KUALA LUMPUR: RHB Bank's Singapore branch completed the world’s largest Islamic bilateral hotel financing deal with the Royal Group, for a five-star luxury hotel valued at S$300mil (RM888.72mil).
It said on Wednesday the Singapore-based Royal Group is involved in the development and management of real estate primarily in the Asia Pacific region.
“The deal involves the five-star SO Sofitel Singapore Hotel, as the underlying asset, marking this deal as one of the largest Islamic hotel financing transactions globally,” it said.
This deal also marks Singapore’s first Islamic bilateral hotel financing transaction and the first Islamic real estate financing in Singapore’s core central business district.
RHB Bank explained the rarity value of this deal was that hospitality-related assets were used for Islamic financing, which in the past was considered taboo as not all income is deemed to be Shariah compliant.
It pointed out in the past, hotel businesses were considered Shariah compliant if sales of alcohol did not exceed more than 20% of total revenue.
In April 2016, the Shariah Advisory Council of the Securities Commission Malaysia, resolved that the 20% rule is no longer applicable as the main purpose of operating hotels and resorts is to provide accommodation.
RHB Bank Singapore head of Islamic banking Nazmi Camalxaman said: “RHB Bank Singapore is focusing on a niche and targeted market for Islamic financing.
“We see hospitality assets as one of the best performing real estate classes in Singapore and we will continue to remain aggressive in this sector from a financing perspective”.
Nazmi said the market consensus was that there would be a diminishing new supply of hotels in Singapore, particularly after 2020.
He also pointed out that for the first time in five years, the government is expected to launch a site for hotel rooms as part of its Government Land Sales (GLS) programme in September 2018 amid a positive tourism outlook.
The bank's optimism in this sector was due to the combination of dwindling hotel stock while there was a national target for international visitors to reach 20 million per annum by 2020, he said.
Royal Group of Companies co-chairman Bobby Hiranandani, said, “Embarking on this deal with RHB Bank is an exciting journey. This is our first Islamic financing facility and it shows that the Group is open to alternative financing so long as the economics makes sense”.
SO Sofitel Singapore is a 134-room hotel located in an iconic historical building at the heart of the CBD built in 1927.
The hotel opened its doors in 2013 and is one of the most popular hotels in downtown Singapore uniquely attracting both business travellers and tourists.
The Royal Group of Companies was established in 1947 and their portfolio includes a wide range of properties with an enterprise value of over S$4bil.
The group currently owns seven hotel assets of which four are in Singapore including SO Sofitel Singapore and Sofitel Singapore Sentosa Resorts & Spa.
Overseas, the group’s hotel portfolio comprises of DoubleTree by Hilton and Hilton Garden Inn both in Kuala Lumpur. The group also has five hotels in its pipeline in Singapore, Maldives and Malays