UPDATE 2-Qatar property arm eyes $962 mln loan for expansion

* Islamic facility to finance European investments

* Qatar Islamic Bank appointed lead arranger

* Gulf state eyes cheap property deals in UK

(Recasts, adds analyst comment, more background)

By Jason Benham

DUBAI, Sept 9 (Reuters) - State-owned investment firm Qatari Diar has appointed Qatar Islamic Bank QISB.QA as lead arranger for a 3.5 billion riyal ($962 million) syndicated Islamic facility, earmarked to finance European investments, it said.

Qatar, the world's largest exporter of liquefied natural gas, has aggressively targeted the UK to snap up real estate bargains stemming from the global economic downturn, with excess cash from a six-year boom in the Gulf Arab region.

The property arm of the country's sovereign wealth fund, which counts London's Chelsea Barracks among its most high-profile overseas assets, said on Wednesday the five-year Islamic facility would be subject to regulatory approvals.

"This transaction comes at a time where Europe and France, in particular, are eager to develop Islamic finance and is at the same time in line with QIB Group's plan to serve European and French markets," Jean Marc Riegel, general manager corporate investment and development group at Qatar Islamic Bank, said in the statement.

Executives at Qatari Diar were not available for comment.

Qatari Diar is refinancing its 637.5 million euro loan that was underwritten in 2008 and signed in March 2009, according to bankers. That one-year deal, which backed Diar's buyout of French engineering company Cegelec, paid a margin of 135 basis points over EURIBOR.

Britain's battered property market is showing signs of a recovery with house prices in England and Wales rising for the first time in more than two years, property data company Hometrack said in August.

Commercial property values in Britain rose a second straight month in August, CB Richard Ellis said last week.

Qatar Holding LLC and China Investment Corporation in August agreed a deal to take a stake in Songbird Estates SBDb.L, which is the majority owner of London's financial hub, Canary Wharf. [ID:nL225141]

"If you look at it in dollar terms, investors would prefer to invest in a more stable developed economy where prices have fallen by 50 percent in US dollar terms, over a developing region like Dubai, where prices have also fallen 50 percent," said Saud Masud, head of research and senior real estate analyst, Middle East and north Africa, at UBS in Dubai.

Qatari Diar launched a luxury real estate project in Tajikistan in August, its first in Central Asia, worth at least $150 million and in May signed a deal to build a luxury hotel in Cuba. [ID:nLT464434] [ID:nN06411425]

The company has more than 80 projects worldwide worth in total about $60 billion, its chief executive Ghanim bin Saad Al Saad said in May.

(Additional reporting by Christopher Mangham; editing by David Cowell)