DIB awards Badr Project Phase 1 contract to Engineering Contracting Company

Dubai Islamic Bank (DIB) has awarded an AED687 million contract to construct Badr Project Phase 1 to Engineering Contracting Company (ECC). Abdulla Al Hamli, Managing Director at DIB, and Hatem Kamal Farah, Chairman and CEO at ECC, held a signing ceremony on March 29 at DIB headquarters.

The Badr Project is a self-contained residential community built on DIB-owned land. It consists of five distinct zones with apartment buildings as well as a number of villas and other community buildings and recreational facilities. The project is situated at the intersection of two key traffic arteries, Sheikh Mohammed Bin Zayed Highway E311 and Al Khawaneej or Airport Road, giving it easy and quick access to most of Dubai and to routes of other UAE cities. Phase 1 is located centrally within the overall project, adjacent to a central park with mixed-use and retail facilities. 

The community will have a Mediterranean theme, inspired by elements of Andalusian, Spanish and Italian architecture that marries the urban environment experience with a focus on encouraging outdoor activities and healthy living through its well-connected facilities. The master development, Badr, with a total built-up area of 13.8 million sq ft will be developed across five phases and the first phase with a built-up area of 2.2 million sq ft is expected to be completed by 2018. 

Al Hamli said: “Following a thorough tender process to identify the right construction partner, we selected ECC LLC as the lead contractor to bring the Phase 1 of this project to completion. With regard to Badr, we are confident that given its location, quality of project, attractive price points, it will be high on the priority list of investors. ”

“At Dubai Islamic Bank, we are deeply committed to investing in the long-term development of Dubai’s infrastructure,” said Dr Adnan Chilwan, Group CEO, DIB. “This initiative is, yet again, an indication of our belief in the strong fundamentals of UAE’s economic landscape and its ongoing appeal to both local and international investors.”

“Moving forward, by leveraging our vast experience and knowledge, we will continue to support Dubai’s ambitions and aspirations in the lead-up to Expo 2020, building a climate that not only fuels global commercial interest but also attracts residents who want to make the emirate of Dubai and the UAE their permanent home,” he added.

MARC rates Putrajaya Bina's sukuk wakalah programme AAAIS

Ratings corporation MARC has assigned a preliminary rating of AAA_IS with a stable outlook to Putrajaya Bina's (PB's) proposed Islamic medium-term notes (sukuk wakalah) programme of up to RM1.58 billion. An AAA rating from MARC denotes an "extremely strong ability to make payment on the instrument issued under the Islamic asset-based financing contract(s)".

Proceeds from the issuance will part fund the RM1.9 billion development costs for nine blocks of government office buildings and one block of shared facilities that PB will undertake under a concession from the Malaysian government.

Based on a private finance initiative, the development entails two phases: three and a half years for construction and 25 years for asset maintenance. Putrajaya Holdings (PJH), as a PB shareholder, will contribute RM380 million in the form of shareholders’ advances to meet an 80:20 finance-equity ratio requirement. Upon completion of construction and one month after receipt of the certificate of acceptance, PBSB will be entitled to receive concession payments in the form of availability charges (AC) of RM215.6 million per annum and asset management service charges (MC) of RM69.2 million per annum for tenancy of the building from various ministries and government agencies.

The assigned rating is driven by the credit strength of the government which provides the AC and MC payments over the tenure of the sukuk wakalah programme. The sufficiency of the quantum of the annual AC payments alone without considering the MC payments to meet the principal and profit payments under the sukuk wakalah programme is also a key consideration. The rating also incorporates an irrevocable and unconditional letter of support (LoS) from PJH to meet PBSB’s financial obligations, including any cost overruns during the construction period. MARC maintains a long-term rating of AAA/stable on PJH.

The project construction, which commenced in Q415 and is expected to be completed by Q418 is being undertaken by Sunway Construction under a fixed-price contract. MARC considers the completion and cost overrun risks to be mitigated by the moderate complexity of the project, the established track record of the principal contractor Sunway Construction and the terms of the fixed-price contract. PJH’s obligations under the LoS which will remain effective until the date of the first AC or MC payment, whichever is later, alleviates the payment risk in the event of delay. Notwithstanding this, should the concession be terminated during the asset management period on default of the government, PB will be entitled to a compensation amount of the net present value of foregone future AC payments discounted at the company’s weighted average cost of capital.

Interested?

