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Islamic finance awards 2008: Most innovative deal

The Islamic finance industry is expanding so rapidly and in such a fragmented manner that barely a month goes by when some financial institution does not claim to have launched a new shariah-compliant asset class.

 Al-’Aqar Capital

Often, a little scratching under the surface will find that the asset class has actually been developed before, perhaps in a slightly different way, by someone else – and sometimes even by the same institution.

Nevertheless, the M$300 million ($91 million) sukuk issued and backed by Al ‘Aqar Capital is a genuinely innovative product. It is the first time an Islamic Reit (Al-‘Aqar KPJ) has issued a sukuk. In addition, the Reit itself, which was launched in 2006, is the world’s first Islamic healthcare Reit (the properties consist of six hospitals in Malaysia), as well as the world’s first listed Islamic Reit. The funding provided by the sukuk ijara programme is allowing the Al-‘Aqar Reit to increase its total asset size from M$481 million to M$651 million. This will make it the largest Islamic Reit and the second-largest Reit in Malaysia.

Seohan Soo, director of debt capital markets at AmInvestment Bank, the lead arranger and principal adviser for the deal, says what made it stand out was the quality of its ijara (lease-back) structure. He says it is the first sukuk ijara to combine parallel master lease agreement (between Al-‘Aqar KPJ Reit and its wholly owned subsidiary, Al-‘Aqar Capital) and sub-lease agreements (between Al-‘Aqar KPJ Reit and the hospital operators).

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