Islamic Real Estate
Securitisation
Abradat Kamalpour
Partner
Dechert LLP London
+44 20 7184 7856
[email protected]
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
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.”
Simplified CMBS Structure
Liquidity Facility
Provider
Liquidity
Facility
Loan Sale Agreement
Originator
Servicing Agreement
Class A Notes
Issuer
SPV
Class B Notes
Class C Notes
Bank
Accounts
Commercial
Real Estate
Loan
Commercial
Real Estate
Loan
Commercial
Real Estate
Loan
Commercial
Real Estate
Loan
Ijara – Islamic Lease Financing
Lease (Ijara)
Islamic
Finance
Originator
Lessee
Put Option and Call Option
Service Agency Agreement
Service
Agent
Murabaha Real Estate Financing
Murabaha Agreement (Real Estate)
Client
Bank
Deferred Payment Obligation
Spot
Payment
Real
Estate
Seller
Purchase
Agreement
(Real Estate)
The Ijara Sukuk
Undertaking to Purchase
the Asset
Tenant / Final
Purchaser
Ijara
Cash
Sukuk
Asset
Transfer
Issuer SPV
Sukuk Holders
Cash
Cash
Asset
Transfer
Asset Holder
Sukuk Al Musharaka
Purpose is to generate profits
Profit Distribution
Profit Distribution
Management Agreement
Musharaka
Fund Contribution
Purchase Undertaking
Issuer
Sukuk
Sukuk Holders
Musharaka Partner
Musharakah Management
Agreement
The Pooling Structure – Getting Close
Purchase of Islamic Financing Assets
(Ijara, Murabaha & Istisna’a)
Sukuk
Sukuk Holders
Issuer SPV
Islamic Finance
Originator
Cash
Guarantee / Liquidity Facility
Cash
Islamic Real Estate Securitisation Structure
Lease (Ijara) and
other documents
Asset Sale / Trust
Sukuk
Holders
Sukuk
Issuer
Islamic
Finance
Originator
Lessee
Service Agent
Lessee
Service Agent
Servicing Agreement
Lessee
Service Agent
Lease (Ijara) and
other documents
Lessee
Service Agent
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