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Shari’ah Compliant Property Purchases Allow Gulf Investors to Buy into Britain
The Rolls-Royce Factory in Glasgow

Shari’ah Compliant Property Purchases Allow Gulf Investors to Buy into Britain

The Rolls-Royce Factory in Glasgow

Gatehouse Bank plc, the City of London-based wholesale investment bank, has acquired a 541,962 sq ft core manufacturing and logistics facility in Glasgow, Scotland which is let to Rolls Royce plc. The deal was worth £52.7m and was completed using a Shari’ah compliant structure.

The site was bought in a corporate purchase from a fund managed by Evans Randall, the privately held UK investment banking and private equity group. The sellers were advised by Davenport Lyons. Financing for the transaction was provided by Helaba, who were advised by Taylor Wessing.

The lease on the site provides 17 years of certain term income and fixed rental uplifts of 1.5% per annum. The net purchase price represents a net initial yield of 6.60% on standard purchaser’s costs.

Adam Cavanagh, Head of Acquisitions, Real Estate at Gatehouse Bank, explained the attraction of the site:

“Glasgow is a major business location and the largest industrial centre in Scotland. The fact that the industrial market has also shown resilience in 2010 makes this a solid investment opportunity with significant capital growth potential and secure current income returns. There is considerable and growing demand for long-leased properties with strong covenants, such as Rolls Royce plc. We believe this demand is set to continue, resulting in increases in capital values over the projected hold period to generate strong returns for our investors.”

The value of Gatehouse Bank’s real estate portfolio has reached in excess of £200 million in less than 18 months. The Scottish purchase marks the fifth major UK property acquisition during the last 18 months, all of which have been structured and financed in a Shari’ah compliant manner.

Tony Poole, Corporate Partner at Trowers & Hamlins LLP, commented:

“Trowers & Hamlins is delighted to have again acted for our established client Gatehouse in relation to another Shari’ah compliant UK real estate leveraged corporate acquisition.”

“Deals like this show continuing enthusiasm amongst Gulf investors for tenanted properties with strong covenants outside London and the South East if the deal is well structured and provides an attractive return. We look forward to working with Gatehouse on more transactions in the future.”

Trowers & Hamlins’ Islamic Finance team advised Gatehouse on its first major UK real estate transaction in December 2009, the £31.55m purchase of Procter & Gamble’s UK headquarters with Shari’ah compliant financing using a commodity murabaha structure.

Since then, Gatehouse has spent £29 million on two student accommodation properties in Liverpool and Loughborough in March 2010, £40.1 million on BT’s regional headquarters in Leeds in July 2010 and £32.65 million on the InterContinental Hotel Group’s global headquarters in Denham, Uxbridge in November 2010.

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