Red Sea Project set to secure new financing, launch off-plan sales: CEO

Red Sea Project set to secure new financing, launch off-plan sales: CEO
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John Pagano, CEO of The Red Sea Development Co. (Supplied)
Red Sea Project set to secure new financing, launch off-plan sales: CEO
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The Red Sea Project was announced by Crown Prince Mohammed bin Salman in July 2017. (Supplied)
Red Sea Project set to secure new financing, launch off-plan sales: CEO
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Upon full completion in 2030, the Red Sea Project will comprise 50 hotels offering up to 8,000 hotel rooms and 1,300 residential properties across 22 islands and six inland sites. (Supplied)
Red Sea Project set to secure new financing, launch off-plan sales: CEO
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Upon full completion in 2030, the Red Sea Project will comprise 50 hotels offering up to 8,000 hotel rooms and 1,300 residential properties across 22 islands and six inland sites. (Supplied)
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Updated 13 February 2021

Red Sea Project set to secure new financing, launch off-plan sales: CEO

Red Sea Project set to secure new financing, launch off-plan sales: CEO
  • John Pagano: PIF-backed tourism megaproject is ‘going to open up huge investments’

JEDDAH: Wednesday’s launch of the dolphin-shaped Coral Bloom luxury island project is just one part of the rapid development taking place along Saudi Arabia’s Red Sea coast, with the main developer behind the project close to finalizing $3.7 billion in investment from local banks, and off-plan sales set to begin in the second quarter of this year.

In an exclusive interview with Arab News, John Pagano, CEO of The Red Sea Development Co. (TRSDC), confirmed that off-plan sales of real estate units will begin in the second quarter, but will be at a limited capacity of around 300-400 units.

The majority of the units sold in the first phase will be placed in the rental pool for guests, he said.

TRSDC is wholly owned by Saudi Arabia’s Public Investment Fund (PIF) and its main focus is the Red Sea Project, which was announced by Crown Prince Mohammed bin Salman in July 2017.

Work at the project site is well underway, and the developer last year announced it had awarded approximately $4 billion worth of construction projects in 2020.

Pagano confirmed that the first four hotels, and an international airport, will open by the end of next year.

Twelve more hotels are scheduled to open before 2023, and upon full completion in 2030, the project will comprise 50 hotels offering up to 8,000 hotel rooms and 1,300 residential properties across 22 islands and six inland sites.

On Wednesday, the crown prince launched the Coral Bloom development as part of the Red Sea Project.

Designed by the world-renowned British architectural firm Foster + Partners and located on project’s main island, it will be the world’s fourth-largest barrier reef system.

During the design of Coral Bloom and the wider Red Sea Project, Pagano said the emphasis was very much on preserving the location’s unique surroundings.

With no more than 22 islands selected for development out of more than 90, the CEO stressed the importance of keeping the pristine nature intact, and the construction crew will “work around the area’s unique biodiversity to positively enhance the area.”

In January, Pagano was also appointed CEO of Amaala, a 4,000 sq. km. luxury tourism project located roughly midway between the gigantic NEOM development to the north and the port city of Jeddah further south.

Both the Red Sea Project and Amaala are backed by the PIF, and Pagano said of the $3.9 billion capital equity already provided by the sovereign wealth fund for the development of both projects, $1 billion have been spent so far.

He confirmed that another $3.7 billion will be provided by local Saudi banks and will be concluded soon, bringing the total capital across both projects to $7.8 billion.

While the projects have received backing from local developers and lenders, Pagano said he is keen to tap into the international investment market, but is aware that many will first need proof of concept before they sign on the dotted line.

“Investors have choices, as you’ll appreciate, and they’ll apply different risk premiums depending on their perception of risk,” he said, adding that while it is currently an “an untried and unproven market,” he is optimistic that when international investors get to see the Red Sea Project and the government’s plans for the area, they will come on board.

