Bahrain’s much anticipated retail and leisure development on Amwaj Island, has experienced overwhelming interest from potential lenders.
$90 million ‘The Lagoon’ was offered four times more debt than the required $20 million by a consortium of Islamic lending banks, with the company curtailing its borrowing to secure exceptional returns for investors.
The Lagoon Bahrain is currently financed with over $41 million of equity and over $32 million of debt from a bank consortium. The rest of the $90million is financed through pre-sales.
The normal process for debt subscriptions from the consortia of banks is for the Lead Arranger to approach the market in the search of loans. When Abu Dhabi Investment House’s went through this process last month, it was inundated with offers to provide finance for The Lagoon Bahrain.
Ali Mahmoud, Abu Dhabi Investment House’s executive director of investment, was surprised by the exceptional interest.
He said: “The level of interest is extremely unusual. In fact, I have never experienced such a high level of enthusiasm. “There are a number of reasons for this. The project grew from two levels, with a ground and first floor, to three with the addition of an extra floor. “Over the past six months the overall scheme has changed due to rolling re-designs providing a much improved layout for prospective buyers. For instance, previously some units had been facing outward from the lagoon, but with some clever redesigns of parking facilities, all the units are now facing in towards the picturesque waterfront.
“Added to this was a major improvement in terraces, with more being added, along with an increase in each terrace area. Also, initially it was planned for ground floor units to benefit from terraces with a few on higher levels, but now all three floors have them.
“Of course construction prices for the Lagoon have went up with the re-designs, but the key is that expected returns have risen substantially more than the 20% expected rate of return announced in April.
“Banks have been watching developments intently and this has resulted in the over-subscription in debt. We could have increased debt by 80%, but held it to a 20% increase in order to secure fantastic returns for investors.”
The consortium of banks include: Bahrain Islamic Bank; Khaleeji Commercial Bank; Kuwait Investment Company; Qatar Islamic Bank; Kuwait Finance House; Bina wa Nama and Emirates Islamic Bank.
Michael Lawrence, Abu Dhabi Investment House’s director of real estate believes the over-subscription is due to resounding belief in the project. He said: “We shouldn’t be surprised, as investors and lending institutions liked the project when first announced. The many changes for the better since then have turned an already attractive project into a real stand out.
“Add to this the fact there is a great deal of liquidity in the Islamic finance sector at the moment; a relatively short term, which means their capital is not tied up for a long period, and the security factor of the project – with land paid for and available as collateral. These factors all shape up to an attractive proposition compared to other GCC commercial real estate projects.”
With inspiration from bustling ‘dining destinations’ such as London's Covent Garden and Cockle Wharf in Sydney, The Lagoon Bahrain 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, will lie at the heart of Amwaj Island’s new community and attract visitors from Bahrain and throughout the GCC.
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