Randeree, Director of the TFI Investra UK Property Income Fund and Managing Director of Investra, said, “The strategy of the Fund is to build a diversified portfolio of well located properties sized between GBP 2 to 10 million pounds, with remaining lease terms of 8 years and yields of at least 8%, with single tenancies and tenants with strong covenants.  We are pleased to have acquired the first two properties and are planning for two more acquisitions by August 2013.”

Martin Waller, Managing Director of Pelham Associates commented, “Over the past six months we have seen signs of strengthening in the market with lending conditions softening and institutional investors acquiring property in this space. Assets with unexpired lease terms of more than 10 years let to strong covenants are becoming highly desirable and we are seeing yields tightening in our pipeline of potential assets.”

TFI has been sponsoring, managing and advising on real estate investments and funds with a track record in the US, Brazil, UK and the wider GCC. While Investra and its affiliate Pelham have considerable expertise as principal investors with a minimum 20 year principle investment track record in the UK property market with over £1 billion property transactions in the UK alone.