Sharia-compliant funding is coming to Texas.
BMO Harris and Synovus Bank provided $200 million in Sharia-compliant financing for a portfolio of medical practices joint venture between Dallas-based Big Sky Medical and Bahraini investor GFH.
The financing involved the joint venture’s purchase of 13 medical offices and healthcare facilities in seven states for over $400 million. The buildings are used by healthcare providers such as Children’s Wisconsin, Beaumont Health, Texas Health Resources, UPMC and Women’s Care Florida.
The lender provided the financing in various tranches through June and July. A portion of the portfolio was acquired with cash so the debt was placed upon closing while the remainder of the portfolio was acquired with funding from BMO Harris and Synovus Bank.
Newmark’s John Nero and Ben Appel brokered the deal.
According to Nero, Sharia-compliant financing was a prerequisite for the GFH.
Islamic law prevents usury or paying interest on a loan, so Islamic banks often buy the asset and then sell it back to the borrower at a higher price, usually paid in installments, in a structure known as a murabaha. In the case of the doctor’s practice takeover, the financing was designed as a master lease, since lease payments are technically more rent than interest.
Sharia-compliant financing is nothing new in the US real estate market. Notably, Sharif El-Gamal used the model for his luxury housing development in Tribeca at 45 Park Place when he received a $162 million loan from Malaysian bank Maybank in 2016.
While such arrangements can facilitate huge investments in real estate projects by petrodollar-rich institutions, Sharia-compliant financing can also complicate the already complex relationship between the lender and borrower involved in a difficult project.
Four years after securing its financing, El-Gamal faced foreclosure on its 200-meter-tall condominium tower and went to court alleging that Maybank “failed to act in accordance with Sharia principles,” which constituted a “raised standard of good faith and Good faith” requires fair trade.”
GFH is headquartered in the financial port of Bahrain and has over $15 billion in total assets and assets under management, according to its website.