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Saturday, 9 August 2008

National Australia Bank to pay $35m for stake in Shariah-compliant industrial property trust

THE National Australia Bank will spend around $35 million for an interest in what is likely to become the world's first listed industrial property trust compliant with Islamic Shariah law.

NabInvest, the bank's direct investment management business, has formed a joint venture with Oxley Corporate that will own 80 per cent of the company, which manages the $S967 million ($774 million) Singapore-listed Cambridge Industrial Trust.

The trust is currently seeking unitholder approval to convert to a Shariah-complaint REIT to cash in on growing wealth in the Middle East.

But the trust will first have to finalise a Shariah-compliant financing solution for $S369.3 million of interest-bearing loans, because to be Shariah-compliant, a REIT must not pay or receive interest.

While the Islamic Bank of Asia has been appointed adviser for the conversion, the Hong Kong & Shanghai Banking Corp is advising on the refinancing solution.

Shariah law will also prevent the trust from stockbroking or share trading in non-compliant securities and conventional insurance. Also outlawed will be investments involving hotels or resorts and some entertainment activities that include gambling or gaming, involvement in the manufacture or sale of non-halal goods and the sale of tobacco-based products.

As well as approval from unitholders, the Singapore Stock Exchange must also give its blessing.

Approvals will make the NAB-managed trust the world's first Shariah-compliant industrial REIT and Singapore's first publicly listed Shariah-compliant REIT.

Analysts said the industrial trust would get greater access to a new investor pool when raising capital or debt. The trust's current portfolio consists of 43 buildings, all of which are fully leased.

Ahmed Fahour, the head of NAB's Australian business, is a Muslim. The bank has attempted to build bridges with the Islamic community by operating a $25,000 postgraduate scholarship in Islamic finance, which is named after Australia's Islamic spiritual leader, Sheik Fehmi Naji al-imam.

Under the terms of the REIT management deal, NabInvest owns a 70 per cent interest in a joint venture company with Oxley Corporate.

The joint venture company in turn owns 80 per cent of CITM, the company that manages the trust. Japanese conglomerate Mitsui will continue to own the remaining 20 per cent.

The Oxley Group is headed by Michael Dwyer, the former CEO of Allco Singapore.

NabInvest chief executive Garry Mulcahy said yesterday the group was delighted to enter the high-growth Asian market through the venture.

He said the transaction was not material to the NAB.

Subject to certain conditions, NabInvest's management interest acquisition should be completed within four weeks.

(The Australian Business)

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