The tiny island country of Bahrain, nestled in the Persian Gulf, continues to be the little investment engine that could when it comes to cross-border capital into U.S. commercial real estate. Prominent and wealthy Middle Eastern countries such as Saudi Arabia and Israel have traditionally been major players when it comes to U.S. assets. But Bahrain — which covers less area than New York City and has fewer people than San Antonio — has not only kept pace but has flexed its own muscles.
As of June 2022, Bahrain was the top Middle Eastern country for capital placed in U.S. properties over the prior four quarters. According to data from MSCI Real Assets, funding sources with ties to Bahrain pumped $2.84 billion into 228 American assets, increasing their dollar volume by 176% year over year. That was a large enough amount to eclipse Israel (which spent $1.9 billion on 131 property purchases) and the United Arab Emirates ($1.13 billion into 16 properties) during this time, not to mention Saudi Arabia, which entirely dropped off MSCI’s list of the top 25 overseas investment sources.
In fact, per MSCI, only four other countries surpassed Bahrain’s investment total during the year ending in second-quarter 2022: cross-border juggernaut Canada, followed by Singapore, South Korea and Germany. This isn’t a surprise to observers of cross-border commercial real estate investments as Bahrain has been a recent powerhouse in its own right. It ranked among the top 10 foreign funding sources in each of the years from 2018 through 2020, according to MSCI, and rose all the way to No. 4 in 2021.
The most active Bahraini company in American real estate remains Investcorp, a private equity firm based in the nation’s capital and largest city of Manama. Fresh off its participation in nearly $4 billion in deals (both purchases and dispositions) in full-year 2021, Investcorp appears to be committed to being an enthusiastic participant in the U.S. commercial real estate market. In the year ending in Q2 2022, the company’s real estate investment wing was involved in 29 U.S. property purchases with an aggregate value of more than $2 billion, good for No. 6 among all foreign-based firms tracked by MSCI. Investcorp also was busy in the sales market, divesting 74 U.S. properties for a total of roughly $1.5 billion.
Last year started with a bang for Investcorp. In February, it announced its acquisition of 64 industrial properties in Chicago, New York City, Dallas, Atlanta, Houston, Philadelphia and St. Louis. The portfolio, which encompassed 5.6 million square feet and was valued at $640 million, brought Investcorp’s overall U.S. industrial holdings to roughly $3.5 billion, spread across 425 properties and some 32 million square feet.
At the time, Investcorp executive Herb Myers highlighted the “need for available warehouses and fulfillment centers to match the exceedingly high demand,” adding that Investcorp is “eager to expand our portfolio and capitalize on the current drivers of industrial growth.” Another figurehead, Michael Moriarty, said that the company’s acquisitions “reflect our expectation that outsized rent growth will continue and that the industrial fundamentals in each market will remain strong.”
Considering the new calculus involved in commercial real estate of late, it’s difficult to use past statements and activities to project what the future holds. For what it’s worth, however, Bahraini investors have recently shown a penchant for weathering adverse economic conditions, so counting out the little Middle Eastern powerhouse in the coming year is likely a mistake. ●
