MORABAHA OFFER
TERM SHEET
June 2008
This document summarizes the terms and conditions for participation in a specialized Morabaha pool investing in the development of residential-cum-commercial tower (‘the Dar Tower’) in a prime city centre location in Dar es Salaam, the commercial capital of Tanzania. The project is being promoted by Integrated Property Investments (T) Ltd (‘IPITL’). The opportunity is to invest in Islamic Morabaha financing pool to fund purchase of construction materials by IPITL, the Promoters. The offer is open only to a select group of investors with the required experience to consider similar investments.
Dar City Centre Dar Tower
The Dar Tower is to be constructed on 1-acre plot located next to Movenpick Hotel, a well known five-star hotel. It is a corner plot bordered by two main roads on two sides and an exclusive golf course club, Gym Khana, on the other. A number high rise towers are currently built in the proximity of the site. For example, another 25-floor building is now constructed on the former Red Cross site across the road while a similar tower to be known as Uhuru tower is being built just 250 meters away. The more established towers in the area include Barlcays House, the head office of Barclays Bank, the PPF tower owned by the Parastatal Pension Fund but used by number of banks and international organizations. A number of other high-profile companies and government agencies are located nearby, which explains why the demand for commercial and residential accommodation in the area is very high.
The proposed Dar Tower is a 25-floor mixed-use development with one level underground parking. The ground floor and mezzanine will be used for retail purposes. This will be followed by 10 floors of office space and 10 floors of residential. There will be gym with a swimming pools and coffees shops as wells. The Dar Tower is designed to serve the business community who would like to take apartments and office in the same place. The residents of Dar es Salaam can understand the importance of having all these amenities in one place at the city centre. Traffic congestion and heat are major problems in Dar, therefore having all your working and an amenity in one air-conditioned place is a major advantage for the business community. With a five-star hotel and a golf course next door, and all other banking, commercial and government offices within a walking distance, the Dar Tower is designed to provide an idyllic atmosphere to work, live and entertain. This plot is highly sought-after by companies and wealthy individuals who all competed with IPIT to own it.
The plot is acquired by IPIT through a negotiated joint venture with Nyumba Sanaa, arts and culture trust, which previously owned it. IPIT’s share in the joint venture is 75% and will have full responsibility to construct and manage the building. Nyumba Sanaa share is 25% to represent the value of their land and other services they are providing. There is no time limit to the joint venture, which means IPIT will not be obliged to surrender the property to Nyumba after certain period as the case is with Build Operate and Transfer (BOT) ventures.
Promoters
The Dar Tower is promoted by a group of experienced businessmen and international institutions with track record of initiating and successfully completing development projects in Europe, Arabia and Africa. These promoters are listed below:
- Integrated Property Investments Ltd, UK.
- Russell Woods / Saudi Binladen Group (SBG), UK, Saudi Arabia
- Permal Hedge Fund, NY, USA
- Sheikh Yusuf Al Hajiri and Sons, Kuwait
- Former IMF Country Director,
- Others
The Project Status
We have signed a Joint Venture (JV) Agreement with Nyumba Sanaa, the former owners. Under the terms of the JV, IPITL will own 75% of the completed project. IPIT will seek building permits, assemble professional team, mobiles funds, and hire a contractor. It will also start a marketing campaign through TV, bill boards and distribution of brochures to solicit buyers and tenants for the units at the site.
The Economics of the Dar Tower
A complete feasibility study is being prepared and will be ready by the 20th of June. However, the preliminary figures indicate a highly profitable venture as shown below:
| Description | Unit Value | Value In USD |
|---|---|---|
| Sale of apartments (75 apartments) | 425,000 | 31,609,375 |
| Sale value of Office building 14,875 sqm. | $15 per sqm rent per month capitalized at 8% | 33,450,000 |
| Sale value of the retail net area of 3000 sqm | $15 per sqm rent per month capitalized at 8% | 6,693,750 |
| Total GDV | 71,753,125 | |
| Total cost of construction 45,500 sqm | $1000 | 45,500,000 |
| Net profit | 26,253,125 | |
| Profit Margin on GDV | 36.5% |
Morabaha Terms
The offer is for a few select investors (not more than 5) to pool a sum of money in a managed account and make these funds available to IPIT. IPIT will use the funds to buy construction materials from local as well as foreign markets. The transaction will be structured in accordance with Islamic Sharia principles. This morabaha is not intended to fund the construction of the whole building, but just to prepare the site for construction and stock some needed materials. A more detailed offer will be made to finance the actual construction of the site, and it will be made available once the full feasibility study is completed. The basic terms and conditions of the offer are as follows:
| Morabaha Pool Amount | US$ 1.000.000 (One million five hundred thousand) |
|---|---|
| Beneficiary | Integrated Property Investments (T) Ltd (‘IPITL’), a property development company currently developing the Dar Dar Tower Project. |
| Investors | Not more than 5 High Net Worth individuals or institutional investors with proven knowledge and sophistication to understand and undertake investments in the emerging markets. |
| Mode of Investment | Investors will pool funds into a Managed Account with a Designated Manager who will in turn invest the funds in Islamic Morabaha transactions with the Beneficiary. |
| Designated Manager | The Designated Manager is Ascot Palace Ltd, an offshore company registered in the BVI owned and controlled by the Beneficiary (IPITL). |
| Pooling Process | Two or three select investors will transfer a total of US$ 1.5 Million into the bank account of Ascot Palace Ltd as below:
Account name: Ascot Palace Ltd Bank Name: HSBC Bank Address: 19 Grosvenor Place Hyde Park Corner London SW1X 7HT Sort Code: 40 05 15 Account number: 59783886 The pool will be managed by ASCOT PALACE which is fully owned and controlled by the Principals of IPITL, the Promoters. |
| Purpose | Purchase of construction materials for phase 1 of 25-floor Dar Tower. |
| Term | 1 year (renewable for a maximum one more year at the option of the Investors). |
| Profit Margin | 20% p.a. (net of all expenses). Same profit margin applies if financing is extended for another year. |
| Risks | The investment will have priority payment over shareholders’ equity and preferred equity. Therefore, this should not be seen as an equity investment which is riskier. The main risk associated with this investment is the credit risk of IPITL, which is minimal. IPITL has the resources and assets to honor its financial commitments to creditors.
IPITL intends to repay the morabaha from a more permanent funding of the project but not from the sales of the houses. These funding arrangements are negotiated medium term financing from lending institutions, pre-sale installments or equity solicitation currently planned in the form of Private Placement in this year, 2009. |
| Currency | US Dollars |
| Governing law | The laws of the United Republic of Tanzania. |
| Repayment | In lump sum with profit after 12 months |
| Further Information | Further information can be received from Suleiman A. Dualeh, the Managing Director of IPITL at the following address:
Plot No. 27, Email: suleiman.dualeh@ipitz.com Fax: +255222650707 |
……..
Annexes
* Commitment letter draft
* Profile of IPITL
* Design of a 25-floor apartment-cum-office Dar Tower in Dar city center (in the pipeline).
