Closing during COVID-19

In recent articles, I have covered the practicalities of conducting due diligence during a lockdown and my observation that COVID-19 is accelerating human behavioural changes that were already advancing, but now I can share my experiences from recent closings of acquisitions. For during the second half of May we did just that, both in the US and the UK.

Our own 90 North’s mantra of ‘Passion, Precision and Perseverance’ was added to the pragmatism of all parties to get these US$120 million-worth of investments completed, comprising the sellers, finance providers and our Kuwaiti equity partner.

In the US, we returned to the Midwest and acquired the new US headquarters of Ensemble Health Partners, located outside Cincinnati. Our tenant, property and legal due diligence which have been largely completed prior to the pandemic needed to be revisited.

With the tenant being a medical billing management company, a new tenant interview was undertaken to understand what impact (good or bad) the virus was having, with a positive response with respect to the operation of their business and a new 50-page manual of the new codes required for the treatment of COVID-19 patients.

Being acquired prior to completion of final fit-out, provisions were added to the purchase and sale agreement to provide accommodation for any delays due to the lockdown, and of course all of this was then signed off by our US finance provider, all as part of a Shariah compliant structure.

Working through airport and personal lockdowns in Kuwait to get monies moved and documents signed, as well as the practicalities of getting legal documents to US title companies that could only accept overnight couriers rather than delivery in person, the extended team worked to a successful close.

Across the Atlantic in the UK, our focus was on closing out two student accommodation acquisitions, this time in Edinburgh and Leicester.

Comprising 243 beds in total, the main area of focus was on possible disruption to the rental income from students during this summer term and beyond into the 2020/21 academic year. For this, we were able to agree a rental support structure which was easy to describe in concept but devilishly difficult to document to the equitable satisfaction of all parties. But we got there.

And then the practical implications of seller repairs to the property not being able to be completed and signed off were dealt with, seeking to both protect our position but not subject the seller to financially onerous conditions.

All of this achieved with a finance bank needing to return to credit and understandably wanting to reaffirm its position.

Thankfully, the defensive nature of these assets and the commercial structuring applied allowed them to succeed, and certainly made the closings all the sweeter!

As the proverb says: “Where there’s a will, there’s a way.” Great for the Islamic finance world to show what can be done in times of adversity.

This article was first published in Islamic Finance news dated 10th June 2020 (Volume 17, Issue 23)