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Islamic Real Estate Securitisation

Islamic Real Estate Securitisation. Abradat Kamalpour Partner Dechert LLP London +44 20 7184 7856 abradat.kamalpour@dechert.com. Areas to Cover:. conventional securitisation common Islamic real estate financing structures confusion of some Sukuk with securitisation

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Islamic Real Estate Securitisation

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  1. Islamic Real Estate Securitisation Abradat Kamalpour Partner Dechert LLP London +44 20 7184 7856 abradat.kamalpour@dechert.com

  2. Areas to Cover: • conventional securitisation • common Islamic real estate financing structures • confusion of some Sukuk with securitisation • discussion of Islamic securitisation structures • some points to consider

  3. What is conventional Securitisation “…the repackaging of income generating assets into a marketable form which are used to secure bonds. The bonds are repaid from the dedicated cashflows generated by those assets.”

  4. Simplified CMBS Structure Liquidity Facility Provider LiquidityFacility Loan Sale Agreement IssuerSPV Class A Notes Originator Class B Notes Servicing Agreement Class C Notes BankAccounts Commercial Real EstateLoan Commercial Real EstateLoan Commercial Real EstateLoan Commercial Real EstateLoan

  5. Islamic Finance Originator Lease (Ijara) Lessee Put Option and Call Option Service Agency Agreement Service Agent Ijara – Islamic Lease Financing

  6. Bank Spot Payment Purchase Agreement(Real Estate) Client Murabaha Real EstateFinancing Murabaha Agreement (Real Estate) Deferred Payment Obligation Real Estate Seller

  7. The Ijara Sukuk Undertaking to Purchasethe Asset Tenant / Final Purchaser Ijara Cash Sukuk AssetTransfer Issuer SPV Sukuk Holders Cash Cash AssetTransfer Asset Holder

  8. Sukuk Al Musharaka Purpose is to generate profits Profit Distribution Profit Distribution Management Agreement Musharaka Fund Contribution Issuer Purchase Undertaking Musharaka Partner Musharakah Management Agreement Sukuk Sukuk Holders

  9. The Pooling Structure – Getting Close Purchase of Islamic Financing Assets (Ijara, Murabaha & Istisna’a) Sukuk Sukuk Holders Issuer SPV Islamic Finance Originator Cash Cash Guarantee / Liquidity Facility

  10. Islamic Real Estate Securitisation Structure Lessee Service Agent Lease (Ijara) and other documents Lessee Service Agent Islamic Finance Originator Asset Sale / Trust Sukuk Holders Issuer Sukuk Servicing Agreement Lessee Service Agent Lease (Ijara) and other documents Lessee Service Agent

  11. Some Points to Consider • Is a “True Sale” possible in the jurisdiction • Stamp duty considerations for asset transfer • Debt transfer for Murabaha • Local bankruptcy law considerations • Enforceability of foreign judgements • Currency and clearing of Islamic bonds • Rating agency familiarity

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