SMART MOVERS

Kuwait 2016 | FINANCE | INTERVIEW

TBY talks to Fahed Faisal Boodai, Co-founder and Executive Chairman of Gatehouse Financial Group, on Kuwaiti investment and differences between regulatory regimes.

 Fahed Faisal Boodai
BIOGRAPHY
Fahed Faisal Boodai is the Co-founder and Executive Chairman of Gatehouse Financial Group, the holding company of Gatehouse Bank, an investment bank based in the City of London, and Gatehouse Capital, an investment advisory firm based in Kuwait City. He is also the Vice Chairman and Chief Executive Officer of The Securities House, a Kuwaiti public shareholding company with a history spanning over three decades in trade and investment. He has presided over diverse real estate acquisitions and exits totaling more than $3 billion. He holds an MBA in Finance from Loyola Marymount University in Los Angeles, and a BSc in International Business from the University of San Diego. He also occupies a number of external board and director positions.

How would you describe your investment philosophy at Gatehouse?

We call ourselves a merchant bank, meaning that we are partners with our clients. Our investment philosophy is focused on the needs of clients in this region. Historically, they have invested with big, well-known investment banks, but these firms have been going through strategic changes. Additionally, the regulatory environment has evolved which has impacted the industry. We realized many Gulf-based firms were employing an ineffective model, namely that having someone in an office who has never known a market, structuring a product, and having relationship managers selling that product without understanding it was not working. I wanted to have people on the ground defining what we and our clients want and need.

What are some of the recent successes you have had at Gatehouse?

Coming out of the financial crisis, we were deploying capital across a range of single tenant, income-producing assets when many were too afraid to invest. We employed this strategy in the US and the UK where we saw increased economic growth and corporate balance sheets improving. This had a positive effect on both the office and industrial real estate markets, among others. Today, our thesis has proved correct as we have successfully exited a number of these investments. In student housing, which today is a very popular asset class with institutions, we were among the first to enter the sector in the UK and the US. We then looked at single-family residential assets in the US. Many of these assets were held by banks due to the mortgage crisis. Due to the valuations we were seeing, combined with our view towards economic, job, and rent growth, we became heavily involved the sector during 2013-14 period. Today, we own approximately 1,800 homes across multiple growth markets; these assets are providing strong current income for our investors. Building upon this, we looked for similar opportunities in the UK. While the private rented market differs in the UK relative to the US, we saw that there was a significant supply-demand imbalance in the UK market.

Kuwait, through its sovereign wealth fund, investment companies, and the investments of private individuals, is known as the leader in the region in terms of investment outflows. What do you think is needed in order to bring some of this investment into Kuwait?

What it comes down to is the rule of law. We choose the US and the UK for our investment activities because we can define and understand what our legal rights are in those jurisdictions. Global investors need clear local laws and transparency. An investor does not want to be in a market where they may run into problems if they want to liquidate assets or move money. That being said, Kuwait is a sophisticated market in terms of liquidity and has the potential to be a leading frontier market with global exposure. However, another challenge is that Kuwaitis tend to feel that they should be the ones investing in their country. This is different from the attitude in other GCC states where they are heavily promoting foreign capital investment. If there is a project in Kuwait that global companies want to fund or be part of, Kuwaiti companies tend to want to do it themselves. This is a cultural mentality, and I do not blame local companies for seizing these opportunities when they have the liquidity. In recent years, Kuwait has been trying to encourage more foreign investment by introducing new foreign capital regulations and tax incentives. Kuwait needs to be more welcoming and clearer from a legal perspective and also refine the bureaucratic process to get things done.