The size of the Saudi Arabian market and the desire for bricks and mortar investments were the two things that drove former Damac MD Ziad El Chaar towards his new role leading Dar Al Arkan, he said.
"You are in a very big market, where everybody is vastly interested to invest in real estate products," Mr El Chaar told The National in a telephone interview following his appointment as chief executive of the Saudi developer.
“So you have a big demand to satisfy and there is an opportunity in presenting those investors with new, innovative products and projects. This is the main attraction. And you have a household name like Dar Al Arkan to supply these products to satisfy this demand.”
Dar Al Arkan is Saudi Arabia’s biggest listed property developer, with revenue of 1.87 billion riyals (Dh1.83bn) last year and shareholders’ equity of over 18bn riyals. However, the company recently posted its lowest quarterly revenue in years for the first three months of 2017 as revenues were impacted by the recent introduction of the “white land tax” in the kingdom – a tax brought in on undeveloped land to encourage housing development by penalising those who hoard land as a store of value. The company reported a 17 per cent decline in first-quarter revenue to 360.3 million riyals, while net profit fell year-on-year by 79 per cent to 12.1m riyals.
“Dar Al Arkan, until now, is still primarily a land developer. Its retail or recurring segment is approximately 10 per cent of revenues,” said Ayub Ansari, an analyst with Bahrain-based Securities and Investment Company.
“Obviously it has a huge land bank in Saudi Arabia and everyone knows there is a massive demand for housing there. So on that front, the company is nicely placed if there is massive development in Saudi housing.”
The company has a land bank of close to 40 million square metres. Although this could be viewed as a liability in the short term, once it brings forward proposals to develop sites these will no longer be subject to the tax. Moreover, Mr Ansari argues that if the tax achieves its stated aim of bringing down land values, it will be beneficial for developers in the long run as it will make projects easier to stack up.
Mr El Chaar said that Dar Al Arkan is bringing forward plans for three major company-owned sites in the kingdom’s biggest cities, including a 3.2 million square metres plot in Riyadh, a 1 million sq metres plot in Jeddah, and an 8 million sq metres plot in Dammam.
“The three master plans are under final licensing. We have started the design of the final stages of infrastructure, and some of the main elements we would like to launch under these master plans,” Mr El Chaar said.
He said that these would be converted into modern, mixed-use communities with apartments, town houses and villas as well as community facilities like schools, retail units and jogging tracks. They will also contain serviced apartments.
Mr Ansari said that in theory at least, Dar Al Arkan is also well placed as rules governing Saudi off-plan sales are relaxed as the government seeks to encourage the development of more affordable housing.
“Whether or not it’s able to execute, that’s another thing.”
mfahy@thenational.ae
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