Lagoon musharaka oversubscribed

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Rashad Janahi, CEO of ADIB, and Nader Ibrahim, executive director BIB, at the signing of the musharaka agreement.

Lagoon Bahrain, the Kingdom's new and innovative commercial freehold development, has secured a US$32m Islamic financing facility.

Bahrain Islamic Bank (BIB) has arranged the musharaka for Middle East Real Estate & Development (MERED) to develop the project on behalf of Abu Dhabi Investment House (ADIH).

BIB is acting as the lead arranger and musharaka investment agent on behalf of a six-bank consortium, as well as acting as book-runner, documentations agent and structuring bank. The offering was two times over-subscribed when it went to market in December 2006.

Rashad Janahi, CEO of ADIH, said: "We were anticipating a good reaction, but frankly the response surpassed our target. We have opted to cap our borrowing to just over $30m to secure exceptional returns for our investors."

This means that the $90m Lagoon Bahrain is currently financed with more than $41m of equity and more than $32m of debt from the bank consortium. The remainder is financed through pre-sales, which stand at 60% of the total units.Other than BIB, the parties which will provide the musharaka financing are Khaleej Commercial Bank, Kuwait Investment Co, Qatar Islamic Bank, Kuwait Finance House and Bina wa Nama'a Investment Company.

The musharaka facility will have an 18 month tenor with a grace period of six months and will pay a margin of 2.75% over BIBOR (Bahrain Inter Bank Offered Rate).

Nader Ibrahim, executive director, Bahrain Islamic Bank, said: "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."

Lagoon Bahrain is the first project in the region where commercial premises can be purchased by the retailers rather than leased from a common landlord. The project covers 55,000 square metres and is scheduled for completion in September 2007.

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