Arada, the Sharjah-based real estate developer backed by the son of Saudi Prince Alwaleed bin Talal, is targeting Dh2 billion of revenues by next April, as it progresses unit sales on two schemes in Sharjah and ramps up plans to expand in Dubai, Saudi Arabia and Europe over the coming years.
"The founders of Arada set out a 5-10-year roadmap, where the focus was to become the leader in Sharjah," said Arada chief executive Ahmed Alkhoshaibi in an interview with The National. "The next step is Dubai, with multiple projects, then we'll be going to Saudi Arabia, then London or Milan or both."
Arada is a joint venture between KBW Investments – a firm controlled by Saudi Arabia’s Prince Khaled bin Alwaleed bin Talal – and Basma Group.
It unveiled the 2.2 million square kilometre Aljada mixed-use community last year as Sharjah’s largest-ever scheme to date with a projected sales value of Dh24bn. The company has sold 90 per cent of phase one residential units and started sales for the second phase at the Cityscape Abu Dhabi event last week.
The project, which has ten phases, is due to be completed in 2025, while deals to appoint operators of a hotel and hospital are expected to conclude in the coming weeks. Arada is also building the 800-home Nasma Residences scheme in Sharjah, scheduled for completion in 2018.
UAE real estate prices have declined in the past two years due to low oil prices and muted demand, but developers have launched several tourism, housing and mixed-use projects in Sharjah in recent months as the emirate seeks to raise its profile and compete with its neighbour Dubai.
Mr Alkhoshaibi said Arada was experiencing no such downturn in “resilient” Sharjah, where the company closed Dh150m of sales last month, bringing its total sales value since last April to Dh1bn.
“My target for the next 12 months is Dh2bn of revenue – with this growth trajectory we are not seeing a downturn.”
The wider UAE market will bottom out in 2018, he added, with prices rising thereafter fuelled by Expo 2020 and other government initiatives. “We’re entering Dubai soon – we’re going to announce that we’re launching our first project in Dubai so we’re confident it’s a good time to be coming in,” he added.
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Read more:
Sharjah’s Arada, Emaar ink hotel deal at $6.5bn mega-scheme
Shurooq, Eagle Hills unveil plans for Dh2.7bn trio of real estate projects in Sharjah
UAE developer to build biggest-ever real estate project in Sharjah
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The first Dubai project will be a "signature" residential tower in the upper-midscale bracket, located in Dubai Marina or fast-growing Business Bay. Arada's shareholders own several parcels of land in Dubai, but the company is in talks to acquire other plots more appropriate for a first launch.
Arada plans to enter Saudi Arabia from around 2020, most likely Riyadh, depending on market conditions. “From a residential point of view, Saudi is suffering and we need to come in at the right time,” Mr Alkhoshaibi said. Average villa and apartment rents in the kingdom declined by 5 per cent year-on-year in the fourth quarter of 2017, and average sales prices by 4 per cent, according to consultancy JLL Mena.
Beyond that, Saudi Arabia is going through a more fundamental social and economic transformation underpinned by Vision 2030. “They are going through a transition and you need to know where to position yourself in that. Foreign investment laws are changing so we are studying what is happening,” he said.
Mr Alkhoshaibi is also group chief executive of Arada's co-owner KBW Investments, and says the private equity firm is targeting its first partnership acquisition in the next three months, after talks to acquire Middle Eastern contractor Habtoor Leighton Group broke down in 2017. "I was confident we'd close it but during the due diligence process we were not aligned," he told The National.
KBW is eyeing two other acquisitions before the end of this year, with one likely to be in the aviation services sector. “It’s a market that has a good growth trajectory overall and there are synergies with our existing portfolio companies,” he said.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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