The high demand has convinced a handful of the Gulf’s leading companies that now is the time to enter the crane leasing business. Earlier this year, nine founder shareholders formed Ijar. By the end of July, the company will reach another milestone when it takes delivery and leases out its first piece of equipment to a regional customer.
Ijar brings together some of the most famous names in Gulf contracting. Promoted by the biggest of the lot, Athens-based Consolidated Contractors International Company (CCC), its shareholders include five major Saudi Arabian companies and three from Dubai (see table). All have taken an equity stake of 7-14 per cent in the new company, which has an authorised capital of $70 million. And with the exception of Dubai Islamic Bank (DIB), every one is a family-owned business.
Ijar is aiming to have 300-400 cranes within two years. It is planning to offer a cross section, including tower, crawler and rough terrain cranes. So far, it has placed three orders, each worth about $10 million, with manufacturers, and is intending to place similar-sized orders every two months.
Demand for cranes has soared across the Gulf, placing intense pressure on manufacturer capacity and stretching delivery times in some cases to nine-12 months. In its favour, Ijar will be able to draw on the experience and muscle of CCC, one of the biggest equipment purchasers in the region.
Despite having major equipment users within its ranks, Ijar is presenting itself as a market-driven company. Provided end-users are willing to take equipment on long-term leases, which effectively means anything over a year in the Middle East, cranes will be leased to third parties as well as shareholders, it says.
The founders will play a role well beyond providing equity. Ijar is being set up as a virtual’ company. It will not have a huge head office, or a network of its own yards. Instead, the company will rely on the assets of its founders. The vast majority of its partners already have their own yards and they will be paid a fee to assemble the Ijar equipment and deliver it directly to the end-user. In addition, the cranes are expected to be low-maintenance, given that the company has decided to procure only new equipment direct from the manufacturers.
Ijar reckons that it has all the right ingredients. It has the financial resources in what is a highly capital-intensive business. Through its founder shareholders, it can leverage off existing resources, market knowledge and relationships to drive the business forward. And with the regional construction boom expected to last another five years at least, there will
certainly be demand for its services.