RAK Properties mulls sukuk issuance from 2019 to grow portfolio

Company may also seek fresh bank loans as it progresses Mina Al Arab project

Local developer RAK Properties' first quarter profits drop 84 per cent as revenues fall. Jaime Puebla / The National

RAK Properties, the UAE real estate developer, expects to tap the sukuk markets from 2019 and raise additional bank financing as it continues to deliver its 30 million square foot Mina Al Arab coastal project in Ras Al Khaimah.

"We always look at what is the optimal financing structure on a project-by-project basis, whether it's sukuks or bank financing," said Samuel Sidiqi, chief executive of RAK Properties, in an interview with The National.

“Right now we are just using bank financing but we are open to examining sukuks. I don’t know if we would do this in 2019 or [at a later date]. We’d have to look at the markets and see what our requirements are. It’s certainly possible that we would also raise additional bank loans in the next 12 months,” he added.

Issuance of Sharia-compliant bonds in the GCC slowed by around 15 per cent in the first three quarters of this year on the back of tightening global liquidity and rising interest rates, according to a report by S&P Global Ratings last month. Mr Sidiqi, who was appointed in May, declined to disclose the size of the sukuk RAK Properties would issue if it went ahead with its plan.

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The developer, which is listed on the Abu Dhabi stock exchange, is constructing the Mina Al Arab and Hayat islands off the coast of Ras Al Khaimah, to create a cluster of beachfront mixed-use communities.

It unveiled the second phase of Marbella Villas, a residential scheme on the Dh3bn Hayat Island development, during the Cityscape Global exhibition in Dubai this week, and said the first phase of the 205-villa scheme had sold out. Elsewhere on Mina Al Arab, 800 apartments, 600 villas and a 1.2 kilometre-long corniche have been completed, Mr Sidiqi said.

The company is also building two hotels – the Anantara and Intercontinental – and other housing schemes at varying stages of construction, including Flamingo Villas, Gateway Residence, Bay Residences and Julphar Residences.

RAK Properties posted an 82 per cent drop in annual net profit to Dh4.3m for the second quarter of 2018, with lower sales and higher expenses hitting its earnings. Revenue from sale of properties stood at Dh2.9m, down from Dh82m in the second quarter of 2017, the company said in a bourse filing in August.

The sluggish UAE real estate market, which has seen residential rents and sales prices decline by at least 10 per cent year-on-year in the past two years on the back of low oil prices, also had an impact. “The market did affect the results, but it had more to do with what we were selling and when: there were more deliveries in 2017 than 2018,” Mr Sidiqi said.

“You’re going to have chunky bits here and there,” he said. “As a property company it is not helpful to look at results on a quarterly basis because you’re building projects over many years, and especially when you have off-plan sales.”