Saudi-based Islamic investment firm acquires West Michigan properties in joint venture COURTESY PHOTO

Saudi-based Islamic investment firm acquires West Michigan properties in joint venture

BY Wednesday, September 23, 2020 05:27pm

The owner of two industrial properties in West Michigan has launched a new joint venture with a boutique Saudi investment firm to take ownership of the commercial real estate. 

In the deal, Rosemont, Ill.-based Brennan Investment Group established a joint venture equity partnership with Saudi Arabia-based investment firm Arbah Capital to acquire 557,000 square feet of light industrial and flex space in Michigan, Minnesota, Illinois and Iowa.

The five industrial properties include 5460 Executive Parkway in Cascade Charter Township, which is occupied by Tesla Tool and Die, and 1865 Industrial Drive in Grand Haven, which is occupied by Lakeshore Fittings Inc. 

The portfolio includes a mix of tenants in the automotive, manufacturing and the telecommunications industries. 

Global real estate services firm JLL Capital Markets connected Brennan and Arbah, as well as helped the newly formed joint venture equity partnership secure $22.9 million in debt financing via a 5-year floating-rate loan with Wintrust Bank. 

Generally, Middle East syndicates look for high yielding returns linked to mission critical middle market industrial tenants, Claudio Sgobba, senior director of JLL’s London office and a lead on the Brennan-Arbah deal, told MiBiz via email.

“The Midwest, due to its location in the middle of (the) country, has always been a center of attraction for these (investors),” Sgobba told MiBiz via email, while declining to comment on the specifics of the Brennan-Arbah transaction. 

The Sharia-compliant nature of the joint venture, which prohibits charging interest and mixing with non-compliant funds, added extra complexity to the deal. 

Because of the ban on charging interest, the investor in effect becomes a business partner with the entity that is raising money, Sgobba said. The investor’s return comes from the revenues that the asset generates, not from interest.

Typically, Sharia-compliant funds tend to avoid investing in properties that involve alcohol or gambling, limiting what types of deals available to them, Sgobba said, noting that industrial properties tend to fit the profile for Islamic investors.  

“Sharia-compliant funds are providing an important source of cash for the US Industrial real estate market,” Sgobba said. 

JLL previously worked with Arbah Capital, and was tapped by Brennan Investment Group to arrange the joint venture. 

“Brennan Investment Group appreciates JLL’s efforts in introducing both equity and debt partners to this transaction and looks forward to growing a strong business relationship with Arbah Capital in the coming years,” Scott McKibben, CIO of Brennan Investment Group, said in a statement. 

An affiliate of the Illinois-based firm originally acquired the 178,000-square-foot Cascade Township facility for $9.5 million as part of a multi-state, 11-building deal, as MiBiz previously reported. Brennan Investment paid $4.85 million for the 38,600-square-foot Grand Haven facility in 2017, according to property records. 

Details about the recent transactions were not disclosed. 

“We were very impressed with the professionalism and pragmatism of our partners to get this deal over the line,” Arbah Capital CEO Mahmood Y. Al-Kooheji said in a statement, noting the international deal happened despite “a number of challenges” stemming from doing business during the pandemic. “Arbah looks forward to building on our relationships for more success in the future.”

Arbah Capital, which formed in 2008, has four main focuses in its operation: asset management, Middle Eastern real estate, international real estate and structured finance solutions. The company lists its international holdings as including a senior living center in Brandon, Fla., according to its website. 

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