Middle East's top private equity firm targets $4bn in property acquisitions in US and Europe

Bahrain-listed private equity and alternative asset manager Investcorp is looking to invest $4 billion on property acquisitions in the US and Europe over the next two years, according to a top executive of the firm.

"We are on a growth trajectory and we see ourselves growing significantly from a portfolio perspective in the next two years," Jon Dracos, head of real estate investment at Investcorp told The National in an interview. "We are targeting a number of properties in the US and Europe especially in the residential and industrial warehouse sectors as occupancy continues to be good."

The company plans to fund its acquisitions through a mix of debt and equity, according to Mr Dracos. Since its inception in 1996, Investcorp’s global real estate investments have totalled about $18bn in over 800 properties across the US, Europe and India.

Investcorp has been actively investing in the US and Europe in buying residential property as well as industrial warehouses with total investments of about $6bn. Its invested about $5bn in the US market and $1bn in Europe.

It recently acquired 32 industrial properties in the US for more than $280 million. That investment expanded the company's industrial real estate portfolio to about $2bn, in tandem with rising demand for warehouses. The growth in demand comes in the wake of an uptick in e-commerce activity and companies increasingly digitising their businesses as a result of the coronavirus pandemic.

“The global trends and national trends around e-commerce, online supply chain dynamics is driving a lot of demand in the warehouse space,” he said, adding the company will be looking to invest in 20 to 30 major metropolitan areas in the US in buying warehouses as well as residential property.

“The sectors that we are investing in, which is residential and warehouse, collections in those sectors continued to be very good. Occupancy in those sectors continues to be in mid-upper 90’s.”

Investcorp is also aiming to grow its presence in Europe. In March, it entered the Belgian market through a $98m acquisition of The Bridge, a single-let office and research and development asset located in Brussels. It also bought office property in Germany and the Netherlands.

“In the UK, we focused on warehouse properties related to e-commerce dynamics…active in buying warehouses over the last three years and will continue to do so.”

The UK industrial and logistics sector performed well in the first half of 2020, despite disruptions to the UK economy caused by Covid-19. The company attributes this largely to rising demand for large warehouses. E-commerce companies and third-party logistics firms accounted for approximately 57 per cent of the floor space taken in the first half of 2020, according to Investcorp.

However, investment volumes for industrial and logistics assets in the UK have declined by approximately 21 per cent year-on-year during the period to around £2.2bn, mainly due to a muted second quarter as the investment market paused due to Covid-19.

On Brexit and how is it is impacting investment decisions in the UK, Mr Dracos said, the company is focusing on domestic-oriented tenants in the industrial warehouse space.

“That proved to be a good strategy given the (Brexit) uncertainty over the last four years and we are going to continue to invest in that space.”

The company, which counts Mubadala Investment Company as its biggest shareholder, is eyeing new opportunities in India, where it already has $200m worth of investments.

“We see a good opportunity in that market and our growth focus is really around residential, which is statistically pretty dynamic in India right now," Mr Dracos said. "In addition to that, we are looking at some strategic sectors around education, which India continues to develop and it will be a really interesting space.”