ADIB provides AED 200 million to finance Tesco & Waitrose supermarket investments in the UK

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Paul Maisefield

Abu Dhabi Islamic Bank (ADIB), a leading financial institution, has provided structured Islamic financing for Middle East investors on two supermarket assets in the UK.

The first transaction, supported the acquisition of a Tesco Extra store and ancillary retail parade in Oldham, Greater Manchester by Kuwait Business Town Real Estate Co. The property is prominently located on Huddersfield Road (Oldham) and has a 13-year unexpired lease term to Tesco Store Ltd.

The second transaction comprises a purpose-built supermarket extending to over 34,000 sq/ft in Weston-super-Mare, Somerset owned by Capital Trust. The building is leased to Waitrose Ltd until May 2045.

Olga Aburdene, CEO of Capital Trust, said:

“We are pleased to receive the continuous support of ADIB that has allowed us to maximise the shareholder returns while pursuing our strategy for this asset”.

Paul Maisfield, pictured, Head of UK Real Estate at ADIB, said:

“Our clients have a strong appetite to acquire UK assets, particularly those benefitting from long dated income with proven operational resilience offering good income visibility underpinned by strong tenant covenants, providing attractive cash on cash yields.

Our expertise on the ground, ability to source, structure, provide competitive financing terms and efficiently execute transactions is proving an attractive proposition to our Middle East clients which is driving growth of the UK business and has established ADIB as a leading player in the UK Islamic commercial real estate financing sector”.

According to Savills, the UK supermarket sector saw investment volumes reach circa £1.5 billion (AED 7.65) in 2020.

The average prime achievable retail yield has moved out from 4.43% in 2019 to 4.75% at the end of 2020, while in contrast the average prime achievable yield for supermarkets moved in from 5.7% to 5.53% over the course of 2020.

Kuwait Business Town Real Estate Co was advised by Keystone Law & Jade Merchant Bank. Capital Trust was advised by Dentons. ADIB was advised by CMS Cameron McKenna Nabarro Olswang LLP.

ADIB has a strong track record in offering bespoke and competitive Sharia-compliant property financing solutions for its clients in the UK.

This year alone, it has closed over AED 750 million (£150m) in senior financing transactions including AED 260 million (£53m) financing for a major Saudi investor to acquire the PWC HQ in Belfast.