Raising capital will be challenging for waterfront project
- Sharjah Oasis Real Estate Development hopes to attract private investment for Sharjah Waterfront
- It is planning to combine equity investment, development partnerships and debt
- The weak real estate market will make raising finance difficult
For Sharjah Oasis Real Estate Development, a new company with no track record in real estate development, raising finance for the $2.5bn first phase of its Sharjah Waterfront project will be a major challenge.
Sharjah Oasis is working hard to convince private investors to finance the 60 million-square-metre project.
The first phase of the project has been split into four zones, including commercial, retail, residential of various types, and a theme park. Each zone can go ahead independently when the necessary capital has been raised, giving more flexibility.
We have a dynamic financial model, says Hayssam el-Masri, president of Sharjah Oasis. There are different solutions including leverage, private investors, funds, self-funded sub-developments. We could start with any zone based on the macroeconomy, feedback from investors and demand in the market.
The firm is targeting local and GCC private investors, such as investment banks, real estate and pension funds and high net-worth individuals. This is where El-Masri has plenty of experience.
We are investors specialised in real estate, so in the end we are focused on ROI [return on investment], says El-Masri. We are working with investors and building appetite.
The owner, the local Hanoo Group is committing some equity. Sharjah Oasis is also searching for other developers as junior partners, and will sell off some plots of land for independent projects.
Sharjah Oasis expects to sign contracts with major investors at the Cityscape event in Dubai in mid-September.
The company is also looking to secure some debt financing.
El-Masri is certain the Sharjah Waterfront project is workable and will go ahead, but the state of the real estate market will make persuading investors to commit capital almost impossible.
The current market situation is very difficult says Manoj Prasad, executive vice-chairman & CEO of Dubai-based Que Capital. Investors property has gone down in value so they are holding on to a certain level and not making new investments.
This may lead to delays as Sharjah Oasis continues to court investors and raise the necessary funds. If oil prices and real estate markets do not recover soon, the delays may be substantial.
Big investors are still negotiating but they are not committing any serious money, says Prasad. Dubai has lot more high-end opportunities and is always the first choice among the investors for better returns than investing in Sharjah.
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