The bank has built a $100m portfolio of UK Residential Assets, as the asset class sees interest from GCC clients, including family offices looking at the UK for real estate opportunities.

Rasmala Investment Bank is seeing strong interest among GCC clients looking at UK real estate and has now ammassed a $100m residential rental property portfolio.

Last May, the bank launched a five-year UK multifamily strategy aiming to create a portfolio of residential properties exceeding $2bn in investment value.

The strategy targets the UK multifamily market through a Shariah-compliant investment vehicle, with an initial focus on the serviced apartment and build-to-rent subsectors in and around London.

Adnan Adil (pictured), an investment director at the investment bank speaks to Citywire Middle East about how the fund has done and how he sees the real estate market developing in 2025.

Why should someone look to invest in the UK and why now?

The UK, in particular London residential, is well known as being one of the most stable and reliable performing corners of the real estate market globally. We have price data going back all the way to 1968 and it shows a steady price increase with very little volatility.

One may get fabulously rich by investing in bitcoin if they’re lucky for example, but to preserve wealth over generation(s), there is no better place than UK real estate. There is also a massive housing shortage in UK that continues to underpin the real estate market, and it will take many years and substantial amount of capital to correct.

More importantly, the recent weakness in market prices presents an extraordinary entry points into core London assets and commuter locations that may be seen perhaps once in a decade.

Your funds focuses on build-to-rent properties and serviced accommodation. Can you explain why this area is becoming so popular and can you share your experience in managing this type of properties?

There are two main demographic trends that are driving the popularity of build-to-rent (BtR) properties: firstly the generation now in their 20s and 30s (younger millennials and Gen Z) are less interested in home ownership and prefer to rent.

The second demographic trend is that these customers are demanding more flexibility and better services, simply seeking a better quality of life. Unlike Dubai, the rental market in the UK remains extremely fragmented with most apartments still owned by individual landlords, and typically do not offer much in the way of amenities.

What is the return profile of your fund?

The fund is targeting an average annual dividend of 4%-5% and a total return of 13%-15% a year upon exit.

What is the role of institutional capital in the UK residential market?

The entrance of institutional capital into the BtR market aims at improving amenities and customer experience to deliver the kind of product that the market needs.

In our building in Hemel Hempstead for example, we provide a two storey gym, a work from home area with meeting spaces, a party room with kitchen that people book for dinners, concierge services etc. It also offers flexible payment terms and this allows us to command a premium compared to the surrounding buildings and therefore deliver a higher income to our investors.

Within the UK living sector, what has worked well in the past but is no longer viable? Conversely, what are new opportunities, strategies or structures that may have been overlooked before?

One of the classic private equity models that has also been popular in real estate has been the OpCo/PropCo model. In this model, the real estate manager separates the operational business (OpCo) from the property owner (PropCo), retaining the former and raising money in the latter. The low-risk low-return PropCo was acceptable for many ‘fixed income’ investors when deposit rates were exceptionally low.

However, that return profile does not work so well for the majority of investors in the current environment. In comparison, we have built our Living Sector fund very differently, where the operational business is owned by the fund. It provides investors true operational exposure and a higher return profile. It also allows the fund to very closely curate the living experience for our guests. The tight integration between the OpCo and PropCo is something that we’re seeing more and more of among some competitors too.

How are Middle East investors approaching the asset class? Do you see interest from family offices?

We’re seeing a lot of interest in the strategy. Many GCC investors are intimately familiar with London streets; many of them spend their summers there or send their kids to universities, so they totally relate and easily understand our fund’s strategy. Many of them own direct properties too, but managing large portfolios brings with it a host of operational challenges, and tax and inheritance-related issues. We are also seeing a lot of interest from Muslim investors in the UK due to the lack of viable and attractive sharia compliant instruments in the Middle East.

How will real estate investment opportunities look different in 2025 than 2024?

The next 12-18 months will look very different. While the occupational trends have been very strong in residential and logistics sectors (beds and sheds), there has been a real lack of liquidity from institutional investors, as many still prefer sitting on the sidelines. The yield spreads are fairly wide at the moment, which makes me believe that the chances of tightening are extremely high in the coming upcycle.

Having said that, it’s important to invest in a disciplined manner and not follow the next hottest trend. Real estate investments tend to reward patient investors that build knowledge and experience in one corner of the market.