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 sixth REILS transaction, would be senior to equity in a portfolio of multi-family properties, consisting of 1,339 rental residential units in the states of New York, Nebraska, Missouri and New Hampshire, USA. The funds from REILS would be used to develop 3 additional buildings with 396 units. The properties currently have an average occupancy of 95%. The REILS investors would receive second charge on the existing portfolio as well as the new 3 buildings being developed.
The current REILS transaction is structured with a net ~8% coupon, payable quarterly, and with an escalating quarterly amortization schedule during the 4-years holding period. It is expected that at exit, the investors advised by Arzan Wealth will have received around 52% 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 a national Apartment Index, and the National Consumer Price Index (CPI). The total IRR of this REILS investment is structured with a floor of 8.4% and a ceiling of 12%, depending on the performance of the indices.
Arzan Wealth advised 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:
“We are pleased to advise on our sixth 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. In the current higher inflation environment, the reference to CPI movements to determine the final payment to investors could increase the chances of reaching the maximum contractual IRR from this investment. Arzan Wealth continues to prioritize opportunities that preserve and protect the wealth of our clients, while providing them with a very predictable and regular income stream.”