TH Properties Sdn Bhd venture in Sydney paves way for more Islamic financing

TH Properties Sdn Bhd venture in Sydney paves way for more Islamic financing

KUALA LUMPUR, Nov 23 — The participation of TH Properties Sdn Bhd in developing residential projects in Sydney, Australia may indirectly pave the way for more Malaysian and local banks to venture into Shariah-compliant financing in the future.

TH Properties is the property development arm of Malaysia’s pilgrimage fund, Lembaga Tabung Haji.

It has just completed a A$220 million (RM675.4 million) Bay Pavilions property development project at Lane Cove and is now involved in three other developments with a gross development value (GDV) exceeding A$800 million (RM2.4 billion).

The projects are the A$200 million (RM614 million) Imperial Hurstville at Treacy Street, the A$500 million (RM1.5 billion) ONE The Waterfront project at Wentworth Point and a proposed A$110 million (RM337.7 million) high-rise apartment to be launched in 2016 at North Strathfield.

The Bay Pavilions project takes pride as being the first property development project in Australia funded through a Shariah-compliant financing.

It was funded via a A$96 million (RM294.7 million) Islamic term financing provided by Maybank Islamic Bhd, the first Shariah-compliant financing facility ever structured for a property development project in Australia.

Maybank Group will also provide the A$100 million (RM307 million) financing for the Imperial Hurstville development.

Maybank Islamic Chief Executive Officer Datuk Muzaffar Hisham had previously said: “The transaction creates an opportunity for Islamic financing to expand further into cross-border and foreign currency space.”

Piety THP Developments Pty Ltd, an equally shared joint venture between TH Properties and Australian partner, Piety Group, did not disclose how it would part finance the other two projects, namely ONE The Waterfront and the proposed project at North Strathfield.

Nonetheless, TH Properties Chairman Datuk Azizan Abdul Rahman said that it might consider rolling back about RM130 million investment that had been approved by the Malaysian Ministry of Finance previously for its next and future developments.

“We may also roll back the over 20% expected margin that we get from our first successful residential project here, The Bay Pavilions,” he said.

Bay Pavilions property development project, located 10 kilometres from the Sydney Central Business District, is also the first TH Properties venture overseas.

Malaysia’s Minister in the Prime Minister’s Department, Datuk Seri Jamil Khir Baharom, said that the size of Islamic banking and finance globally is estimated at US$2 trillion (RM8.5 trillion) and is now a staple in financial centres such as London and Singapore.

“The project may therefore open the door to further overseas investment into Australia,” said the Minister when officiating at the completion of Bay Pavilions recently.

TH Properties’ successful venture in Australia by bringing Maybank along has inspired National Australia Bank Ltd (NAB) to have a series of Shariah-based financing.

Its Associate Director of Islamic Capital Markets, Product and Markets, Dr Imran Lum, said Bay Pavilions’ success story in terms of Shariah-compliant property financing, would be the best recipe to be inculcated in the development and infrastructure sectors in Australia.

It was reported in August this year that NAB has closed its first onshore Islamic financing deal, a A$19.9 million (RM61.09 million) arrangement to fund a real estate purchase by Sydney-based asset manager, Crescent Wealth.

The funding platform designed by NAB, the country’s top 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, the report said.

Islam is the fourth largest religious grouping in Australia.

In 2006 Census, New South Wales alone – where all TH Properties’ projects are located – accounts for 50% of the nation’s Islamic followers.

TH Properties’ venture in Australia, Sydney in particular, started way back in 2013 after it was approached by a soft spoken Lebanese, Bilal El Cheikh, who is the Managing Director of Piety Group.

“I am a Muslim. All these while, I have to get loans from the conventional banks to support my business. It is not halal. I was not happy.

“I pray and ask Allah for directions, the same directions that Allah has given to Prophet Muhammad. Yes. Allah answered my prayers. I found (Lembaga) Tabung Haji,” he said with a smile.

The collaboration between TH Properties and Piety Group began with a residential project in Waitara, Sydney.

It was partly funded by Lembaga Tabung Haji via its subscription in the Shariah-compliant Waitara Property Fund.

“I have a second wife in Malaysia,” Bilal said in jest, referring to his frequent travels to Malaysia for meetings and discussions with the Lembaga Tabung Haji Group.