Seera Investment Bank, a Bahrain-based Islamic investment bank, has successfully exited a Sharia-compliant financing transaction to develop a student accommodation property in London, UK.

The financing generated a total return on investment of around 50 per cent over a holding period of two-and-a-half years and an internal rate of return (IRR) close to 20 per cent, said a report in the Gulf Daily News (GDN), our sister publication.

The transaction closed in 2012 and comprised a Sharia-compliant structured financing facility for a new purpose built student housing project and commercial property in central London.

The property consists of 346 student rooms and 37,000 sq ft of commercial space and has been fully let on a long-term basis to a prominent higher education institution.

The prevailing favourable property valuations helped in completing the exit.

Seera chairman Hamad Al Ameeri said the investment was underpinned by a strong belief in the fundamentals of the UK student housing sector given the persistent demand supply gap for purpose built student housing in the UK, the property's prime location, attractive investor returns, relatively short investment tenure and the deal's favourable risk profile.

"We believe that completion of this exit further establishes Seera's track record and credibility in the bank's sound investment strategy and we are very positive on the growth and success of Seera with other similar investments," Al Ameeri said.

Seera's chief executive Abdulla Janahi said the bank was "especially pleased with this exit as the transaction exceeded our initial expectations and generated an IRR of close to 20 per cent against our original conservative projections of around 15 per cent.

"Investors also received steady yields of 8.5 per cent per annum which was paid quarterly throughout the investment holding period," he said.

When structuring the transaction, Janahi said the focus was on mitigating risks relating to income payments and investor capital.

"The construction was on schedule and to very high specifications and the property achieved near full occupancy from the first year.

"Moreover, a long-term lease was achieved with a major international business school adding to the investment appeal of the property," Janahi added.

On Seera's value addition, he said during the investment holding period, the property value grew by nearly 40pc as a result of several measures including increasing the number of rooms and achieving a long term lease with a reputable institution.

"These measures along with the timing of the exit and the favourable market conditions have helped achieve these exit returns," he said.

"Seera's strategy is to invest in deals with strong fundamentals and in industries which are not highly cyclical.

"We place high importance on risk governance and focus on investments which meet our risk return tradeoff and are within our risk threshold in the foreseeable economic environment," Janahi added.

Seera has investments in the industrial manufacturing and transportation sectors in addition to smaller investments in the utilities and affordable housing sectors.

The bank's investment strategy is to maintain a diversified investment portfolio geographically and industry wise, focusing mainly on defensive sectors underpinned by strong fundamental demand. - TradeArabia News Service