By Celestine Okorie
A Dubai-based advisory firm regulated by the Dubai Financial Services Authority, Arzan Wealth (DIFC) Limited has announced that it has advised its client on a successful exit of a mezzanine lending transaction in New Orleans, in the United States, achieving strong returns for investors.
This investment is part of Arzan Wealth’s Debt Platform, which focuses on identifying investments into real estate debt opportunities. The New Orleans transaction utilizes the innovative Real Estate Index Linked Securities (REILS) structure, which is an amortizing mezzanine loan, and was structured in a Sharia-compliant manner. The New Orleans REILS investment was made in April 2018 to finance a portfolio comprising three multifamily properties consisting of 740 apartments located in New Orleans, Louisiana, USA.
The New Orleans REILS transaction was structured with a net 8 per cent coupon, payable quarterly, and with an escalating quarterly amortization schedule as well as an additional payment at the end of the instrument’s term that was designed to generate a total IRR of between 9.4 per cent and 11.8 per cent. Arzan Wealth acted as the Sub Strategic Advisor on the exit of this investment at a net IRR of 11.9 per cent per annum.
CEO of Arzan Wealth Muhannad Abulhasan said: “The Arzan Wealth team is very proud to be able to advise on the exit of the New Orleans REILS deal, and at the highest possible IRR as designed by us when we advised on entering the deal two years ago. We are particularly pleased to be able to deliver these very positive results to our loyal investors in the midst of the global economic catastrophe that is unfolding as a result of the COVID-19 public health crisis.
An IRR of 11.9 per cent from a safe and income-producing real estate debt investment is consistent with Arzan Wealth’s objective of offering clients superior risk-adjusted opportunities in mature real estate markets. The stable and regular cash flow payments from our REILS transactions have proven to be an important stabilizing element in the portfolios of our clients, especially during turbulent economic times like the one we find ourselves in today.
Arzan Wealth will continue to focus on advising on new REILS deals, as well as other real estate investment opportunities that create a secure and regular income stream, with as low a risk profile as possible. While economic turbulence can create uncertainty, Arzan Wealth will always be a stable and reliable partner for our clients, during good times and bad. I am grateful to our loyal clients for their continued trust in Arzan Wealth.”