Dar Al Arkan Properties Company, the real estate business seeking a new listing on Saudi Arabia's stock exchange, will have a 2.68 billion riyal ($714.7 million) asset base made up of mainly retail and high-end residential properties, the chief executive of its parent company has said.

Dar Al Arkan Real Estate announced last Sunday (December 31) that it is planning to offer 30 percent of the shares in Dar Al Arkan Properties to investors via an initial public offering (IPO). It will retain the remaining 70 percent.

In a telephone interview with Zawya on Thursday, Ziad El Chaar, chief executive of Dar Al Arkan Real Estate, said that "more than 50 percent" of Dar Al Arkan Properties' portfolio will initially be retail property, with the remainder being residential units.

Some of this retail stock will comprise built assets, but the company is also planning to place two retail projects it is developing in Jeddah and at its Shams ArRiyadh site in Riyadh into the vehicle. Designs for the Jeddah project have already been finalised, he said, but the Riyadh site is still under detailed design.

El Chaar, who has been chief executive of Dar Al Arkan Real Estate since June last year, after leaving his job as chief executive of Dubai private developer Damac, said that properties division was initially established five years ago to manage assets the company has retained for income generation.

El Chaar said that although Dar Al Arkan Real Estate has an "introductory list" of properties that will make up the Properties division's asset base, these are still subject to final approval.

He added that he could not give a timeline either for the publication date for Dar Al Arkan Properties' new prospectus, or for the likely date of the listing, explaining that both processes were being led by the company's advisor for the flotation, Samba Capital. However, he said that "we are definitely hoping it will come this year".

REIT qualities

He said that the aim for Dar Al Arkan Properties is to create a company that has similar qualities to a real estate investment trust (REIT) in terms of its income-generating qualities, but which offered greater potential for growth as it can invest in new developments.

REITs are usually restricted in terms of the amount of capital they can invest in new developments, and in Saudi Arabia they typically redistribute 90 percent of the income they generate as dividends to shareholders. (Read more here).

Real estate markets in Saudi Arabia's main cities have been on a downward trend for much of the past two years, with rents in the capital, Riyadh, declining across the office, residential, retail and hospitality sectors.

However, the most recent quarterly report on the Riyadh market published by consultancy JLL for the third quarter of 2017 stated that headline rents and vacancy rates in the retail sector had held stable during the quarter.

"With retail sales continuing to increase, this could be the first sector of the Riyadh market to recover," it argued.

In the nine months to September 30, Dar Al Arkan Real Estate reported a 9 percent increase in net profit to 232.7 million riyals, which it said was mainly a result of higher property sales. The company reported a 57.5 percent year-on-year increase in revenue for the nine-month period of almost 2.3 billion riyals.

(Reporting by Michael Fahy, Editing by Shane McGinley)
(michael.fahy@thomsonreuters.com)

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