Arada, a Sharjah-based real estate developer, is eyeing joint venture partners in Dubai and Saudi Arabia and may spend as much as Dh2 billion to acquire a rival developer in Dubai, its vice chairman said.
The developer, which is building a Dh24 billion megadevelopment called Aljada in its home market, is in talks with several parties in Dubai for a joint venture and could take over a developer with the right asset bank to gain access to the market, Prince Khaled bin Alwaleed bin Talal said.
Acquisition "is on the table. That is actually one [of the] reasons why we are taking our time [in entering Dubai market]", Prince Khaled told The National in an interview at Cityscape Abu Dhabi on Tuesday.
“We can either form a joint venture or acquire and we are being agnostic to what structure we use to come into Dubai. It will really depend on how we would like to move forward.”
Arada is looking at spending as much as Dh2bn for a potential acquisition of a developer “who currently has an asset bank available”, the prince said. The company would look to finance the joint venture or an acquisition through a mix of equity and bank debt, he said.
The private developer, a joint venture between KBW Investments – a firm controlled by Prince Khaled – and Basma Group, last year expressed intentions to expand beyond Sharjah, however, it is being “picky” and “opportunistic” in timing its entry into Dubai, the vice chairman said. Arada expects to announce a deal to build a townhouse project in the emirate within the next three months and is trying to catch the market “at the bottom” of the price range, Prince Khaled said.
UAE real estate prices have declined in the past two years due to a slow down in the global economy, lower oil prices and muted demand, as more property projects come online. Still, developers have launched several tourism, housing and mixed-use projects in Sharjah as the emirate seeks to raise its profile and compete with its neighbour to the south, Dubai.
When Arada announced its 2.2 million square-kilometre Aljada mixed-use community in 2017, it was Sharjah's largest-ever scheme at the time, which the developer is funding through a mix of debt, revenues from off-plan sales and banks. It is now looking to raise Dh1bn in bank loans. The bilateral loan deal with a UAE bank, Prince Khaled said, will consist of two tranches - Dh600 million for Aljada and Dh400m for Nesma, another project of the developer.
Arada announced a target last year of Dh2bn of revenues by April 2019, and achieved the milestone in March. It is now looking to achieve revenues of Dh1.3bn to Dh1.5bn for the whole of 2019, Prince Khaled said.
Beyond Dubai, Arada is focusing on expanding into Saudi Arabia, the Arab world's largest economy, which is facing housing shortages and, like it’s GCC peers, has witnessed a softening property market over the last few years.
“Saudi is definitely a market we want to tackle first before anywhere else,” Prince Khaled said. “Cityscape Jeddah really opened up our eyes in terms of partnerships that we can have with government and quasi-government entities … the Ministry of Housing and its subsidiaries.”
The company, which is in the process of setting up an office in Saudi Arabia, is already in preliminary talks with potential partners in the kingdom and hopes to announce a deal by the end of 2019 or the beginning of next year.
“When you talk about Saudi you talk about 90 per cent of the projects being Saudi government owned… so what we are trying to do is not only partner with them but also start something for ourselves,” he said, adding that a tie-up with a landowner or a developer is also an option.
Riyadh is the primary focus of Arada in Saudi Arabia and it is also looking at potential opportunities in Asir.
Prince Khaled expects Saudi real estate market to level out, if not rebound this year or next on the back of government initiatives.
“Saudi government has really been active with the private sector and businesses to improve the regulations and to better the investment environment for private developers to restart their work in Saudi Arabia,” he said.