“We’re creating an environment that’s conducive for people to come and invest with us,” he said. “My razor-sharp focus is to deliver the first phase of the Red Sea Project, deliver the first phases of Amaala, and prove to the world what Saudi Arabia has to offer,” he added.

“As we get to that stage and they start to see the successes, I think it’s going to open up huge investments.”

With off-plan sales set to launch in the second quarter, Pagano stressed that there will be great opportunities for pioneer investors, and “early movers should make more money in the long run.”

 

 

While the two projects will have 11,000 hotel rooms in total — 8,000 at the Red Sea Project and 3,000 at Amaala — Pagano is targeting no more than 1 million visitors per year.

“We’re not looking for mass tourism … We’re going to limit the number of visitors. Why? Because we want to protect the environment,” he said, adding that the location is the company’s biggest asset. “It sits on our balance sheet in the same way as our capital does.”

An example of TRSDC’s bid to adopt the best possible environmental credentials is the fact that it has already completed the first stage of platinum certification as part of the Leadership in Energy and Environmental Design (LEED for Cities) industry award certification.

The company is also working with the US Green Building Council to ensure that the natural environment is protected and enhanced during the construction period and beyond.

“We want to lead the world through example, not just words. There’s a different way that you can approach development: Don’t take your natural capital for granted,” Pagano said.


Customers in Saudi Arabia still prefer visiting supermarkets: BinDawood CEO

Customers in Saudi Arabia still prefer visiting supermarkets: BinDawood CEO
Updated 07 May 2021

Customers in Saudi Arabia still prefer visiting supermarkets: BinDawood CEO

Customers in Saudi Arabia still prefer visiting supermarkets: BinDawood CEO
  • Pandemic food supplies maintained, no panic buying in Saudi Arabia as retailer’s profits rose 7 percent

JEDDAH: When the coronavirus disease (COVID-19) pandemic lockdowns started in early summer last year, media reports about stockpiling became common place.
Industry data in the UK showed that in one week in March, at the start of the first lockdown, sales of toilet paper surged 64 percent, while flour was up 73 percent, and pasta 55 percent.
While memes of toilet-roll stockpiling began trending on social media, in Saudi Arabia this did not occur, according to Ahmad BinDawood, CEO of BinDawood Holding, one of the Kingdom’s biggest supermarket operators.
He told Arab News: “We have seen some of the pictures of what was happening around the world. The operation level that happened here, especially from the government side and us as retailers, and from the customers’ side, was amazing.
“There was no shortage, we made sure that there were enough supplies always in the market and customers were also responding to that positively.
“If they don’t need something they won’t buy it. They weren’t doing any excessive buying. It was a smooth flow of goods coming to the market. The supply was there, and we have successfully passed the difficult times of 2020,” he said.
With people spending more time at home, the digital revolution was sent into overdrive. Luckily, BinDawood had invested in its online presence four years ago. “We immediately responded to the changes that were happening with consumers when it came to shopping.”
He noted that customers made fewer visits to physical stores but purchased more items online.
“What we have seen from customers during the pandemic was they have started coming less frequently, but with bigger basket sizes; that was one of the major changes. Second, customers preferred buying their ingredients and cooking at home to avoid possibly contaminated food. We responded immediately to the ingredients that the customers were looking for in our social media platforms,” he added.
While the company’s online orders soared, BinDawood pointed out that Saudi consumers still preferred going to a physical store.
“The primary way that the customer prefers to shop is actually visiting the stores, not through online. Online shopping is still going to be good for the future but so far we see that the customer prefers to shop in stores to have that experiential element when they come,” he said.
Uncertainty surrounding the COVID-19 pandemic did not impact the firm’s balance sheet. In March, BinDawood Holding Co. reported a net profit after Zakat and tax of SR447.7 million ($119.39 million) for 2020, up 7 percent year-on-year.
The family business opened its first supermarket in 1984, having previously operated gift shops and perfumeries targeting pilgrims.
“The first supermarket was opened by my father and my uncles and that was in Makkah under the brand name BinDawood, and then from there we expanded and opened different stores within the city of Makkah.
“We then moved to Jeddah, then Madinah, and the acquisition of Danube took place in 2001.”
With the two brands, BinDawood and Danube, BinDawood Holding has a network of 74 stores in 15 cities throughout Saudi Arabia. In 2019, the company announced plans to reach 100 stores by 2024, meaning an average of five to six stores per year. It is now looking at opportunities for expansion in terms of product offerings and within different formats.
In December, BinDawood revealed that its first international Danube store outside the Kingdom would be located in Bahrain. The 5,305-square-meter hypermarket in the Al-Liwan Project is expected to open its doors to customers on Oct. 4.
The company also has wider international plans, and according to a Bloomberg report was looking at possible acquisitions in neighboring countries.


