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Abu Dhabi, UAETuesday 19 June 2018

 Saudi developer Dar Al Arkan to sell a 30 per cent stake of unit in IPO 

Samba Capital appointed as financial adviser for public share sale

Emirates NBD Asset Management is looking to increase the size of its Saudi Arabian Equity fund to $100m by the end of this year ahead of kingdom's anticipated reclassification as an emerging market. Fayez Nureldine /  AFP.
Emirates NBD Asset Management is looking to increase the size of its Saudi Arabian Equity fund to $100m by the end of this year ahead of kingdom's anticipated reclassification as an emerging market. Fayez Nureldine / AFP.

Dar Al Arkan Real Estate Development, the biggest publicly traded real estate developer in Saudi Arabia, has received a nod from its board for plans to sell a 30 per cent stake in its property management unit, joining a growing list of regional companies looking to raise funds through initial public offerings of their subsidiary businesses.

"The company plans to file the offering application to the [ Saudi Arabia's] Capital Market Authority to obtain the approvals," Dar Al Arkan said in a statement the Tadawul stock exchange, where its shares are traded. Samba Capital & Investment Management is advising Dar Al Arkan on the deal, it said without giving a timeline of the transaction or how much it plans to raise through the share float.

Dar Al Arkan Properties Company, is a wholly-owned unit and runs Dar Al Arkan's property management and leasing business. It has income producing assets worth 2.68 billion Saudi riyals (Dh2.62bn) spread across a number of cities in the kingdom.

With a successful IPO, Dar Al Arkan will join the ranks of firms such as Emaar Properties, the UAE's biggest developer by market capitalisation, and state-controlled energy producer Abu Dhabi National Oil Company (Adnoc), both of which have listed shares in their units this year on Dubai and Abu Dhabi bourses, respectively.

Public offerings are making a comeback following a dry spell over the past couple of years when a slow-down in economic growth forced many companies to shelve plans for IPOs amid concerns of not getting proper valuations for their businesses. The Middle East and North Africa region recorded five IPOs in the third quarter of this year alone, up from a single listing in the same period last year and more offerings are expected, thanks to the recovery in oil prices, consultancy EY said in a report released in December.

The value of IPOs in the third quarter rose 20 per cent to US$236.7 million from a year-earlier period, led by three deals on Tadawul, according to EY.

Dar Al Arkan, which has predominantly focused on its home market in the past, in December launched a Dh800 million (US$218m) residential tower in the UAE, marking its first foray outside the kingdom. The 34-storey ‘I Love Florence Tower’ is located in Downtown Dubai close to the fast-growing Business Bay and Dubai Canal district.

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The company, in November, reported a 86.3 per cent profit hike for the third quarter of 2017 to 209.6m Saudi riyals from 112.5m reported for the same quarter last year.

Real estate investment opportunities abound in Saudi Arabia, the region's biggest economy and Opec's top oil producer, especially in the the country's hospitality sector despite softer economic conditions, the real estate agency Knight Frank said in December.

The agency said that the supply of hotels in the key cities of Jeddah and Riyadh remained heavily tilted towards five-star hotel developments with a lack of hotels in the mid-scale sector and that represents an opportunity for developers.