Arzan Wealth (DIFC) Limited (‘Arzan Wealth’), a Dubai-based advisory firm regulated by the Dubai Financial Services Authority, is pleased to announce that it has advised on a mezzanine lending opportunity in the United States, as part of its strategy focusing on investments into debt structures. This investment utilizes the innovative Real Estate Index Linked Securities (“REILS”) instrument, which is an amortizing mezzanine loan, and has been structured in a Sharia-compliant manner.
This deal, which is our third REILS transaction, finances the acquisition of a portfolio of two properties located in Ohio and California in USA. The first property will function as a residential wellness/rehabilitation centre spread across 120 acres, and is newly developed to focus on clients struggling with alcohol and drug addiction, as well as any underlying behavioural health issues. It is located in a suburb of Cincinnati, Ohio. The second property is an office building located in downtown Sacramento, the capital of California, and comprises 46,941 sq ft of single-storey space with modern infrastructure and amenities. The building is under renovation and will be leased by The California Highway Patrol (CHP) for 10 years.
The current REILS transaction is structured with a net 9% coupon, payable quarterly, and with an escalating quarterly amortization schedule. It is expected that at exit, the investors advised by Arzan Wealth will have received around 98% of their investment through quarterly payments alone, and will receive an additional payment at the end of the instrument’s term that is linked to the MVI index of East North Central Division CPI and West-Pacific Division CPI. The total IRR of this REILS investment is structured with a floor of 10.4% and a ceiling of 12.6%, depending on the performance of the index.
Arzan Wealth acted as the Sub Strategic Advisor on the structuring of the REILS instrument and the due diligence of the underlying assets and will continue its advisory role during the holding period of this investment.
Muhannad Abulhasan, CEO of Arzan Wealth said:
“This deal is the third transaction in our growing mezzanine debt platform, which is designed to generate equity-like returns but from the lower risk position of debt instruments.
Our REILS platform is particularly attractive to our investors due to the aggressive amortization schedule that is embedded within the structure, which allows them to quickly reduce the risk of their investment while earning a strong flow of income.
The assets being financed by this REILS transaction, combining a long lease to the State of California with a healthcare asset addressing an undersupplied market, offer underlying stability of income that is not correlated to volatility of the general economy.
During these unprecedented times, with global economies struggling to deal with the coronavirus pandemic, we continue to seek opportunities that preserve and protect the wealth of our clients, while providing them with a very predictable and regular income stream.”