RHB Bank branch inks Islamic bilateral hotel financing

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KUALA LUMPUR (July 11): RHB Bank Singapore (RHB BS), a branch of Malaysia’s fourth largest banking group RHB Bank Bhd, has inked the world’s largest Islamic bilateral hotel financing deal with the Royal Group, for a SG$300 million 5-star luxury hotel.

In a statement today, RHB said the deal involves the 5-star SO Sofitel Singapore Hotel as the underlying asset, marking this deal as one of the largest Islamic hotel financing transactions globally.

“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,” it said.

RHB BS head of Islamic banking Nazmi Camalxaman said the bank 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”.

“Our optimism in this sector is due to the combination of dwindling hotel stock and the fact that there is a national target for international visitors to reach 20 million per annum by 2020,” he said.

In the past, hotel businesses were considered Shariah compliant, if sales of alcohol did not exceed more than 20% of total revenue.

However, in April 2016, the Shariah Advisory Council of the Securities Commission Malaysia resolved that the 20% rule is no longer applicable, as the main purpose of operating hotels and resorts is to provide accommodation.

“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 (CBD),” RHB said.

Located within an iconic historical building at the CBD, SO Sofitel Singapore opened its doors in 2013 with 134 rooms, attracting both business travellers and tourists.

Meanwhile, Royal Group of companies co-chairman Bobby Hiranandani said the group is open to alternative financing, so long as the economics makes sense.

“This is our first Islamic financing facility,” he said.

Established in 1947, Royal Group portfolio includes a wide range of properties, with an enterprise value of over SG$4 billion.

At midday break today, RHB Bank fell 5 sen or 0.94% to RM5.28 with 50,700 shares traded, giving it a market capitalisation of RM21.17 billion.