A British investment bank has linked with National Bank of Abu Dhabi (NBAD) to secure Gulf capital for European property projects. NBAD has joined forces with Evans Randall, the investment bank and private equity group, to provide mezzanine investments, a type of loan that charges interest rates typically more than double those of conventional products.
Shiraz Habib, the head of NBAD's investment banking product development, said the bank would provide capital for the mezzanine funding, and seek funds from Gulf investment banks and institutional investors. "We have the capital, we have the structuring capability and the regional knowledge," Mr Habib said. NBAD and the London-based Evans Randall have set a capital target of US$500 million (Dh1.83 billion) and will seek a return on loans of between 15 per cent and 20 per cent. The target clients are property developments in Germany and the UK.
Mezzanine investment is gaining importance as a financing tool during the credit crisis to make up for lenders' unwillingness to provide full credit to developers. Prior to the credit crunch, developers had little difficulty sourcing 100 per cent financing for a project, while today banks are rarely willing to finance more than 60 per cent, or sometimes as little as 50 per cent, of the costs. In return, developers seek shareholders for about 15 to 20 per cent of projects, and finance the rest from mezzanine funds.
"When banks' appetite for lending declines, [mezzanine financing] could be an opportunity where transactions could happen because there are more parties involved and returns are higher," Mr Habib said. "There is an absolute demand in the market today for products such as this to keep the business environment sustainable." Also today, Abu Dhabi Commercial Bank (ADCB) and Macquarie Group launched a fund called ADCB Macquarie Infrastructure Fund to raise $1bn to invest in infrastructure development in the GCC and MENA region. ADCB said it already had an initial investment of $500m from Al Hail Holding, a UAE investment and development company, and another $130m in commitment. The fund would primarily invest in roads, water, utilities, ports and airports development. mjalili@thenational.ae
