Dar Al Arkan eyes aggressive regional and international expansion

Ziad El Chaar, Vice Chairman of Dar Al Arkan tells Big Project ME that the hugely successful first half of the year is just the beginning, as it plots its regional and international expansion

By any measure, the year 2022 has been a mammoth one for Dar Al Arkan, the Saudi Arabian real estate developer. The first eight months of the year has seen the Kingdom’s largest listed developer achieve more than most companies would in five years, with a range of projects, announcements and partnerships confirmed as part of its ambitious strategic expansion plan – both regionally and internationally.

At the start of the year, the developer announced that it had agreed a strategic partnership with Compass Project Consulting, which has since grown into the acquisition of an undisclosed majority stake in the Dubai-based project consultancy firm.

In February, Dar Al Arkan opened its first office in Beijing, China – a move that is in line with its strategic expansion and will allow it to promote cooperation and partnerships within the real estate and technology sectors to exchange and implement global best practices in these respective industries. Furthermore, the office allows the company to develop joint ventures with its Chinese counterparts for both the Chinese and Saudi markets, thus enhancing investment and knowledge sharing opportunities.

In March, the developer announced a deal with Oman Tourism Development Company (OMRAN Group), to develop AIDA, which is regarded as one of the largest premium mixed-use real estate projects in the Sultanate of Oman. This project marks Dar Al Arkan’s first entry into the country and is set to be a key part of Oman Vision 2040.

Also in March, the company launched its first project in Qatar, the Les Vagues residences by Elie Saab, which is being developed in collaboration with Qetaifan Projects.

All of these significant moves were being carried out with ongoing work on its Dubai-based projects, including its very first project outside Saudi Arabia – the $218mn Urban Oasis by Missoni residential project in Business Bay. Construction work also began on its $272mn W Residences Dubai, while significant progress has been made on its $217mn DaVinci Residential Tower, which is being built in partnership with Italian hyper car manufacturer, Pagani Automobiles.

Rounding out this list of enviable achievements is its first European luxury residential project – Sidra, a $133mn, 500,000sqm exclusive vacation and housing development in Bosnia. On top of all these project announcements, on 30 June 2022, Dar Al Arkan sold a $400mn, three-year Sukuk, with Bahrain’s GFH Financial Group acting as a joint lead manager, alongside other parties.

The sukuk has been met with strong demand from both regional and international investors and is the 12th issuance for the Saudi developer till date. With a portfolio of assets valued at more than $8.5bn, the developer says that the issuance will be used to further support its development goals and pipeline of world-class projects.

“We have a strategy of expansion for inside Saudi Arabia and a strategy of expansion outside Saudi Arabia,” Ziad El Chaar, Vice Chairman of Dar Al Arkan, told Big Project ME during an interview at Urban Oasis by Missoni, the developer’s first non-Saudi-based project. “We’re actually being motivated by the Ministry of Investment and the Ministry of Tourism in Saudi Arabia to go outside KSA and do projects, and to plant the Saudi flag in the cities that we’re operating in, so as to show that there are many successful companies in the Kingdom, who can cross borders and continue their success – be in Dubai, in Muscat, in Doha, in London, in Spain, or in China.”

“Dar Al Arkan is one of the few companies that has around $8.5bn in assets, which shows how solid the company is in terms of asset base. Out of this, approximately $798mn is free cash, which gives us the ability to look for opportunities to deploy that free cash on projects that have good IIR and a good return on equity in our target markets,” El Chaar states.

He adds that the impressive financial results registered by the company in 2022 (the developer saw a 675% profit spike in Q1 due to higher sales) is due to the timely completion of projects. He points out that Dar Al Arkan has been working very aggressively over the last year on a number of projects – mainly in Saudi – and that their ongoing completions will continue to have a positive financial impact on the company’s position.

“Our specialty has always been residential and specialised residentials, which could be serviced apartments, co-living projects, etc. We believe that if you want to continue your success, then you should continue in your specialty and grow it. Globally, we’re increasingly seeing deeper specialisation. You cannot be a jack of all trades in real estate – you will fail in some categories.

