Singapore (3 September 2020) – Muslim investors in Singapore can now invest in Shariah-compliant “exit-focused” pre-development land parcels in the growth corridors of the United States.
This is now possible after such land parcels offered by The Walton Group of Companies (Walton), an international real estate investment company, received the Shariah-compliant stamp Tuesday from Shariah advisor Kuala Lumpur-based Amanie Advisors.
With the certification from Amanie, “our expanding Muslim client base can now be re-assured that our investment products are Shariah-compliant,” Bill Doherty, Chief Executive Officer of Walton International said.
Walton sought the Shariah-compliant certification as it plans to offer the land-based investments to the Middle East and other regions. “Last year, we opened an office in Dubai, and this year (in) Taiwan,” said Suriyana Safie, Walton’s Vice-President of Sales.
Ms Suriyana Safie
The EFPDL is Walton’s second product to receive the Shariah-compliant certification. Its pre-development land investment, or PDLI, received Shariah-compliant certification from the Financial Shariah Advisory and Consultancy (FSAC) of Pergas in 2016.
“We are no longer marketing PDLI projects – they have been replaced and evolved to the new structure, EFPDLI,” Suriyana said.
The exit-focused pre-development land parcels, or EFPDL, as its name implies, is structured with an exit of the investment in mind. It has all the features that its predecessor product, Shariah-compliant PDLI, is devoid of.
Liquidity And Capital Preservation Key
The new structure places importance on liquidity and capital preservation, said Suriyana. “We (listened to) our clients’ feedback. Especially in this current economic situation, with Covid-19, having better liquidity in our structure caters to our conservative investors.”
Maya Marissa Malek, Chief Executive Officer of Amanie Advisors said they were pleased to be able to provide clarity on EFPDL structures that satisfy Shariah requirements. “As the Islamic investment industry grows, investors increasingly demand a broader pool of offerings to diversify their portfolios,” she said.
EFPDL investment entails Walton identifying a parcel of raw land that a property developer would desire to develop in the near term. Walton, together with its syndicate of investors, would acquire the raw land. At the point of acquiring the land, Walton would concurrently enter into an “Exit-Focused Letter of Intent” with the property developer, which would be buying the land in phases.
This gives the developer a fixed period of time to work on the development plan of the raw land and negotiate the terms of a phase-by-phase acquisition of the land. Once the developer is ready to purchase and develop the property, the developer will align payments for the land with home sales activity.
With this new structure, investors will be informed well in advance on the potential returns, which Walton would have negotiated with the potential buyer, in terms of the targeted lot price and the number of “phased takedowns,” Suriyana said.
The investment generates annual cash flow proceeds starting from the second or third year of investment right up to the completion of the development, Suriyana said. “Investors don’t have to wait for a long time to get their first proceeds. Proceeds received will be part capital and part profit,” she added.
Investors begin to receive cash flows when the developer places a 20% deposit at the commencement of the acquisition phase of the land. When the houses, built in phases, are sold to property buyers, the developer will release the balance 80% of the land sale price. Once the project is completed, the developer will proceed to buy the next plot of land for development. The cycle goes on until the whole project is completed, Suriyana said.
Investors in the PDLI, on the other hand, are still waiting for news of exit.
“We are continuing in marketing PDLI projects in getting exit offers, depending on the market readiness of each region.”-/- www.halaluniverse.net
Note: Our staff writer is invested in PDLI and has been waiting for an exit.
Disclaimer: The article above is intended for information and educational purposes only and not to be construed as an investment advice. You should seek investment advice from licensed investment advisors.
