Kuwait’s GIH to focus on Bahrain’s property boom

GIH restructures its holding firm into new entity, the First Bahrain Real Estate Development Company

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By  Eudore Chand Published  April 9, 2005

Kuwait-based Global Investment House (GIH) has restructured its newly set up holding firm as a new entity, with the focus on developing real estate in Bahrain. Buraq Al Khaleej Holding Company was incorporated in October 2004 with a paid-up capital of US $3.42 million (KD1 million). This has now been restructured, and its name changed to First Bahrain Real Estate Development Company. Its capital has been raised to $68.5 million (KD20 million). “First Bahrain will operate in the real estate market in Bahrain and will comply to the Islamic Shariah principles,” according to Omar El Quqa, GIH executive vice-president for corporate finance and treasury. He said GIH has secured a 33 911 m2 plot in Al Seef district (opposite to City Centre Mall which is under construction) and it will be sub-parceled into smaller plots. Al Seef district is considered a relatively new and thriving area and has become a favourite shopping and leisure destination for many. Its proximity to the workplace is attracting many employees of financial institutions to live in the area. “First Bahrain will utilise 8000 m2 of total available land to develop a complex comprising 380 flats of varying sizes in two towers. The two high-rise towers will include multi-story parking lots for 268 cars, a health club in each tower, children’s playground, water fountains, and gardens. In addition, it is estimated that around 17 400 m2 of land will be sold after parceling at an average price of $205.58 (BD77.5), resulting in a profit of 44%,” said El Quqa. The towers will cost $78.7 million (KD23 million) to build, and construction is expected to be finished within 27 months. The project will be managed by The Action Real Estate Company, which specialises in real estate development and management. Based on an initial capital outflow of $68.5 million (KD20 million), ten-year dividends stream and price-to-book value multiple of 2.0x, the IRR for First Bahrain is expected to be around 17%. The financials are based on the assumption that the company will pursue only this one project. However, First Bahrain may well pursue additional projects in Bahrain, which could further improve the returns to its shareholders. First Bahrain will list on the Kuwait and Bahrain Stock Exchanges after three years. However, for investors who wish to exit before, GIH will form a Special Purpose Vehicle for them. GIH has successfully closed the private placement of 190 million shares for First Bahrain, raising its capital to KD20 million. The introduction of First Bahrain comes at a time when the real estate sector in Bahrain faces a new boom.

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