Neophytes to international real estate purchases might assume that, when it comes to the Middle East, tiny Bahrain’s investment volume pales in comparison to that of its larger neighbors. That, however, would be a grievous misconception.
Bahrain — the first country in the Persian Gulf region to develop a high-income, post-oil economy by diversifying into banking and tourism — has led the Middle East in capital invested into U.S. commercial real estate for two of the past three years, according to data from Real Capital Analytics (RCA). In 2021, there were 130 such transactions totaling $2.32 billion that involved Bahraini investors, good for fifth place among all foreign sources of capital into the U.S., per RCA. Only heavyweight cross-border funding sources Canada, Singapore, South Korea and the United Kingdom exceeded Bahraini inflows.
This large volume came one year after Bahrain was 10th among all countries in the same ranking, with only Israel (eighth) surpassing it among nations in Southwest Asia. And in 2019, Bahrain was No. 7 in the world, helping to fuel a revival of Middle Eastern investment in U.S. assets after several years of lackluster action.
Evidently, Bahraini investors were eager to redeploy funds stateside after their capital inflows into U.S. properties dropped by 65% annually in 2020. With the U.S. commercial market going from a recovery to a boom in 2021, Bahrain bounced back along with it to the tune of a 185% year-over-year increase in cross-border investment volume.
At the forefront of that was Investcorp, based in Bahrain’s capital and largest city of Manama. The investment company’s real estate wing, which was among the top 20 largest cross-border commercial real estate buyers and sellers in each of the past three years, made 33 purchases in 2021 for nearly $2 billion in volume, according to RCA.
“The record level of activity within our North American real estate business in 2021 has created many opportunities to help drive Investcorp’s growth and retain its position as a top cross-border real estate buyer and seller in the U.S.,” said Mohammed Alardhi, Investcorp’s executive chairman. “Long before the pandemic, we perceived residential and industrial real estate investments to be one of the most recession-proof sectors.”
Investcorp was well positioned to weather the pandemic’s doldrums while taking advantage of the shifts it spurred, having narrowed its focus to multifamily housing and industrial properties in 2014. The company estimates that roughly 95% of its $7.6 billion in U.S. real estate holdings (which comprise more than 425 industrial buildings and some 20,700 multifamily and student-housing units) fall into these two flourishing property sectors.
Slightly more than $1 billion of Investcorp’s total spending last year was on industrial properties as the company banked on the continued growth of e-commerce to strengthen its already robust portfolio. Its most recent acquisition was in October 2021, a $380 million selection of 89 industrial properties located in Los Angeles, Dallas, Phoenix and Seattle.
Investcorp appears poised to continue its assertive ways as this year rolls on. Michael O’Brien, co-head of Investcorp’s North American real estate team, declared this past January that the company remains bullish heading into 2022 and is looking forward to further growth, citing “strong macroeconomic tailwinds inspiring continued optimism.” Given the positivity of Bahrain’s most prolific investment company, it’s likely a safe bet that the nation’s needle as a capital source will continue to point upward. ●