ARZAN WEALTH ADVISES ON SECOND US MEZZANINE LENDING TRANSACTION
April 23rd, 2018 – 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 the new strategy focusing on investments into debt structures. This second 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 second REILS finances the acquisition of a portfolio comprising three multifamily properties (“Portfolio”), consisting of 740 apartments located in New Orleans, Louisiana, USA. The properties currently have an average occupancy of 93%, and are rented just below market rates. The borrower is a specialist multifamily asset management company that is providing the equity to acquire the Portfolio, and has previously improved operations of similar assets in the same regional market.
The current REILS transaction is structured with a net 8% 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 87% 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 New Orleans Apartment MVI index. The total IRR of the REILS is structured with a floor of 9.4% and a ceiling of 11.8%, depending on the performance of the index. This index has grown by around 24% in the last 6 years period.
Arzan Wealth acted as the 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:
“Our New Orleans deal is the second transaction in our recently-launched debt platform, which is designed to respond to the risks of a rising interest rate environment. We believe that there are appealing opportunities 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. I look forward to continuing our engagement with our clients in future deals, as we continue to seek opportunities that preserve and protect their wealth, while providing them with a very predictable and regular income stream.”