Dar Al-Arkan plans to buy foreign properties



REUTERS

Published — Wednesday 21 November 2012

Last update 21 November 2012 4:06 am

| نسخة PDF Print News | A A

RIYADH: Saudi Arabia’s largest listed real estate developer, Dar Al-Arkan, plans to buy assets in Asia as part of its strategy to diversify revenue streams, its chairman Youssef Al-Shelash told Reuters.
Al-Shelash said the company owned just under 35 million square meters (8,650 acres) of land, and in the past it has relied heavily for revenue on sales of land within Saudi Arabia.
Its decision to branch out overseas illustrates how a growing number of Saudi companies, buoyed by the economic boom of the past two years, are looking to diversify abroad.
Outward flows of foreign direct investment from Saudi Arabia hit $ 3.4 billion last year, close to a record $ 3.9 billion recorded in 2010, according to the Arab Investment and Export Credit Guarantee Corp.
“We are targeting some geographical diversification. We have a concentration issue. Most of our assets are in Saudi so we would like to diversify outside Saudi Arabia through a long plan over five to seven years,” Al-Shelash said at the Reuters Middle East Investment Summit.
He said the company was targeting assets outside the Gulf and North Africa, “maybe in Turkey or Asia, Malaysia, Singapore, some stable countries,” and that it would look to buy existing buildings rather than develop new sites.
“We would like to get some stability in the company income,” he said, but said it would likely take five to seven years to generate 40 percent of revenue from rental income, a goal which he said last year would hopefully take three years.
Al-Shelash added the company was still finalyzing a more detailed strategy, which it hoped to have ready early next year.
Dar has enjoyed a dramatic recovery in its fortunes over the past two years, which to some degree mirrors the fortunes of the Saudi economy.
When Dar issued an Islamic bond or sukuk in 2010, investor demand was sluggish and the company had to settle for raising $450 million instead of its target of $ 500-700 million.
This year, however, its sukuk yields have dropped sharply and its share price has jumped 14 percent, far outperforming a 4 percent gain by Saudi Arabia’s main stock index — although the stock’s value is still less than a quarter of its 2007 peak.
Although Dar is not explicitly backed by the government, official action has convinced investors that authorities would like to see the company succeed.
Last October, the country’s Public Investment Fund approved a SR 4 billion ($ 1.1 billion) facility to finance one of Dar’s biggest projects, the Qasr Khozam development in Jeddah, estimated to cost SR 12 billion.
The company now has outstanding debt of around SR 4.4 billion, with sukuk of SR 750 million and SR 1.69 billion maturing in May 2014 and February 2015 respectively. It also has short-term murabaha Islamic loans with local and international banks, which it plans to roll over.

Dar, which posted third-quarter net income of SR 867 million, paid off a $ 1 billion sukuk in July this year after selling land.
Al-Shelash said the sukuk maturing in 2014 and 2015 could be paid off through company earnings without selling assets and would not be rolled over, adding that the company was waiting to see the impact of the US “fiscal cliff” on international debt markets before it would consider raising more money.
Al-Shelash said it was too soon to predict the impact of the mortgage law on the real estate sector, but that it was likely to increase prices as lenders eventually gained confidence in the regulatory system and more consumers gained access to financing.
“It will add new additional demand. It will also make the price...to be a little bit up,” he said. He added that he was not sure what the direct impact would be on Dar’s business.
Although the cabinet approved the law in July, details have yet to be made public by the central bank.
Analysts have said most housing demand in Saudi Arabia is among lower-income Saudis, while many developers have tended to focus on building more expensive properties which yield higher profits. Rising land prices mean it is sometimes more profitable for firms to simply trade land than to build low-cost houses.
Al-Shelash said a housing-loan company partly owned by Dar would likely focus on the upper-middle segment of the housing market.

What's happening around Saudi Arabia

JEDDAH: Social media is abuzz with the news of an 80-year-old man who has been relieved of his duties after working for four decades at the Prophet’s Mosque. Citizens have launched a campaign for the man, identified as Moqtada by publishing his photo...
DAMMAM: The World Heritage Committee of the UN Educational, Scientific and Cultural Organization (UNESCO) has added the rock art in Hail to the World Heritage List. The addition was made during the committee’s 39th session in Bonn, Germany, and becam...
Huge projects change the faces of cities and great ambitions help create such projects. Madinah had its date with a quantum leap to usher in a new era of urban development. Such huge projects help achieve formidable civilization advancements and sign...
RIYADH: The Japanese ambassador to the Kingdom, Noriheiro Okoda, has held a meeting with Hashem Abdullah Yamani, president of the King Abdullah City for Atomic and Renewable Energy (K.A.CARE), and discussed bilateral cooperation in the fields of atom...
AL-BAHA: Forty three percent of Al-Baha cannot be developed easily because of the region’s mountainous terrain.This is the view of Khaled Al-Sayegh, undersecretary for construction at the municipality, who was speaking at an event held at the College...
JEDDAH: An official at the Council of Saudi Chambers said the council’s members are discussing a regulation to submit to the Ministry of Labor and other government agencies to deny a number of privileges to companies that force its labor to work unde...
ABHA: With many families wanting new furniture during Ramadan, furniture and interior decorating shops are raising prices to more than double what they were before the month.Homeowner Zaina Mohammed says she used to change her home furniture every Ra...
RIYADH: Saudi Commission for Tourism and National Heritage (SCTNH) President Prince Sultan bin Salman described the first visit by Custodian of the Two Holy Mosques King Salman to Madinah as “historic.”In his comments following the visit which saw th...
MADINAH: Economists expected the volume of investments in Madinah’s economies during the coming few years to reach SR500 billion.The forecasted growth in the population, to reach 2.6 million people after 25 years, and the number of visitors to 12.2 m...
JEDDAH: It seems that many Saudi families are gradually coming to terms with the new reality of living in apartments, as building villas is not possible due to shortage of appropriate land.With the increasing display of housing units by the Ministry...
RIYADH: Migrant rights advocacy group Migrante-Middle East (M-ME) has lambasted their country’s leadership over the claim that the number of overseas Filipino workers are declining due to sustained economic growth in the Philippines.The group has cal...
RIYADH: A charitable foundation called “Smile” will be launched on Sunday night at the Al-Hokair Land in the Saudi capital to make people happy. “The foundation will be launched to make Saudi Arabia a center of smiles,” well-known television host and...
MAKKAH: The Kingdom has seen a sharp rise in the number of Umrah pilgrims to around 6 million from 1.5 million in the last 16 years. Moreover, the number of pilgrims overstaying their visas has come down to about 1 percent. The Ministry of Haj has be...
RIYADH: The King Khalid Foundation (KKF) said here recently that it has financed small enterprises (SMEs) run by 130 widows in some of the Kingdom’s provinces.KKF hosted an iftar party last week for local media at its headquarters in Riyadh at which...
JEDDAH: Prince Abdullah bin Abdul Aziz bin Musaed, governor of the Northern Borders province, has died.He will be buried after Taraweeh prayers in Jeddah on Saturday, the Royal Court said in a statement carried by the Saudi Press Agency. No other det...

Stay Connected

Facebook