Purple Urban concludes N5bn Sukuk bond issuance, achieves 100% subscription

Purple Urban Limited, a member of the Purple Group, has concluded its Sukuk bond privately issued to the investing public, raising N5 billion. 

The bond issue, which opened and closed recently, was 100 percent subscribed and has a maturity date of September 1, 2026.

“The Sukuk bonds were issued to finance the construction of 94 out of 112 housing units in an urban residential development of mainly 4 bedroom semi-detached maisonettes and penthouses, as well as 2, 3 and 4 bedroom apartments just off Freedom Way in Lekki Phase 1, Lagos, Nigeria,” the company said.

The company said the lead arranger of the bond issue was Cardinal Stone Partners Limited, while Marble Capital Limited acted as a joint shariah adviser alongside One17 Capital Limited. 

The company added that the Purple Urban Sukuk follows the Sukuk Al-Ijarah concept, which is a lease agreement. 

“A lease agreement in which the owner of a property transfers the legal right to use and derive profit from the property to another person, for an agreed period, at an agreed consideration.  In this instance, for a 5 year period with an option for the lessee (musta’jir) to pay up the consideration (Ujrah) on a fixed term at an agreed return,” it said.

Olaide Agboola, CEO of Purple group, said Sukuk gave an avenue for alternative funding, which the company decided to explore.

“It’s no secret that the investor market has gone through some shocks with the effect of the global pandemic and other perceptions affecting investor confidence. We found that the asset-backed nature and the flexibility of the Sukuk structure especially for real estate gave us the impetus to issue a Sukuk that would ensure investor comfort and confidence,” he said.

Agboola said as of today, it has been 100 percent subscribed, and ”the order book met our expectations”. 

“Considering the current economic climate, we think the Sukuk performed extremely well, as it gave investors an avenue to release funds for a world-class real estate development where the instrument can be properly secured,” he said.

 The CEO revealed that, as part of the company’s upcoming fundraising activities, they are undertaking a series of equity issues commencing with a rights issue, private placement and considering its options in the public market via in an initial public offer through a combination of preference shares and ordinary shares under a REICO structure, as permissible from a regulatory perspective. 

“Both of which we expect to be shariah-compliant amongst other shariah-compliant capital market instruments,” he said.

“Similar to bonds in Western finance, Sukuk is an Islamic financial certificate that complies with Islamic religious law commonly known as Sharia. Since the traditional Western interest-paying bond structure is not permissible, the issuer of a Sukuk essentially sells an investor group a certificate and then uses the proceeds to purchase an asset that the investor group has a direct or partial ownership interest in.”

“The issuer must also make a contractual promise to buy back the bond at a future date at par value. It is a sharia-compliant bond-like instrument used in Islamic finance and it involves a direct asset ownership interest, while bonds are indirect interest-bearing debt obligations.”