Saudi and Kuwaiti money returns to London property despite Brexit

The glamor and history of London continue to appeal to international investors. This year saw Gulf-based investors renew their interest. (Reuters)
Updated 30 April 2019

Saudi and Kuwaiti money returns to London property despite Brexit

  • Preliminary data for the first quarter has seen two transactions worth almost $171 million put Saudi Arabia and Kuwait back on the London commercial property investment leader board
  • Taking into account the UK’s planned departure from the EU, Knight Frank expects the central London commercial property market to remain robust

LONDON: Property broker Knight Frank estimates there is as much as £40 billion targeting real estate assets in London this year despite a sharp retreat by Gulf-based investors in 2018.
Preliminary data for the first quarter has seen two transactions worth almost $171 million put Saudi Arabia and Kuwait back on the London commercial property investment leader board for 2019.
Taking into account the UK’s planned departure from the EU, which has dented confidence in some property sectors, Knight Frank expects the central London commercial property market to remain robust and supported by strong letting demand for prime property.
That was supported by a record letting this week when 37-year-old hedge fund boss Ravi Mehta agreed a £250-a-square foot rent for an office in Mayfair to be occupied by his firm, Steadview Capital Management.
“Despite the uncertainty thrown up by Brexit, there are bigger macro political considerations that are helping to cement London’s position as the number one global property investment destination,” said Faisal Durrani, an associate at Knight Frank.
“During 2018, the city beat other major global gateway locations including New York, Tokyo, Paris and Singapore, claiming the crown for the largest volume of commercial property investment globally, which amounted to £16.2 billion. This is on par with the level recorded in 2017, highlighting the depth of demand for London’s commercial assets.”
However Gulf investment fell sharply last year.
“For those from the Gulf, investment volumes, as always, remain volatile, with Bahrainis and Qataris committing $39.5 million and $471 million last year, which was up 125 percent and 34 percent, respectively, on 2017, according to RCA,” said Durrani.
While 2017 saw just over $2 billion spent by GCC investors on London commercial assets, this figure fell to just over $1 billion in 2018, with investment from the UAE down most notably by 88 percent to $132 million.


Oman’s bond market return a key test for reform path

Updated 21 October 2020

Oman’s bond market return a key test for reform path

  • After becoming ruler in January, Sultan Haitham made shaking up and modernising state finances a top priority

DUBAI: Oman’s return to the international bond market this week will be a test of its ability to convince investors that long-awaited fiscal reforms have started to put it on a sustainable financial footing.

Oman, rated below investment grade by all the major credit agencies, announced on Monday plans to issue bonds with maturities of three, seven and 12 years, in what would be its first global debt sale this year.

Sultan Haitham, who became Oman’s ruler in January, has made shaking up state finances one of his priorities.

But investors would like to see more concrete steps being taken and, after a further sovereign downgrade last week, may require the new bonds to offer a significant premium over the country’s existing debt.

“The new sultan has done some good things — rationalizing the number of ministries, the implementation of VAT, plans to generate additional tax revenues, and they still have sovereign assets,” said Raza Agha, head of emerging markets credit strategy at Legal & General Investment Management.

“There is positive momentum but it will take time for that credibility to build.”

According to a bond prospectus, Oman has begun talks with some Gulf countries for financial support.

“I don’t think this will actually be taken into consideration by investors unless there is a tangible announcement from Gulf countries with a tangible support package,” said Zeina Rizk, executive fixed income director at Arqaam Capital.

Oman will likely price the new three-year bonds in the high 4 percent area, the seven-year tranche in the high 6 percent and the 12-year in the mid-to-high 7 percent area, implying a premium of at least 50 basis points (bps) over its existing curve, she said.

Two other investors, who did not wish to be named, said the paper could carry a 25 bps premium over existing secondary trading levels.

Sources have previously told Reuters Oman would target over $3 billion with the new deal.

“If they take $3 to 3.5 billion, you will have a market indigestion for Oman, and I’m sure people will ask to be compensated for this risk,” Rizk said.