Nintendo profits boom on healthy sales of its Switch as people stuck at home play games

Nintendo profits boom on healthy sales of its Switch as people stuck at home play games
Updated 07 May 2021

Nintendo profits boom on healthy sales of its Switch as people stuck at home play games

Nintendo profits boom on healthy sales of its Switch as people stuck at home play games

TOKYO: Nintendo Co.’s profit for the fiscal year that ended in March jumped 86 percent on healthy sales of its Switch handheld machine as people stayed home due to the pandemic, turning to video games for entertainment.
Annual profit for the Japanese maker of Super Mario and Pokemon games totaled 480.4 billion yen ($4.4 billion), up from 258.6 billion yen the year before. The results, released Thursday, were better than the company’s internal profit forecast of 400 billion yen ($3.7 billion).
Sales rose 34 percent to 1.76 trillion yen ($16 billion), the company said.
In game software sales, demand remained strong for “Animal Crossing: New Horizons,” with 20.85 million units sold for cumulative sales of 32.6 million units. “Mario Kart 8 Deluxe” and “Ring Fit Adventure” also were popular.
Kyoto-based Nintendo said digital downloads for the Switch also did well, helping to support its bottom line.
But Nintendo said it didn’t expect such good fortune to persist through the current fiscal year, which ends in March 2022. It is forecasting a 29 percent drop in profit to 340 billion yen ($3 billion).
Nintendo said it has attractive games in the works, including a collaboration in the mobile sector with Niantic on an application featuring Pikmin for smart devices. It expects to release that in the second half of 2021.
Other software titles planned for global release later this year include “Mario Golf: Super Rush,” and “The Legend of Zelda: Skyward Sword HD.” A new Pokemon game is planned for late 2021, according to Nintendo.
Nintendo is among companies that have thrived during the pandemic, which is wreaking havoc on the global economy overall.
Its Super Nintendo World theme park in Osaka, Japan, built with Universal Studios, opened in March after a delay due to the pandemic. But it closed soon afterward because Osaka is one of several areas under a state of emergency due to a surge of new coronavirus cases.
The state of emergency began last month and is certain to be extended beyond its May 11 end, as all such large-scale facilities are being asked to close.


Renewables set to grow far faster than oil sector

Renewables set to grow far faster than oil sector
Updated 07 May 2021

Renewables set to grow far faster than oil sector

Renewables set to grow far faster than oil sector
  • Models show renewables meeting 74% of total energy demand by 2050

