Arada eyes Saudi Arabia expansion with a Dh24bn mega project in Riyadh
The Sharjah-based developer aims to boost revenues to Dh3bn by 2025, its vice chairman says
Sharjah-based real estate developer Arada plans to enter Saudi Arabia’s real estate market next year with a Dh24 billion mixed-use project in Riyadh as it looks to boost annual revenues to Dh3bn by 2025, its vice chairman said.
“We are looking at a residential and commercial project in Riyadh in the first quarter of 2020. The investment would be in the size of our Aljada project in Sharjah, which would be Dh24bn or more because of the sheer size of Saudi market,” said Prince Khaled bin Alwaleed in an interview on the sidelines of Cityscape in Dubai on Wednesday.
The prince declined to give further details of the project. A formal announcement will be made in the first quarter of 2020.
“Demand is enormous in Saudi Arabia especially, the residential [sector] and also ... commercial [real estate],” he said. Arada will offer good prices with a quality product to penetrate the market, he said.
The real estate market in Saudi Arabia, like most other GCC markets, is facing headwinds amid a sluggish global economy and fluctuating oil prices. In the office sector, rental rates continued to soften amid limited corporate activity. Residential sale prices and rental rates also dropped year-on-year in Riyadh during the second quarter of 2019, property consultancy JLL said in its Q2 KSA report.
However, the kingdom's government initiatives to lift economic activity will boost demand in the real estate sector and will reflect positively on the overall performance of the market in the long-run, JLL said.
Arada is also betting on the long-term prospects of the Saudi market and aims to boost its revenues to Dh3bn on the back of combined sales from its Sharjah and Riyadh developments. The company has so far sold 1,800 units in 2019 at Aljada in Sharjah, boosting it revenue to Dh1.5bn - a 30 per cent year-on-year rise, Prince Khaled noted.
“Sharjah has been a success. We were not selling it at exuberant prices .... we were selling quality units at affordable prices. We had a positive effect on the consumer side in knocking down a lot of the competitors' prices to realistic prices," he added.
Aljada is a mixed-use mega development spread over an area of 2.2 square kilometres and the project is expected to be completed by 2025. It is also building an 800-home community known as Nasma residences.
In May this year, Arada, secured Dh1bn in total from two Sharia-compliant financiers to help fund the construction of its Aljada and Nasma Residences. The deal follows a previous Dh1bn facility arranged in December 2017.
Arada is a joint venture between KBW Investments – a firm controlled by Prince Khaled - and Sharjah-based Basma Group.
The founders are considering a potential initial public offering of Arada and another group subsidiary, Raimondi, an Italian crane company, but “it is too early” to reveal the details of the potential public offerings, he said.
On potential acquisitions in the region, the prince said Arada is studying the Saudi market and will try to deploy its own capital there rather than expanding through an acquisition.
The market in the UAE has slowed but Arada sees long term potential and "that’s why we are being opportunistic,” he said.
The fall in residential sales and rental prices in the UAE has slowed this year and some analysts are predicting a market recovery as government initiatives such as a new long-term visa system, offering residency of up to 10 years to specialists in technical fields, are expected to contribute a pick-up in demand.
“I do see a rebound and Expo 2020 having a positive impact on the real estate market,” Prince Khaled said.
Earlier this week, Arada rolled out The Boulevard, a new residential community that forms part of the Aljada development. The project consist of 600 units, including include one-, two- and three-bedroom apartments.
Updated: September 25, 2019 08:01 PM