Sharjah property developer Arada raised $350 million by issuing a five-year sukuk or Islamic bond.
The dollar-denominated sukuk is listed on the London Stock Exchange, and is the first real estate issuance from the Middle East and North Africa region in 2022, Arada said on Wednesday.
The issuance created strong demand from regional and international investors, with a subscription order of $720m, more than double the size of its offer.
Institutional investors, fund managers, high net worth individuals, and banks from Europe, the Middle East and Asia invested in the sukuk, which is the company’s first public financing deal since its inception in 2017.
Arada is 60 per cent owned by KBW Investments, controlled by Prince Khalid bin Alwaleed of Saudi Arabia, while the remaining 40 per cent is retained by the Basma Group, which is chaired by Sheikh Sultan bin Ahmed Al Qasimi, Deputy Ruler of Sharjah.
“The closure of our debut sukuk on the London Stock Exchange is an exceptional endorsement from international institutional investors of both Arada’s track record and its future prospects,” Prince Khalid, vice chairman of Arada, said.
Since its launch in 2017, Arada has launched three mega projects in Sharjah, with a combined sales value of Dh33.5 billion ($9.12bn). It also announced the purchase of a plot of land on Dubai’s The Palm Jumeirah for Dh240m as part of its expansion plans outside Sharjah.
The developer is targeting 25 per cent sales growth in 2022 to Dh3bn on the back of the UAE’s property market recovery from the coronavirus pandemic. It also aims to complete 4,000 homes during the course of the year. In total, Arada has sold just under 10,000 units since inception, valued at more than Dh7bn, it said.
Arada’s projects include Aljada, Sharjah’s largest mixed-use development with 5,000 units and Masaar, a community with 4,000 villas and townhouses.
"The proceeds for the sukuk will be used for the management of existing bilateral funding, general corporate purposes and to support the development of Arada’s existing projects," the developer said.
Standard Chartered Bank, Dubai Islamic Bank and Emirates NBD Capital acted as joint global co-ordinators on the deal, while Abu Dhabi Commercial Bank, Ajman Bank, Al Rajhi Capital, Mashreq, Sharjah Islamic Bank, Kamco Invest, and Warba Bank were the joint lead managers and bookrunners.
The UAE's property market is continuing to recover from the pandemic on the back of the government initiatives such as residency permits for retirees and remote workers, as well as the expansion of the 10-year golden visa programme and the economic boost generated by Expo 2020 Dubai.
The market has also benefited from the country's widespread Covid-19 vaccination programme, which has kept case numbers relatively low.
In Abu Dhabi, villa sales prices during the first quarter of 2022 grew 10 per cent annually, while apartment sales prices rose 4 per cent, according to Asteco. In Dubai, villa sales prices surged 40 per cent year on year and apartment prices increased 22 per cent in the three-month period amid a broader recovery in the country's property market.
The value of property deals in Dubai more than doubled last year and broke a 12-year record in terms of sales transactions, buoyed by demand in the secondary real estate market, according to listings portal Property Finder.
The emirate registered 61,241 sales transactions worth Dh151.07bn last year, compared with Dh71.87bn worth of transactions it closed in 2020, making 2021 the best year for total transactions since 2013 and the highest in value since 2009, Property Finder said. The total value of sales in 2009 was Dh155.6bn.
Arada secured Dh250m in funding from Dubai Islamic Bank to speed up the construction of its Aljada mega-project in Sharjah last year.
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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.”
