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INTERNATIONAL FINANCE: A bridge of understanding

Given the events of Sept. 11 and the ensuing U.S.-sponsored war on global terrorism, the world's attention is now focused on the threat posed by violent, radical Islamists. Most Muslims, of course, roundly condemn terrorism and have been deeply saddened by the attacks and their aftermath. In this time of increased tension, then, the importance of moving beyond stereotypes and misunderstandings cannot be overstated.

Doing business together is one of the best ways to build that bridge of understanding.

Islamic investors represent a huge, although as yet relatively untapped, source of real estate investment capital. And while at present most of their real estate investments are in the multifamily sector, observers say there is no reason why more shopping center ventures can't be successfully undertaken. It will take more than a solid concept, however; many Islamic investors are guided by religious and social customs that are thousands of years old. These customs must be respected and adhered to if a planned retail development is to come to fruition.

Religion-based investments

The cultural and religious tenets of Islam dictate what Islamic investors can and cannot do. For example, according to Islamic law, or Shari'ah, making money from money (i.e., charging interest) is unacceptable. In addition, no material part of the sales of a project (read: shopping center) can consist of the sale of goods prohibited by Islam, such as alcohol, conventional banks that charge interest, or gun shops.

So how in the world could an Islamic institution or family invest in a shopping center? With great care and planning, explains Don Knight, senior partner in the Atlanta law firm of King & Spalding and co-chair of its Islamic finance and investment group. “Significant Islamic investors would have a Shari'ah advisory committee,” he explains. “Each differs in its views, so there are interpretations and degrees of flexibility. So, for example, in the case of a restaurant where alcohol sales were incidental you might or might not have a problem.”

But what about paying interest on financing? “You can arrange financing and documentation for what amounts to an Islamically acceptable mortgage,” Knight explains. “If you have a lease that is a finance lease, where at the end of the lease the tenant has paid all of the rent and owns the property, it's actually a financing in American eyes but acceptable for Islamic purposes.”

This can be more complicated than it first appears. For example, according to Shari'ah law, the owner must bear the risk of property damage, while under a typical U.S. finance lease that responsibility resides with the tenant. However, that obligation can be “carved out” of the lease and a side agreement created involving the use of an agent responsible for repairs, notes Knight. In addition, creative solutions can be devised if certain tenants are deemed not acceptable. For example, you could possibly “condominiumize” the shopping center.

“It is probably worthy of note that a lot of major lenders in the United States have come to the conclusion that they can document their financings of real property in a way that is Islamically acceptable and be as well protected as they would have been under normal secular financing,” says Knight. These institutions include Bank of America, CitiBank, Key Bank of Cleveland and Freddie Mac.

The lead Islamic investors, Knight says, are based primarily in the Arabian Gulf area. They include First Islamic Investment Bank, Kuwait Finance House, and Abu Dhabi Islamic Bank. “There are also a number of high-net worth families whose investment appetite is clearly the equivalent of most institutions,” he adds.

Getting off on the right foot

Because of the significant role religion and social customs play, the potential success or failure of your investment can be sealed within a few minutes: with an Islamic investor, you truly only have one chance to make a first impression, says Michael Lee, CSP, president of Seminars Unlimited, a multi-cultural consulting firm in Castro Valley, Calif.

When it comes to meeting and greeting, Lee says, “If you do that wrong, they don't care how much money you have or how attractive you are; if you offend them, they will not do business with you.”

As Americans, “we assume everyone wants be greeted with a firm handshake,” Lee notes. “Let them take the lead; see what they do and you do likewise. They may shake your hand and grab it with both hands, or they will often nod at you.”

One of the biggest issues, he says, is personal space. “In America, we drop our hands and stand a few feet apart. In Islamic countries, they stand very, very close. They have a saying: ‘When I'm talking to a friend I want to feel your breath on my cheek.’ If you back up, they will chase you all over your office.”

Small talk is encouraged. “To us, time is money,” Lee notes. “In the Islamic culture, time is for building relationships. It's really important to spend your time talking about things other than business — family and children are absolutely appropriate, but wives are not. You never want to ask about the woman, if one is with them; don't shake hands, just nod in their direction.”


“Their social and religious tenets are not negotiable,” adds Ronald A. Altoon, partner in Altoon + Porter, Architects LLP, of Los Angeles. “There are multiple layers of relationships that you are invited into; don't force yourself in. Initially, there will be a purely business relationship. They will make the gestures that will invite you into a first-name basis, a meal, a more casual setting. It's entirely up to them.”

Altoon, whose firm has worked in the Middle East since 1977, also notes that the Islamic attitude toward time extends to real estate. “They don't care about the time value of money,” he explains. “Getting it right is more important.”

Steve Lewis is an Atlanta-based writer.

Designed with Islam in mind

Even in the heart of Saudi Arabia, creative designers have shown it's possible to satisfy Islamic religious concerns while creating a shopping center that will meet the diverse needs of its patrons.

Kingdom Center, currently under construction in Riyadh, is being developed for HRH Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud. The mixed-use project will include a hotel, offices, luxury residential apartments and two base wings that will house a conference, exhibition and wedding hall, sports club, and business center on one side and a three-level, 450,000-sq.-ft. shopping center in the other. The fully leased center is anchored by Saks Fifth Avenue and Debenhams (U.K.)

It is the center's design that is most unique. “We designed the third level exclusively for women,” notes Ronald Altoon, partner in Altoon + Porter, Architects LLP of Los Angeles — one of three architectural firms working on the project. This level includes a business center, a spa and a theme restaurant. “Here, the women can remove their veils and walk around in jeans and T-shirts, and so be unencumbered by physical garb,” explains Altoon.

This “women-only” shopping area, unique in the Middle East, also includes the top floor of each of the department stores, and a play area for children. “This way, the women can spend the entire day there,” says Altoon.
— Steve Lewis

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