Dar al-Arkan to return to market in 2015

10 June 2014

Saudi Arabian real estate company Dar al-Arkan lists sukuk on Nasdaq Dubai

The Saudi Arabian company Dar al-Arkan Real Estate Development Company is likely to issue a fourth US dollar sukuk (Islamic bond) in 2015, under its sharia-compliant bond programme.

The company raised a five-year $400m sukuk in May and in 2013 it issued a $300m sukuk in November and a $450m Islamic bond in May under the same Islamic bond programme.

All three sukuk were listed on the Nasdaq Dubai exchange at the end of May. Speaking to MEED after the bell-ringing ceremony at the exchange on 8 June, chairman of Dar al-Arkan, Youssef bin Abdullah al-Shelash, said he is considering issuing a fourth sukuk in 2015.  

“Most likely next year,” Al-Shelash said, referring to the timescale for the potential fourth bond.  

He added he expected that market conditions will be more favourable for the company in 2015, and he would aim to achieve lower pricing on the issuance.

“I believe it will be better and maybe cheaper next year,” he said.

Although Al-Shelash says the pricing on the latest issuance, at 6.5 per cent, was “very reasonable”, it was higher than the 5.75 per cent pricing seen on last year’s May and November sukuk issuances.

Al-Shelash says next year Dar al-Arkan will have finished some of its real estate projects, which will improve the company’s credit profile in the eyes of investors and enable the company to negotiate better pricing. “Next year the market will be hungry for issuance,” he adds.

Dar al-Arkan is currently working on three main real estate projects, Shams ArRiyadh housing project, the Al-Qasr mixed-use development in Riyadh and its Al-Tilal villa complex in Medina.

The issuance of Dar al-Arkan’s sukuk brings the total value of sukuk listed in Dubai to $22.23bn. Dubai is the world’s third-largest venue in terms of value for the listing of sukuk.

Al-Shelash says sukuk is a preferable way to fund his business. “Most of our projects are long-term projects, so this is the best product for us as a funding strategy,” he says.

Al-Shelash is also the chairman of AlKhair Capital, one of the mandated lead arrangers of the recent sukuk, along with Germany’s Deutsche Bank, Dubai’s Emirates NBD and the US’ Goldman Sachs.

AlKhair Capital officially opened an office in Dubai within the Dubai International Financial Centre (DIFC) in May. The investment company is the first Saudi company registered by Saudi Arabia’s Capital Market Authority to receive a licence to operate in the DIFC.

“Dubai is gate for us to go to the local markets, the regional markets and international markets,” says Al-Shelash. “As a Saudi institution, we would like to have this access through Dubai.” 

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