IAF banks on Dubai hotel

The Gulf-based alternative lender has structured junior debt for the new Taj Dubai hotel.

Integrated Alternative Finance, an Abu Dhabi-based private debt provider, has structured and financed a mezzanine debt tranche to back Downtown Investments Limited’s hotel project, Taj Dubai. The AED700 million project ($190 million; €170 million) is roughly split 60/40 between debt and equity, Fawad Khan (pictured), head of the lender, told PDI

The debt financing package for the final phase of construction includes an amortising senior loan with both conventional and Shar’ia-compliant pieces provided by the group of banks that backed early construction; a secured murabaha facility which offers lenders preferred equity in the development; and the conventional mezzanine facility provided by IAF, Khan explained. 

The mezzanine deal has a conventional structure and an interest rate ranging from 12 percent to 17 percent, stepping up over the over five-year lifetime of the bullet repayment loan. The interest is a mixture of cash and payment-in-kind, Khan added. 

IAF is part of the Abu Dhabi Financial Group (ADFG) which also invested in the secured Islamic murabaha via another subsidiary, Qannas Investments. Qannas lent AED4 million of the overall AED52 million murabaha, according to a stock exchange announcement. 

The financing structure, while complicated, meets the needs of the project and is similar to other deals that IAF has structured and financed, Khan said, comparing the deal to IAF’s £50 million mezzanine financing for ADFG’s One Palace Street development.

IAF continues to focus on real estate debt deals in the United Arab Emirates and London, Khan said.

The Taj Dubai is the second Taj hotel in the Middle East. It has 296 rooms and is both in walking distance of and offers an unobstructed view of the tallest skyscraper in the world, Burj Khalifa.

IAF is a wholly owned subsidiary of ADFG and offers financing and structuring of debt packages. The firm has arranged and financed transactions in excess of AED3 billion in the last 12 months, according to a statement.