Shamil Bank, a leading Bahrain-based commercial and investment bank, has announced a successful partial exit of the US$ 50 million United States Development Opportunities Fund I Limited (“USDOF I”) through the disposition of one of the assets comprising the portfolio.
USDOF I, one of Shamil’s real estate Modaraba Funds, provided investors with an opportunity to invest in the development of two (2) condominium projects in the Unites States: one in Fairfax, Virginia and the other in Miami, Florida. The Fund, which was subscribed for in December 2005, projected the realization of an internal rate of return (“IRR”) of 17% over an investment period of two (2) years.
In its capacity as the Modareb, Shamil Bank has closely monitored the investment’s progress leading to the successful exit from the Virginia- based project at an IRR one-hundred basis points higher than initially projected. After applying the proceeds (principal and profits), Shamil would pay investors close to 55% of their invested capital in the Fund from the project which weighed only 46% at the time of subscribing to the Fund.
Commenting on the achievement, Mr. Ahmad Tayara, Head of Investment Banking, Shamil Bank said: “The creation of attractive, well structured funds and their successful placement is one aspect of our business. The real challenge is to appreciate that once a fund is closed, it is at that time that the deal truly starts.
He added: “The post-closing monitoring aspect of our business, to ensure that corrective measures are constantly being applied to keep asset performance on track, consumes a considerable amount of our time but in the end it paid off in this case. “
Mr. Tayara continued: “When the assets were acquired, interest rates in the US were still relatively low and the demand for condominium units (residential flats for sale) surged. Later on and in order to curb potential inflation risk, the Fed decided to hike up interest rates. We decided, in consultation with the developer and other real estate expert consultants, to convert part of the Virginia–based asset that was still under construction into a luxury apartment block for rent. Upon completion, we evaluated offers from investors wanting to acquire the entire block, and since the condominium units of the other block were almost all sold out, we went ahead with the sale. On an asset basis, investors realized close to 18% IRR. We are now focusing on the sale of the condominium units of the Florida-based asset."
“The successful partial exit from the USDOF I in this challenging investment climate being witnessed by the US real estate sector is a testament to Shamil’s strong management capabilities. The year in progress is expected to be an exciting year as we announce further exits and build a strong pipeline of attractive investment opportunities for our investors. Indeed, there is more to come and we will release the news in due time," Mr. Tayara added.
About Shamil Bank of Bahrain B.S.C.:
Shamil Bank of Bahrain B.S.C. (Shamil Bank) is a leading Islamic commercial and investment bank incorporated in the Kingdom of Bahrain. The Bank has grown steadily since 1982 to become a leading Islamic financial institution with a shareholding equity of US$ 353 million as at 31 December 2006.
The Bank provides a diverse range of products and services that cater to the financing and investment needs of individuals and institutions. It conducts its business in compliance with the principles of the Islamic Sharia.
Shamil Bank is a subsidiary of Ithmaar Bank B.S.C., a full service investment bank with a paid-up capital of US$360 million. Ithmaar Bank has a 60% shareholding in Shamil Bank.
Shamil Bank operates a network of local branches and maintains a presence in overseas markets through its subsidiary, associated and affiliated companies. Both Shamil Bank and its majority shareholder, Ithmaar Bank, are listed on the Bahrain Stock Exchange.
The Bank has set a strategic mission to become a premier bank, recognized for developing, arranging and distributing superior and value-added products and services that conform to the Islamic principles and meet customer needs.
The philosophy of Islamic finance is based on the redistribution of wealth. Shamil Bank is distinguished by its unwavering commitment to Islamic values and will continue to support the employment of wealth in productive assets, investments, trade and in creating value for the society at large. The Bank is committed to excellence in fulfilling its responsibility and enhancing value to its customers and shareholders.
The Bank's activities are supervised by the Central Bank of Bahrain and a Religious Supervisory Board. The financial statements of the Bank are audited annually and reviewed quarterly by an international audit firm. These statements are subsequently published in the newspapers.