“We have an aggressive expansion plan both inside and outside Saudi Arabia, but inside the Kingdom will always be bigger in proportion, because as a real estate developer, our strength is in our home market. We are expanding outside of Saudi because we have a very large customer base and very wide distribution channels, with many associations with a large number of brokers, so we’re basically developing these projects for our customer base,” El Chaar says.

He adds that having been established in 1994 and having delivered thousands of units in Saudi Arabia alone, he and his team at Dar Al Arkan have developed a strong sense of what projects appeal to their customer base.

“Most of the people working in the company used to work for other developers who tried to expand beyond their hometown and failed. We’ve learnt their lessons and learnt what to do and what not to do. For example, we will never expand outside of Saudi and go into first homes. That’s because in every market, you have very experienced and aggressive developers who would be better than you in developing first homes for that city, so do go competing with them.”

“That’s why we always go into the second homes or vacation homes markets. We have a clear strategy for that expansion. Inside Saudi Arabia, we’re collaborating with a lot of the governmental companies, especially the PIF companies, to develop portions of their big masterplans.”

This is one of the reasons why the developer decided to acquire a stake in Compass Project Consulting. El Chaar explains that there is a twofold rationale behind the decision – one is that it provides an entry into the fast-growing project management segment, and secondly, it will strengthen the armoury of the real estate giant as it looks to bid for the Kingdom’s upcoming megaprojects as a project consultant.

“We used to do our own project management, our own value engineering, and we have a lot of expertise there as a developer. We saw that many other project management companies because they are not coming from a development perspective, don’t have the same strength that we are able to convey in project management, value engineering or design review. That’s why we thought there was a clear commercial opportunity to get into this business,” he explains.

“We now have Compass Dubai and Compass Saudi Arabia and we’re inputting a lot of real estate development experience into the projects that we are project managing, while at the same time, Compass will benefit from the projects that Dar Al Arkan will eventually do.”

El Chaar points out that one of the objectives of Vision 2030 is to motivate Saudi companies to take on initiatives into sustainability and modern construction, and that the acquisition and partnership with Compass Project Consulting will help push Dar Al Arkan forwards in that regard. This is also why the developer is taking a small step forward into the construction technology sphere, with the establishment of a subsidiary – Dar Al Arkan Construction Technology – which will carry out research and development into various construction technologies and methodologies, he says.

“It will benefit us in the future, that’s why we’ve opened it – to see if we can succeed in this area. But most of it is still in the research and development phase. I hope in time, we’ll be able to crack it and present viable construction methodologies that will assist in the attainment of the targets of Vision 2030.”

He adds that the developer is working with three companies – two in China and one in Denmark – to design villas and build them using 3D printing technology. This will not only have significant sustainability gains but will also allow the team at Dar Al Arkan Construction Technology to test new materials that will allow for major gains in efficiency and energy usage.

Finally, El Chaar points out that despite the successful first half to the year, there is still plenty of work and adaption to come for the developer. He attributes the accomplishments to sound financial planning by the company’s leadership, explaining that care has to be taken to ensure that investments aren’t left exposed.

“You need to make sure that if there’s a slowdown in the areas that we’re operating in, that we don’t get exposed, because eventually, the cash flow that is coming from the projects will be a little weaker. That’s why financial planning is the first thing that we do. We select projects that do not require heavy equity from day one, and we will continue to look at these types of projects till we see that there is some stabilisation around us and that we have weathered the current storm that (we’re facing).”

He adds, “We are also watching construction costs very carefully, versus the prices that we have. With oil prices up and inflation up, you would expect material prices to also rise. We’re watching construction costs very carefully, considering the prices that are prevailing today. This is so that when we award a contract six months from today, we know what to expect prices to be. In fact, we have already factored in some increases in prices for projects that will be awarded as of September 2022!”

“We did not jump into the real estate industry because there was growth in the industry. we’ve been in the industry for the last 28 years and hope to be here for another successful 28 years and beyond. We believe in this sector, it’s a vital sector,” he asserts.

“It will go through ups and downs like any other sector, and we will maintain our position. In fact, we have a target that 10 years from today, in the year 2032, we want to be among the top 20 real estate developers – listed – outside China,” El Chaar concludes.

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