Saudi developer Jabal Omar to close Umm Al Qura merger deal in 2018

Jabal Omar Development will launch a real estate fund to finance new phases of its Makkah mega project that includes commercial malls, residential properties and hotels. (Courtesy Jabal Omar Development)
Updated 01 March 2018
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Saudi developer Jabal Omar to close Umm Al Qura merger deal in 2018

RIYADH: Jabal Omar Development Co. , one of Saudi Arabia’s largest listed property developers, expects to finalize its merger deal with Umm Al Qura Development and Construction in 2018, a senior company executive said.
The deal, announced in November, is key to strengthening Jabal Omar’s presence in the real estate market of the Muslim holy city of Makkah beyond its flagship project within walking distance of the Grand Mosque to help tap growth in tourism.
“A key objective of this deal is basically to add value to Makkah real estate market,” Faisal Shaker, chief investment and development officer, said in an interview.
“The size of King Abdulaziz road (which Umm Al Qura Co. is developing) is over 6 million square meters (65 million square feet) of built-up area. We aim to close the merger with Umm Al Qura in 2018,” he added.
He said the company was currently working on a valuation for the deal with adviser Goldman Sachs.
In November, local media estimated the merger would create a real estate business with 50 billion riyals ($13.3 billion) of investments.
Pilgrimage to Islam’s holiest sites in Makkah and Medina is the backbone of a plan to expand tourism under Crown Prince Mohammed bin Salman’s economic reforms to diversify the economy away from oil.
The annual Hajj pilgrimage and the lesser year-round pilgrimage known as Umra generate $12 billion in revenues from lodging, transport, gifts, food and fees, according to BMI Research.
The government’s Vision 2030 reform plan aims to accommodate 30 million Umra visitors per year, up from 8 million now.
To finance its working capital, Jabal Omar plans to issue Islamic bonds, or sukuk, in the first half of 2018. Gulf International Bank (GIB) and HSBC are the advisers, Shaker said, declining to give further details.
In November, sources said that Jabal Omar was planning a sukuk sale that could top 4 billion riyals.
The company will also launch a real estate fund to finance new phases of its mega project that includes commercial malls, residential properties and hotels over a total built-up area of 1.66 million square meters.
“We are working on a number of investment products such as the REITs (real estate investment trusts) and funds with various structures, and we are looking to put some assets into income producing funds,” Shaker said.
Jabal Omar will have around 5,000 new hotel rooms in its inventory in 2019. It will start off-plan sales of residential properties once it gets the license from the ministry of housing, probably in 2018, he said.


Oil jumps as market tightens, more gains seen

Updated 10 min 15 sec ago
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Oil jumps as market tightens, more gains seen

  • Brent crude hit its highest since May at $80.47 per barrel
  • Commodity traders Trafigura and Mercuria said that Brent could rise to $90 per barrel by Christmas

LONDON: Oil prices rose 2 percent on Monday as US sanctions restricted Iranian crude exports, tightening global supply, with some traders forecasting a spike in crude to as much as $100 per barrel.
Brent crude hit its highest since May at $80.47 per barrel, up $1.63 or more than 2 percent, before easing back slightly to around $80.40 by 0730 GMT. US light crude was $1.18 higher at $71.96.
US commercial crude oil inventories are at their lowest since early 2015 and although US oil production is near a record high of 11 million barrels per day (bpd), subdued US drilling activity points toward a slowdown in output.
Commodity traders Trafigura and Mercuria said on Monday that Brent could rise to $90 per barrel by Christmas and pass $100 in early 2019, as markets tighten once US sanctions against Iran are fully implemented from November.
J.P. Morgan says US sanctions on Iran could lead to a loss of 1.5 million bpd, while Mercuria warned that as much as 2 million bpd could be knocked out of the market.
The Organization of the Petroleum Exporting Countries as well as top producer Russia are discussing raising output to counter falling supply from Iran, although no decision has been made public yet.
OPEC leader Saudi Arabia and its biggest oil-producer ally outside the group, Russia, on Sunday ruled out any immediate extra increase in output, effectively rebuffing a call by US President Donald Trump for action to cool the market.
“I do not influence prices,” Saudi Energy Minister Khalid Al-Falih told reporters as OPEC and non-OPEC energy ministers gathered in Algiers for a meeting that ended with no formal recommendation for any additional supply boost.
A source familiar with OPEC discussions told Reuters on Friday that OPEC and other producers have been discussing the possibility of raising output by 500,000 bpd.
“We expect that those OPEC countries with available spare capacity, led by Saudi Arabia, will increase output but not completely offset the drop in Iranian barrels,” said Edward Bell, commodity analyst at Emirates NBD bank.
JP Morgan said in its latest market outlook, published on Friday, that “a spike to $90 per barrel is likely” for oil prices in the coming months due to the Iran sanctions.
Struggling with high crude prices and a weak rupee, Indian refiners are preparing to cut back crude imports.