Sheikh Abdullatif Al Shelash says as a developer, there are many ways to fundraise for real estate right now. The Purdue University graduate studied leadership there, which has propelled him to become a financial management leader and real estate expert in the Kingdom of Saudi Arabia and beyond.
“I have been a developer in Saudi, and the market is more mature in encouraging the developers,” Abdullatif Al Shelash says. “Real estate funds one of them. Real estate reach [and] the capital market [are] really the primary sources for the [fundraising] in the public market. Also the financial institutions. Financial institutions, such as banks and commercial banks and investment banks.”
Consumer demand is driving a red-hot real estate market in Saudi Arabia, which is a boon for developers like Al Shalash. “Usually for developers, what we do, we bring the concept, not the property,” Abdullatif Al Shelash says. “We do the feasibility study. We show really an illustrative outlook of what would be the returns on the project, [internal rate of return], return investments, and all of these numbers.”
Abdullatif Al Shelash says they then take the research to associated investors and financial institutions. “We raise the funding based on that,” Abdullatif Al Shelash explains. “These are beyond really the major source. That can stand out as beyond one of the companies.”
Abdullatif Al Shelash: How Being a Pioneer in the Saudi Market Has Been an Asset
“Since we started early, when most of these tools were not in existence because the financial markets were developing in Saudi, we were one of the first companies that actually went outside the boundary of Saudi,” Abdullatif Al Shelash says. “And [we] have tapped into the long-term funding doing the sukuk, which is in comparison to the bond and more developed or other markets.”
A sukuk is an Islamic financial certificate representing a piece of ownership in a portfolio of eligible existing or future assets. It’s essentially an Islamic version of a conventional bond, because Sharia forbids lending with interest payments.
“So we issued one in 2007. Prior to that, in 2006, we did one of the four first mortgage bank securities out of Saudi assets,” Abdullatif Al Shelash says. “And that was really to test that type of investors, or to test what are the obstacles within their legal framework in Saudi, to, really, legal framework in Saudi to really perform mortgage bank security issuance. And that was guaranteed by the [International Finance Corporation], which is the commercial arm of the World Bank. We started the first issuance of the sukuk.”
Since then, Abdullatif Al Shelash says he and the company have been regular issuers to the market and have visited investors from Tokyo to Los Angeles. “People really got used to the name of the company, understood the story and understood the story of the real estate sector in Saudi,” he says.
The Strategy of Reinventing Riyadh
The real estate market in the Saudi capital of Riyadh is booming. Arab News is reporting in its Riyadh Real Estate Market Overview report that multinational professional services and accounting organization KPMG found that the demand for residential housing units in Riyadh continues to swell, with the population expected to reach 7.1 million by the end of this year, and 7.58 million by 2025. Zawya.com says the report breaks down real estate in the region into four categories: residential, office, retail, and hospitality.
Rani Majzoub, the head of real estate advisory at KPMG Professional Services, told zawya.com, “The residential market remained resilient during the pandemic, which can be attributed to strong demand fundamentals and has witnessed a positive trend in [key performance indicators] in the first [half] of 2022.” He also stated that he noticed an increase in demand for apartments and smaller units.
Contract management system Serco also just announced that it is opening its headquarters in Riyadh. Serco.com also states that the Serco Institute has found that 81% of the Saudi population recognizes the value of businesses having a major presence in the Kingdom.
Rafal Real Estate Development Co. CEO Elias Abousamra says a renaissance has hit the real estate market in Saudi Arabia, with a move from typical suburban villa housing to an international market with skyscrapers, malls, and mixed-use developments.
“Riyadh is about to have its Metro [rapid-transit system] operational after seven years of work and that would open the opportunity for transit-oriented developments,” Abousamra says on marcopolis.net. “The local population is starting to migrate from villa residences to apartments and lofts in a mixed-use environment. Walkability is becoming key. All this is meant to change the urban fabric of Riyadh, the capital of Saudi Arabia. But historically, Riyadh has been the laboratory for change in and across Saudi Arabia. Whatever we are seeing in Riyadh should cascade into other secondary cities and other major [Saudi] cities like Jeddah, etc. Urban mobility is driving change.”
Abdullatif Al Shelash says he is one of the key players spearheading change in the Kingdom. He not only sits on the board of Saudi Home Loans, but he’s one of three partners in Alaqtar Real Estate Development Company, which has been purchasing and focusing on Saudi areas such as Al-Qassim and Buraydah, where Abdullatif Al Shelash says he sees a different demographic developing.
“It’s catered more toward middle income,” Abdullatif Al Shelash describes. “And we’re doing it in a different method where meanwhile we’re doing infrastructure development, which is the electricity, water, pipelines, pavements, land leveling, and all of that, and dividing the plot and getting really the final approval and really the size of the plot.”
Abdullatif Al Shelash points out that Buraydah is the biggest city in the Al-Qassim district. “It’s north of Riyadh, about 300 kilometers [about 186 miles] away from Riyadh,” Sheikh Abdullatif Al Shelash says. “[It’s] one of the most heavily populated areas in the middle of the country; it’s farming country. It serves all the inhabitants around it. Qassim province, you could say, has inhabitants more than Bahrain and Qatar combined, and yet there is no five-star hotel there. So it could tell you how underserved the real estate market is over there.”
Abdullatif Al Shelash says he not only sees opportunity there, but they’re offering less prominent developers a chance to buy discounted land to construct homes. He adds that they’re also looking at other global investments on the horizon.
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