Sharjah's Arada receives corporate family rating from Moody's

Potential sukuk issuance by the developer behind Aljada, the biggest mixed-use development in the emirate, also receives B1 rating

Sendian community at Masaar. Masaar, Arada’s third project, which is valued at AED8billion and located in the Al Juwaiza’a district of New Sharjah. The 19 million square foot project will include 4,000 villas and townhouses in total. Construction is set to begin in the second quarter and the first homes are scheduled to be handed over in the first quarter of 2023. Courtesy Arada
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Moody’s Investors Service has assigned a B1 corporate family rating to Sharjah-based property developer Arada Developments, reflecting the company’s unique market position in the emirate.

The proposed benchmark-sized sukuk certificates to be issued by Arada Sukuk Limited, a special purpose vehicle established by Arada, also received a B1 instrument rating, Moody’s said in a statement on Monday.

The outlook is 'stable' on all ratings of the developer which, in a short period of time, “has built a strong market position in developing and selling off-plan properties in Sharjah, with Moody's expectation that Arada will have long-term access to premium and well-located land plots”, the rating agency said.

The ratings also reflect Arada’s strong track record of support from the company’s “strategic and influential shareholders and good profitability and revenue visibility in the current market”.

A healthy demand for Arada's bespoke and good-quality master development projects and its improving liquidity profile following the proposed sukuk transaction also support the company’s credit rating, Moody’s added.


Arada at Cityscape Abu Dhabi 2019.
(Photo by Reem Mohammed/The National)

Section: NA + BZ

However, given the company's short operating history, Arada's credit metrics have been weaker, with Moody's adjusted debt to book capitalisation at 76 per cent and Moody's adjusted Ebit (earnings before interest and taxes) to interest expense of 1.3 time as of the end of 2021.

“We expect these metrics to improve materially and reach about 66 per cent and five times, [respectively,] by 2023 as the company executes on its project pipeline,” the rating agency said.

Last year, Arada delivered 1,565 units, generating Dh1.3 billion ($354.2 million) in revenue. The company's off-plan sales during 2021 reached 2,493 units, representing a total property value of Dh2.4bn, while total off-plan sales backlog stood at Dh3.3bn as of end-2021, Moody's added.

The delivery momentum has continued this year and the company is scheduled to hand over about 5,000 units during 2022.

Separately, Fitch Ratings also assigned Arada an expected long-term issuer default rating B+(EXP), with a 'stable' outlook.

The final IDR is contingent on the company's sukuk being issued, the proceeds of which will be used to repay current debt and fund future developments, Fitch said in a statement.

Arada is owned 60 per cent by KBW Investments, controlled by Prince Khalid bin Alwaleed, while the remaining 40 per cent is owned by the Basma Group, which is chaired by Sheikh Sultan bin Ahmed Al Qasimi, Deputy Ruler of Sharjah.

Arada’s projects include Aljada, Sharjah’s largest mixed-use development with 5,000 units currently under construction, and Masaar, a community with 4,000 villas and townhouses.

The developer has so far completed 2,200 homes, including five of the six phases at its first project, Nasma Residences.

Arada aimed to achieve between Dh2.3bn and Dh2.4bn worth of property sales by the end of last year. Its target for 2022 is Dh3bn.

The company is expanding beyond its home market of Sharjah. Earlier this year, Arada purchased the last beachfront plot on the crescent of The Palm Jumeirah for Dh240m in a push for expansion into the Dubai property market. It also plans to build a mixed-use project on the 20,500-square-metre plot bought from The Palm Jumeirah’s master developer Nakheel, Arada said in January.

“The time is right for us to invest in Dubai, given the strong performance of the market during the course of 2021 and the impressive steps the government has taken to increase interest in this sector,” Ahmed Alkhoshaibi, group chief executive of Arada, said at the time.

“We are also confident that further new projects in Dubai will be confirmed during the course of 2022.”

Moody’s said it may upgrade Arada’s ratings should the company “significantly increase its scale, strengthen its business profile and demonstrate over time a robust operating track record in developing and delivering properties through economic cycles”.

Arada, which secured Dh250m from Dubai Islamic Bank to speed up the construction of its Aljada project in Sharjah last year, plans to expand to Abu Dhabi in 2022 and is in discussions to buy land to launch projects, its chief executive told The National last year.

Updated: May 16, 2022, 12:40 PM