Follow the leader

23 April 2004
Forbes ranks him as the fourth richest man on earth: his investments are worth an estimated $21,500 million. Prince Alwaleed discusses his business strategy

Do you have any plans to change the shape of your investment portfolio?

Nothing significant. It is very well diversified geographically and by sector. Half our wealth is in banking - Citigroup and other banks such as Samba [Saudi American Bank] - about 15 per cent in entertainment and 15 per cent in hotels, real estate and construction. The rest is scattered. The number of investments in the Arab world is growing, but not necessarily their proportion within the portfolio. It only takes Citigroup to go up by a $1 and this accounts for a big movement.

Is Citigroup looking to sell its remaining stake in Samba?

Citigroup is going to sell its 20 per cent, and it is selling it imminently. It has not yet decided how, whether by block sale or public offering. I will not be participating - I have enough already.

The rapid growth of Islamic banking has been one of the most visible trends in the domestic banking market, and across the region. How do you view the industry?

I don't acknowledge Islamic banking. There is nothing called Islamic banking. I have been working with banks in Saudi Arabia - I was chairman of one for eight years - and I know exactly how the so-called Islamic banking operates. I just don't believe in it. My bank offered Islamic banking products, but it is only in name. It is just a marketing tool. It is cosmetically different from what normal banking is and they know that. You can see it in the way that the results of this so-called Islamic banking boom when interest rates are high and they sink when they are low.

When is the Kingdom brand going to be rolled out?

On 19 April. It is about institutionalisation. At the moment I am well known, but behind me there is Kingdom Holdings, there is a process. It is not done haphazardly by one man. There is a system with people behind it. It is a first step in the institutionalisation process, bringing everything under one group, one umbrella.

How is the Kingdom Centre doing?

Very well. Our shopping mall is 100 per cent sold, our apartments are 87 per cent sold or leased, as is the office space. The hotel occupancy rate is increasing every month, and we have the highest average room rate in town. We are a landmark in Saudi Arabia, and we were chosen as the number one building in the world in 2003.

Local bankers are talking about a debt restructuring for the Kingdom Centre.

When the project is still under construction the risk is different. And when the project is leased and sold, you go back to the banks and reschedule. All our projects go through debt restructuring every two years. I took the transparency avenue 20 years ago: everything is public. If you are vague and closed, people say 'what's going on?' But if everything is on the table you have nothing to hide. If you make a loss, you make a loss. If you have a success, you have a success.

On the subject of successes, where have you generated your best returns?

Since inception, Citigroup has given me an IRR [internal rate of return] of 30.3 per cent; Four Seasons, about 35 per cent; and News Corporation, 20 per cent. The investment in Canary Wharf has generated an IRR of 40.9 per cent. Among the regional investments, Samba has produced an IRR of 35 per cent and the real estate investments in Saudi Arabia have been well over 100 per cent. For example, the plot of land here [that the Kingdom Centre stands on] covers 225,000 square metres. I bought it for SR 2,000 [$533] a square metre in the middle of the Gulf war, in 1991. Then I slept on it, took 94,000 square metres for the Kingdom Centre - which was an SR 800 million [$213 million] investment - and sold most of the rest for an average of SR 7,000-8,000 [$1,867-2,133] a square metre. The returns have paid for everything, the Kingdom Centre and my own home on the two floors above us. The land was cheap: but was Iraq really going to beat the US? It was irrational. At the moment I have 20 million square metres of undeveloped land on the outskirts of Riyadh which I bought for SR 9 [$2.4] a square metre: it is already worth SR 50 [$13.3]. There have been excellent returns on real estate.

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