OSLO: Renewable energy will account for a far larger share of global supply in 2050 than major oil companies or the International Energy Agency (IEA) expect, Oslo-based consultancy Rystad Energy said on Thursday.
Its updated models show renewables meeting 74 percent of total energy demand by 2050, compared to 43 percent, 45 percent and 69 percent in the most aggressive scenarios from energy firms Equinor, Shell and BP.
The IEA expects renewables to account for 35 percent of the market by 2040.
The renewed commitment to the Paris climate agreement by the US this year, the growing number of countries with net zero carbon emissions targets for 2050 and renewable technology development have changed the energy landscape, Rystad CEO Jarand Rystad told an online conference on Thursday.
“All previous assessments have to be scrapped and we need to look at it with completely new eyes,” he said.
Rystad Energy sees the sales of battery electric vehicles (BEVs) rising to 64 million by 2030, compared with oil company scenarios ranging from 22 million to 38 million and an IEA estimate of 30 million.
Rising renewable energy output amid falling costs and increasing efficiency of solar panels and wind turbines, as well as sales of electric vehicles have also hastened predictions for peak demand for oil and gas.
Rystad Energy said last month it expected global oil demand to peak at 101.6 million barrels per day (bpd) in 2026, versus a forecast made in November for a peak in 2028 at 102.2 million bpd.
With an increasing share of energy being produced by solar and wind power, the global energy trade, dominated by the fossil fuels today, is going to shrink significantly, it predicts.
“We are going to de-globalize the energy market with the new technologies,” Rystad said at Thursday’s conference.


Saudi public debt up 5.6% to $240.4bn in Q1 2021

Saudi public debt increased about 5.6 percent during the first quarter of this year nearly amounting to SR901.4 billion ($240.4 billion). (Shutterstock)
Saudi public debt increased about 5.6 percent during the first quarter of this year nearly amounting to SR901.4 billion ($240.4 billion). (Shutterstock)
Updated 06 May 2021

Saudi public debt up 5.6% to $240.4bn in Q1 2021

Saudi public debt increased about 5.6 percent during the first quarter of this year nearly amounting to SR901.4 billion ($240.4 billion). (Shutterstock)
  • he debt grew by 24.6 percent compared to the same period in 2020, which amounted to SR723.46 billion

RIYADH: Saudi public debt increased about 5.6 percent during the first quarter of this year nearly amounting to SR901.4 billion ($240.4 billion), compared to the end of the fourth quarter of last year.

This recorded the fastest growth rate since the second quarter of last year, which was caused by the pandemic repercussions, Al Eqtisadiah reported.

The debt grew by 24.6 percent compared to the same period in 2020, which amounted to SR723.46 billion.

About 57 percent of the debt comes from internal debt nearly amounting to SR513.74 billion, while the external debt amounted to about SR387.63 billion, Al Eqtisadiah reported citing data of the Ministry of Finance.

The volume of debt to GDP increased to 35.6 percent at the end of the first quarter of this year compared to the end of last year at 32.3 percent, based on the GDP at constant prices.  

The rise in the debt comes despite the budget recording its lowest deficit for the first quarter of this year since the third quarter of 2018 at SR7.44 billion, due to the 9 percent decline in oil revenues on an annual basis, despite the growth of non-oil revenues.

Saudi Arabia was able to raise funds to pay its deficit by about SR29.55 billion, which exceeds the actual deficit for the first quarter, as it intends to use the rest of the funding to pay the deficit for the remainder of the year. 

Saudi Arabia is trying to take advantage of the lower interest rates in the debt markets.

The Ministry of Finance previously estimated that this year's public debt reaches SR937 billion, as the Corona crisis increased the target level of public debt.


Occupancy rate of Makkah hotels sees over 30% rise in second half of Ramadan

Saudis and expatriates used to spend the last 10 days of the holy month in Makkah for worship, but many of them put the habit on hold since the pandemic started. (Shutterstock)
Saudis and expatriates used to spend the last 10 days of the holy month in Makkah for worship, but many of them put the habit on hold since the pandemic started. (Shutterstock)
Updated 06 May 2021

Occupancy rate of Makkah hotels sees over 30% rise in second half of Ramadan

Saudis and expatriates used to spend the last 10 days of the holy month in Makkah for worship, but many of them put the habit on hold since the pandemic started. (Shutterstock)
  • Makkah is the main artery of hotels in Saudi Arabia, alone accounting for more than 64 percent of the sector

JEDDAH/MAKKAH: The occupancy rate at the beginning of the holy month of Ramadan varied between 10 and 20 percent, while in the second half it rose to 30-38 percent, Rayan bin Osama Filali, chairman of the Hotel Committee, an affiliate of the Makkah Chamber of Commerce and Industry told Arab News.

