Real Estate

UK commercial property bargains lure Gulf buyers

October 11, 2023, 5:17 AM

Glasgow's Buchanan Street. Greenridge, a distressed commercial property fund with Gulf backers, is seeking bargains there and elsewhere

$190m Greenridge Opportunities Fund
Saudi, Kuwaiti and Qatari backers
UK market experiencing downturn

Gulf backers have contributed over 80 percent towards a British investment fund targeting distressed commercial property sales in the UK.

Greenridge Investment Management Ltd has just closed the first round of its $190 million Greenridge Opportunities fund and has surpassed its first capital raise target by 46 percent.

Strong participation from Saudi Arabia and Kuwait included investment from Saudi Arabian joint stock company Banque Saudi Fransi, said Bik Bhuptani, co-founder of Greenridge.

Funding also came from undisclosed “very large sovereign-based sources of capital”, as well as family offices, individuals and smaller banks.

“Middle Eastern investors like commercial property generally. The biggest difficulty I hear from investors is for them to get access to those assets,” said Bhuptani.

The increasingly uncertain UK economic climate has created fertile ground for investments in real estate.

High inflation and the rising cost of debt are forcing many property owners to divest.

The market is also witnessing several institutions facing redemption and liquidity issues and lenders exerting pressure on borrowers.

Around 70 percent of property surveyors believe the UK’s commercial real estate market is in a downturn, with 15 percent seeing it as being at the bottom.

Higher Bank of England interest rates have brought the toughest credit conditions since at least 2014, according to a survey from the Royal Institution of Chartered Surveyors (RICS).

Bhuptani, who has completed 27 fundraisings with Greenridge since 2015, agreed the UK market has reached its bottom, with bargains to be picked up for the foreseeable future.

“We think there will probably be another two or three quarters of the level of distress that we’ve seen recently and then maybe some uptick,” he said.

According to Capital Economics, average capital values declined by 12.6 percent during 2022.

Founded in 1994, Greenridge also invests its own capital into various projects.

Bhuptani said of the 2,500 opportunities they receive annually, around eight are taken up.

Bhuptani explained that the company invested in retail warehousing during the Covid pandemic. It was subsequently sold, making “really enormous returns” for investors, in the region of 40 percent and in one case 80 percent.

Greenridge has recently bought a super-prime site consisting of retail and offices in Glasgow’s Buchanan Street. Bhuptani said they paid £7.8 million ($9.5 million) for the deal.

“The last time it traded was at £18.2 million so we got it at a 58 percent discount,” he said.

They also bought a building in the Welsh city of Swansea. “We paid £18.5 million, but to rebuild the surveyors told us it was £58 million – we got a 78 percent discount to build cost,” Bhuptani added.

From the latest fundraising Greenridge is also looking to buy a leisure park in the Midlands and is busy concluding a small office deal in South East London.

“The human suffering story isn’t lost on me. A lot of people are losing their livelihoods and really suffering,” Bhuptani said.

“A lot of small businesses are suffering, but in these really awful times in the UK, US, Europe and elsewhere, we really make our money historically.”

Abu Dhabi Islamic Bank (ADIB), the biggest Shariah-compliant lender by assets in the UAE, added £100 million to its UK commercial real estate financing portfolio in the first six months of 2023.

Some of ADIB’s closed deals include structured financing for projects, such as a 343-unit co-living scheme in North Acton, West London, a 400-room hotel at Gatwick Airport, a 133,000 sq ft grade-A multi-let office campus in Guildford and a 153,000 sq ft national HQ office campus in Newport, Wales.