Find out more about MARC's rating definitions (PDF; from page 53)

Meethaq and Oman Property Development Company facilitate home finance for Ras Al Hamra home project

Meethaq, the pioneer of Islamic banking in Oman from Bank Muscat, and Oman Property Development company have signed a memorandum of understanding (MoU) to facilitate attractive Meethaq home finance for the Al Hamra Classic Home project in Ras Al Hamra. 

The move underlines the upward swing in the residential segment of the real estate sector in Oman in light of the growth in population as well as the developing economy. The deregulation granting property ownership rights to GCC nationals and expatriates has also attracted Oman as an investment destination. 

Sulaiman Al Harthy, Deputy Chief Executive Officer – Islamic Banking, Meethaq, said: “Committed to sustainable social and economic development, Meethaq is happy to be associated with Al Hamra project to provide innovative home finance in line with shari’ah principles. The real estate sector is a major component of the national economy and Meethaq Islamic Banking is committed to extending a helping hand for easy access to shari’ah based home finance.”

Abbas bin Abdullah Al Ajmi, Chairman of Oman Property Development company, said: “Oman Property Development company is proud to join hands with Meethaq Islamic Banking in extending attractive home deals. The co-operation between the two institutions will benefit citizens to fulfill their dream homes in Al Hamra project comprising 15 residential units.” 

Meethaq offers a full suite of Islamic banking products and services, including savings accounts, current accounts, home finance, auto finance, credit cards, mobile banking and Internet banking. Meethaq has 17 branches across the Sultanate and plans to expand the network as well as launch new products and services to complement the Islamic banking experience. 

Al Osool Properties obtain forward ijarah financing from alizz islamic bank

Source: alizz islamic bank. Al Osool Properties signs a forward ijarah financing agreement with alizz islamic bank for The Pearl Muscat. The signing ceremony on 28 December 2015 was attended by Salaam Al Shaksy, CEO of alizz islamic bank (second from left) and Hassan Mohamed Juma Al Lawati, Managing Director of Al Osool Properties (third from left). The signing ceremony was also attended by Ehab Hashish, DGM-Head of Wholesale Banking of alizz islamic bank, alongside the proprietors of the The Pearl Muscat; Hilal Abdullah Al Hoqani and Ahmed Ali Khamis Al Mahrouqi. 

Alizz islamic bank has signed a financing agreement based on forward ijarah with pioneer real estate development and investment company Al Osool Properties for the development of its premium integrated tourism complex (ITC) project The Pearl Muscat. The Pearl Muscat is being developed on land in the Muscat Hills Commercial area. The project spreads over 6,911 sq m and will comprise a basement, ground floor plus six storeys and a penthouse.

The financing agreement marks an important milestone in the development of Oman's real estate sector and reiterates alizz islamic bank's commitment to strengthen institutional participation for real estate projects. Alizz islamic bank provides shari'ah compliant financial solutions for corporate, government and individual customers. In forward ijarah, the property is acquired by alizz islamic bank under an istisna sale contract with a developer upon customer's promise to lease. The property is accordingly leased and delivered to the bank's customer for the agreed term and rentals, after which the ownership is transferred to the customer.

Salaam Al Shaksy, Chief Executive Officer of alizz islamic bank said, "We are pleased to partner with Al Osool Properties for developing its premium project The Pearl Muscat. This is in line with our strategy to support the local tourism and development projects. The bank continues to demonstrate its commitment towards financing projects which contribute to the local economy."

Al Shaksy added that the entry of Islamic institutions has brought a range of shari'ah compliant products and services to meet the diverse financing needs of corporate and institutional clients in Oman.

Hassan Mohamed Juma Al Lawati, Managing Director of Al Osool Properties said that "the development agreement between Al Osool Properties and alizz islamic bank will provide a solid guarantee to our customers that their properties will be delivered within the stipulated deadline irrespective of the market dynamics."

Dubai Islamic Bank backs Union Properties with refinancing facility

Dubai Islamic Bank (DIB), the largest Islamic bank in the UAE, will provide property developer Union Properties with an AED360 million Islamic re-financing facility to help it manage its balance sheet and enhance the focus on its core business. The developer has been moving forward with expansion plans after repaying AED7 billion worth of legacy bank debt.

Source: Union Properties website.

DIB CEO Dr Adnan Chilwan said: “The real estate sector in the UAE has rebounded strongly on the back of the economy’s core fundamentals. The current and planned infrastructure of Dubai and the UAE positions the country amongst the most attractive markets in the world for business growth and prosperity. The expatriate population has seen a significant rise over the recent past as the nation relentlessly progresses towards establishing itself as the hub for regional and global names. With key regulations in place and optimum enforcement of the same by relevant authorities, the industry is now on a solid and sustainable growth path. 

