By Ron Chen, Senior Correspondent, ASEAN Region

A Dubai-based advisory firm regulated by the Dubai Financial Services Authority, Arzan Wealth (DIFC) Limited (Arzan Wealth) has announced that it has advised on a mezzanine lending opportunity in the United States, as part of its strategy focusing on investments into debt structures.  This investment utilizes the innovative Real Estate Index Linked Securities (“REILS”) instrument, which is an amortizing mezzanine loan, and has been structured in a Sharia-compliant manner.

The REILS capital is senior to equity in a portfolio of 11 medical assets serving from home health and hospice care to rehabilitation and other therapy services. This REILS investment is secured by a 15-year lease with 2 per cent annual increases to a well-established healthcare operator with over 40 different locations across the south in Texas, Arkansas, Louisiana, Mississippi, Alabama, and Florida.

The current REILS transaction is structured with annual net distributions of 13.5 per cent including the 5 per cent amortization, payable quarterly during the 2-years holding period.  It is expected that at exit, the investors advised by Arzan Wealth will have received around 28 per cent of their investment through quarterly payments alone and will receive an additional payment at the end of the instrument’s term that is linked to the higher of a national Apartment Index, and the national Consumer Price Index (CPI). The total IRR of this REILS investment is structured with a floor of 8.8 per cent and a ceiling of 11 per cent, depending on the performance of the indices.

Arzan Wealth advised on the structuring of the REILS instrument and the due diligence of the underlying assets and will continue its advisory role during the holding period of this investment.

CEO of Arzan Wealth Muhannad Abulhasan said: “We see a tremendous opportunity to grow our REILS transaction volume during 2022 and beyond, with an increased investment by Arzan Wealth in strengthening our deal sourcing and due diligence capabilities on the ground.  The amortization structure inherent in the REILS instrument allows our clients to recover their investment principal more quickly, thus allowing a more efficient re-deployment into new investment opportunities, which is a feature that increases in importance during inflationary times. Arzan Wealth remains committed to its mission of providing high quality advisory services to its clients to diversify their international portfolios in a wise and cautious manner. The primary objective of Arzan Wealth is to preserve the wealth of its clients, to offer safety and regular income, and to achieve greater diversification in mature global markets.”