Lagoon Bahrain secures US$ 32 million Musharaka facility

Bahrain Islamic Bank (BIB) has worked to arrange the Musharaka for MERED (Middle East Real Estate & Development) to develop the Lagoon project on behalf of ADIH. BIB is acting as the main coordinator and Investment Agent.

Rashad Janahi, CEO of ADIH, said that the Musharaka was two times oversubscribed by financial institutions from GCC countries: 'We were anticipating a good reaction but frankly the response surpassed our target. When we went to market (in search of financing facility, last month) we were inundated with offers to provide finance for The Lagoon Bahrain.'

He said that 'The Lagoon' has been offered 200 per cent more debt than the required $20 million by a consortium six of Islamic lending banks. 'We have opted to cap our borrowing to just over $30million to secure exceptional returns for our investors,' he said.

This means that the $90million Lagoon Bahrain is currently financed with over $41 million of equity and over $32 million of debt from the bank consortium. The rest of the $90 million is financed through pre-sales, currently at almost 60 per cent of total units.

'This deal is a positive response to Lagoon Bahrain from seven major financial institutions, giving yet another show of support for this first-time commercial freehold development,' said Mr Janahi.

He was referring to the fact that Lagoon Bahrain is the first project in the region where commercial premises can be purchased by the retailer, instead of being leased from a common landlord.

Other than BIB as mandated lead arranger the (selected) participants are Khaleeji Commercial Bank, Kuwait Finance House, Qatar Islamic Bank, Kuwait Investment Company and Bena Wa Nam'a Investment Company.

Mr Janahi confirmed that BIB is playing the role of lead arranger and the Musharaka Investment Agent on behalf of the six-bank consortium, as well as acting as the book-runner, documentations' agent and the structuring bank.

Nader Ibrahim, Executive Director, Bahrain Islamic Bank commented, 'In line with our new strategy of playing a leading role in arranging such financing, Bahrain Islamic Bank took the challenge to coordinate and structure this important deal for Lagoon Bahrain. We are very happy with the outcome.'

He said that BIB was established in the Kingdom of Bahrain as the first Islamic commercial bank and has experienced steady growth since its launch in 1979 to become 'a leading voice in the region's Islamic banking sector'.

'BIB has established leadership in the application of Islamic models of investment and financing. The result is a diversified range of products and services for retail customers, commercial businesses, corporate and financial institutions,' he said.

Mr Ibrahim also added that The Lagoon's ability to 'keep to construction promises' has held it in good stead with the financial market. ADIH's Executive Director - Investments, Ali Mahmood concurred that it is the project's consistent ability to deliver to promise that has encouraged the interest of the finance sector.

'Banks have been watching developments intently and this has resulted in the over-subscription in debt. We could have increased debt but held it to a 20 per cent increase in order to secure fantastic returns for investors.'

According to ADIH director of Real Estate, Michael Lawrence, the Lagoon Bahrain does indeed remain on schedule for a Q3 handover. 'Piling works are complete and structure up to the first floor is in place across most of the site. The first floor slab works have commenced,' he said.

He also confirmed that project 'grew' from two levels to three and that over the past six months the overall scheme has changed 'for the better' due to rolling re-designs providing a much improved layout for prospective buyers. All units are now facing in towards the picturesque waterfront and there has been a major improvement to the terrace areas that are incorporated on all three levels.

The Lagoon Bahrain, with inspiration from bustling 'dining destinations' such as London's Covent Garden and Cockle Wharf in Sydney, provides premium freehold opportunities for new concept food and beverage outlets and boutique retail, a first for the Gulf, which has previously only offered rented commercial space.

The 55,000 square metre project, which is scheduled for completion by September 2007, lies at the heart of Amwaj Islands' new community.