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Australia's NAB seals maiden Islamic financing deal
[SYDNEY] National Australia Bank Ltd has closed its first onshore Islamic financing deal, a A$19.9 million (S$19.9 million) arrangement to fund a real estate purchase by Sydney-based asset manager Crescent Wealth.
The funding platform designed by NAB, the country's No. 4 lender by market value, could help open Australia to Islamic investors from the Gulf and Southeast Asia that seek to adhere to religious principles such as bans on interest and gambling.
Crescent Wealth used the four-year financing for a A$30.75 million commercial property acquisition in South Melbourne, with plans to build a portfolio of commercial assets across the east coast, said Talal Yassine, managing director of Crescent Wealth.
"It marks a significant moment for the industry in Australia as the funding was supported by an Australian retail bank." Until know, such deals had to be purely funded by equity, but the sharia-compliant structure would help to significantly remove transaction risk, in particular for foreign investors, said Mr Yassine. "We plan to secure a second asset by year end and again, will be leveraging the existing structure we have with NAB."
Crescent Wealth, established in 2011, currently has over A$100 million in assets under management across five Islamic funds which include cash, real estate and domestic and international equities.
In April, the firm set up an office in Malaysia and is now considering applying for a boutique fund management license.
Islamic financing has struggled to gain traction in Australia due in part to tax issues which can penalise the asset-based nature of such transactions.
Structures such as sukuk, or Islamic bonds, can attract double or even triple tax charges because they require multiple transfers of title of the underlying asset.
The Australian Board of Taxation presented an Islamic finance paper to the government in June 2011 aiming to address such issues, but Canberra has yet to give a response or release the final review.
In the meantime, Britain, Luxembourg, South Africa and Hong Kong have all passed tax amendments to facilitate such transactions. All have issued sukuk over the past year.
The NAB used a structure known as wakala, where one party acts as an agent for another to manage a pool of assets. Wakala is widely used overseas, with Hong Kong using the format for its second issuance of sukuk in May, a US$1 billion deal.
Crescent Wealth was advised on the deal by Deloitte, CapitaLegal and Dar Al Shariah, a Dubai-based Islamic advisory firm.