"Given the current scenario, quality names like Union Properties are uniquely positioned to capitalise on the opportunities that Dubai and UAE represent, and DIB with its rich heritage, expertise and highly liquid balance sheet, is the ideal partner for such strategic names.”

Real estate transactions in the UAE have grown at a rapid pace since 2012, with the volume of deals in Dubai increasing by about 50% over the past year – excluding remortgages and donations – according to Dubai’s Real Estate Regulatory Agency. Standards & Poor’s suggests that prices in the sector will continue to remain stable and will be backed by the strong macroeconomic growth in the UAE, the DIB noted.

Union Properties General Manager Ahmed Al Marri said: “Over the past few years, Union Properties has focused on strengthening its capital position by investing in its core fundamentals and repaying its legacy debt. As we have now successfully completed all these payments, we are well placed to move forward with our new growth strategy that is backed by our positive financial performances. As a result, we are proud to partner with the leading Islamic bank in the country, and this new financing arrangement with DIB represents a fresh start for the company.”

Naveed Ali, Chief of Corporate Banking at Dubai Islamic Bank said: “We have been a critical player, leading and participating in many key deals this year, and our arrangement with Union Properties is another promising addition to our finance book. It is part of our strategy of strengthening our balance sheet by selectively conducting business with major players in the commercial real estate market. Given UP’s strong financial performance this year, the repayment of all previous debt, as well as the growth in the real estate sector, we believe this deal to be another successful step in establishing a sustainable trend in the real estate sector.”

The bank has been involved in a number of landmark international and domestic corporate finance deals over the past year, including a US$750 million sukuk tranche for the Dubai Department of Finance. 

BGC promoting murabaha mechanism with Dubai Multi Commodity Centre

BGC Partners, a global brokerage company servicing the wholesale financial and real estate markets, has partnered with the Dubai Multi Commodity Centre (DMCC) to promote a shari'ah-compliant commodity murabaha mechanism. 

The March agreement is the first between DMCC and an interdealer broker to jointly market commodity murabaha on the DMCC Tradeflow Platform. The partnership offers the trading community a faster, more efficient method of trading this niche financial product, and promotes Dubai as the global centre of Islamic finance at the same time. 
  
Said Charlie Sleightholme, Head of Commodity Murabaha Business at BGC in Dubai: "While trading of this product has been in existence for some time, our joint offering brings a modernisation to the process, offering speed, convenience and innovation to the execution of this popular product."

"We are thrilled to offer an exciting, world class mechanism for the trading of commodity murabaha which we believe will garner significant interest from the trading community both domestically and internationally," commented Paul Boots, Director, Tradeflow at DMCC. 

"With BGC's premier global reputation, its relationships with top-tier institutions across the world and its leading electronic trading capabilities, we believe that commodity murabaha customers will see significant benefits in terms of efficiency and transparency. This, in turn, will continue to promote and assert Dubai's reputation as a preeminent global capital of Islamic finance."

Established in 2002 by Royal Decree, the DMCC is a strategic government initiative of the Government of Dubai designed to enhance trade flows through the UAE by providing infrastructure and an optimal environment allowing clients to fully benefit from both a regulated framework and convenient location. 

The DMCC has helped to bridge the gap in the region between the commodity industry and trade finance by providing a mechanism for the issue of electronic warehouse receipts on behalf of the owners of stored commodities since 2004. In 2012, the DMCC Tradeflow platform unified these services, providing members with a holistic approach to the process of certifying commodities for the purposes of trade finance, as well as for the trade of locally stored commodities between Islamic banking institutions and their counterparties through the commodity murabaha mechanism.

*Murabaha is not an interest-bearing loan, which is considered riba (or excess) and forbidden under shari'ah (Islamic religious law), and is rather an acceptable form of credit sale. Murabaha is an Islamic financing structure in which an intermediary buys an asset with free and clear title to it. The intermediary and prospective buyer then agree upon a sale price (including an agreed-upon profit for the intermediary) that can be made through a series of installments, or as a lump sum payment. 

Similar in structure to a rent-to-own arrangement, the intermediary retains ownership of the property until the loan is paid in full. It is important to note that to prevent riba, the intermediary cannot be compensated in addition to the agreed-upon terms of the contract. For this reason, if the buyer is late on their payments, the intermediary cannot charge any late penalties.