How have Middle Eastern investors reacted to the events that have unfolded in Europe and the US?
While the UK’s vote to exit the EU and a Trump presidency have brought significant uncertainty, investors in the Middle East have been pragmatic about both events, particularly in the context of global geo-political events. Despite the prospect of a protracted and unclear UK-EU renegotiation and the election in the US marred with the anti-Muslim sentiment of the president-elect, investors in the Middle East are still keen to acquire opportunities in Europe and America. Indeed, 90 North is currently involved in three transactions with investment partners from the Middle East and North Africa region.
A main concern is how international investors will react to the perceived threat to the UK’s judicial independence that has arisen post-Brexit. One reason the UK is a safe haven is because of its fully independent legal system, dating back a thousand years, which is considered safe and reliable. The court case following the Brexit vote that challenged the government’s right to trigger Article 50 brought a lot of criticism of the Court of Appeal judges. That is a worry because it suggests a growing tendency towards political interference in the judiciary and this, in turn, could damage the UK’s reputation as a safe haven and therefore its attractiveness as an investment destination.
How can you and the investors you work with remain positive in the face of such uncertainty?
Even in this climate, there remains a strong desire for real assets that produce an attractive yield while protecting capital. There are trillions of dollars parked in negative interest rate sovereign and corporate debt, not to mention the wealth sitting in bank accounts earning nothing (or even under the bed). By contrast, real estate assets—particularly those of a high quality and with long leases—can deliver attractive risk-adjusted returns. Such assets are also favoured by the kind of investors that we partner with, who prefer real assets that are sharia compliant.
Is investment in sharia-compliant real estate the focus of 90 North?
While not an Islamic institution itself, 90 North focuses on investors who prefer to structure their investments Islamically. Hence, we endeavour to invest ethically (no breweries or weapons factories) so that our investment partners know the properties we acquire are sharia-compliant in terms of their use and acquisition and financing structuring. Recently, for our 25th transaction, 90 North advised on the $107 million sale of General Electric’s proposed new global operations centre in Cincinnati, Ohio, a fantastic building that is also ethically responsible.
How difficult is it to cater for sharia-compliant real estate investment?
To ensure compliance, the two questions we always ask when considering an acquisition are what goes on in the building and who the tenants are. If there is even the slightest of doubts about the investment, we will not proceed.
Sharia-compliant banking is both an art and a science—many professionals in the real estate investment industry want to do it but don’t have the skill set or, crucially, the experience to structure transactions. At 90 North we have gained experience and pedigree in this area over time—deal by deal—and the combined value of the transaction experience of 90 North’s team runs into the billions. It’s this unique expertise that has allowed for nearly all the 25 transactions that we have completed since our founding to be structured Islamically, no small achievement.