Filali explained that for the first time, a relatively mild increase in the prices during the last days of Ramadan was witnessed — an unprecedented occurrence, as prices often increase by 300 percent during the last 10 days of Ramadan, compared with the rest days of the month.

“The size and impact of the pandemic caused the cancellation of offers promoted by hotels in the last 10 days of Ramadan,” Filali noted. The fact that only a small percentage of hotels was able to operate “showed the extent of the damage to the sector due to the coronavirus disease (COVID-19), which disrupted the entire system, causing losses that are likely to cast a shadow for years to come.”

The chairman of the Hotel Committee said that the pandemic had directly disrupted much of the hotel sector’s dynamism, as it is one of the most productive, stimulating and job-creating market sectors.

He also said that only 26 hotels in Makkah’s central region are operating this Ramadan season with average prices dropping by 55 percent.

Makkah is the main artery of hotels in Saudi Arabia, alone accounting for more than 64 percent of the sector, which, according to Filali, needs at least four years to recover from the present crisis.

He also noted that the economic implications on the 1,200 hotels were extreme and that most hotels suspended their activities completely, closing their facilities and sending thousands of workers home.

“These workers are still waiting for hotels to open their doors after the end of the pandemic or the completion of the inoculation campaign of the entire community,” he added.

According to Filali, the hotel sector generates huge financial returns for all the countries of the world, and the holy capital depends mainly on the permanence of an industry that creates thousands of jobs annually.

Filali remarked that the sector was awaiting a major expansionary boom but that the virus threatened the industry despite the efforts of the Saudi leadership to maintain the salaries of its employees for several months with the unemployment insurance program “Saned.”

“The lack of demand on bookings and the high operating volume and cost of food have paralyzed the tourism sector, which has led many hotels to suspend their operations until the pandemic ends,” said Filali.

READ MORE

Hotels surrounding the courtyards of the Grand Mosque in Makkah were on Tuesday authorized to issue Umrah permits to guests during Ramadan as part of an initiative to help revive the holy city’s struggling hospitality sector. Click here for more.

Bassam Khanfar, general manager of the Shaza Makkah Hotel, told Arab News that over 17,000 rooms remained vacant due to the pandemic.

He said that a gradual resumption of operations and purchasing power must be taken into account so that the sector can recover with the least possible losses.

He noted out that the average price of a room in the first 20 days of Ramadan was SR 1,300, increasing to an average of SR 1,900 in the last 10 days of the holy month.

Khanfar’s hotel offered a discount of 50 percent to health practitioners in recognition of their great efforts in fighting the virus — efforts echoed in the performance of the Kingdom as a whole in addressing the pandemic.

Saudis and expatriates used to spend the last 10 days of the holy month in Makkah for worship, but many of them put the habit on hold since the pandemic started.

Ahmed Al-Ghamdi, a Jeddah cafe owner, told Arab News: “Before the pandemic, I was keen to perform Umrah in the last 10 days of every Ramadan, especially on the 27th night, which is when Laylat Al-Qadr (Night of Power) is believed to have occurred.”

He added that the Grand Mosque normally would see hundreds of thousands of worshippers during the last 10 days of Ramadan, in pre-COVID-19 times.

“Unluckily, I can’t perform Umrah this time because I have not yet received the first dose of the vaccine despite my attempts to get vaccinated. But it’s to be expected, as millions are trying to register for the vaccine,” he said.

Al-Ghamdi’s friend, retired army officer Salem bin Saleh, said he was lucky to get the first doses and is planning to perform Umrah in the few coming days.

“Performing Umrah in the last 10 days of Ramadan has been one of my habits for over 30 years,” Saleh told Arab News.

He said that performing Umrah in Ramadan is equal in reward to performing Hajj, as Prophet Muhammad said.

“The feeling you get during and after performing Umrah in Ramadan is indescribable,” Saleh added.