x Abu Dhabi, UAEFriday 19 January 2018

Jeddah project gets 4bn riyals of funding

Investors lift Dar Al Arkan's shares yesterday after Saudi Arabia's biggest developer said it received additional financing for a project in Jeddah.

Saudi Arabia's biggest property developer, Dar Al Arkan, said the kingdom's public investment fund approved a 4 billion riyal loan to finance a Jeddah project.

The 400-hectare Qasr Khozam project, a town that is to include malls, hospitals and schools, is a joint venture between Dar Al Arkan and Jeddah Development and Urban Regeneration, a company owned by the municipality of Jeddah.

"This funding will contribute to the project by accelerating the development operations," the company said.

Dar Al Arkan rose 3.4per cent, its biggest advance since the start of last month, to 6.35 riyals on the Tadawul exchange yesterday.

The stock has lost more than 30 per cent so far this year on concerns that the company may struggle to pay 7.6bn riyals of debt due over the next five years, of which 5bn is due in the next two years.

Retail investors, who make up the bulk of trading in Saudi Arabia, said the news was a positive signal for the company's financial health, said Hesham Tuffaha, the head of asset management at Bakheet Investment Group,in Riyadh.

The company had 1.8bn riyals of cash and 1.7bn of short-term receivables, according to financial statements published during the second quarter.

"The receivables should move to cash during the third quarter," said Mostafa El Maghraby, an analyst at Global Investment House in Kuwait.

"The additional financing gives a strong signal they are being backed by the government, in one way or another, and that it would not allow them to default on their sukuks coming due," Mr El Maghraby said.

For now, the company can utilise its rental income portfolio after Al Qasr Mall in Riyadh started operations last month, Mr El Maghraby said.

Al Qasr Mall features a gross leasable area of 75,584 sq metres - or about half the size of Dubai's Mall of the Emirates - including 8,780 sq metres already leased to the French retailer Carrefour. The Al Qasr project, estimated to be worth 1.8bn riyals, involves more than just the mall, with more than 1,700 homes for sale, 1,318 residential units for rent, and significant commercial space.