International Investment Bank (IIB), a globally focused investment bank based in Bahrain, today announced the creation of a new real estate development company for investment in the Saudi Arabian real estate market. To be based in Saudi Arabia, and with an authorized capital of SR400million (more than US$100 million), the planned entity will seek to invest some SR2 billion (US$533 million) in the fast-developing Saudi Arabian property sector over the next three years.
In launching the venture, IIB has partnered with the Islamic Corporation for Development of the Private Sector (ICD, a multilateral investment affiliate of the Islamic Development Bank) and the Saudi Economic and Development Company (SEDCO), a Saudi-based investment group. Together, IIB and its two partners will work to identify and invite subscription from additional strategic investors and partners that can add value and further financial and operating strength to the company.
Commenting on the announcement, IIB’s Chief Executive Officer, Aabed Al Zeera, said, “We are pleased to launch this new venture in conjunction with ICD and SEDCO, with whom we continue to partner in the creation of compelling and well diversified investment opportunities across multiple industry sectors, asset classes and geographic locations.
“Our ongoing relationships with these firms and our work together on a number of recent transactions reflects IIB’s belief that success is best achieved through long-lasting partnerships. We are confident that in joining yet again with ICD and SEDCO, we have created another exciting new opportunity that will yield positive results. The Saudi Arabian real estate market offers strong potential for growth and superior returns and we are confident that in working with the right partners, we are well positioned to benefit from current positive trends. These include the further opening of the market to private and foreign investment as well as the adoption of regulations that are creating a more transparent investment climate.”
Market opportunities in the Saudi Arabian real estate sector are broad ranging as demand continues to increase exponentially. It is expected that in the next ten years, the gap between the housing supply and demand will reach some 1 million units. These projections continue to drive aggressive development plans and the need for greater inflows of investment into the sector, added Mr. Al Zeera.
According to IIB’s Chief Operating Officer, Salah Nooruddin, “These and other dynamics in the Saudi Arabian real estate sector make this an optimal time to target and invest in this rapidly developing market. Expected shortages in housing are already reflected in current government plans such as the Kingdom’s 7th Development Plan, which calls for the construction of some 800,000 new housing units over the next decade. With a strong track record in identifying and participating in successful real estate investments in addition to having the right partners with whom to navigate this market, we are confident that the launch of this venture represents a sound opportunity for our shareholders and investors.”
The Internal Rate of Return (IRR) for investment in the planned development company is expected to be in excess of 22% per annum over a three to five year horizon. Further, there is scope for significantly enhanced returns through capital appreciation at exit should the company be floated through an Initial Public Offering (IPO).
Mohamed Hadi Mejai, Director of Investment and Business Development at IIB, added, “We have already launched a similar company targeting the Bahraini market and are looking to build on this success and the track record of our partners to launch a successful venture in Saudi Arabia. We see many opportunities in this market and across the region and believe we are well placed to capitalize on them. The affordable family housing segment is particularly promising and represents an untapped market where the real demand is across the GCC and broader MENA regions, on which we will focus.”
On an ongoing basis, IIB continues to develop and bring to market new and well diversified investment products and opportunities. Already in 2006, the Bank has established a strong deal flow and expects to announce a number of additional transactions across multiple industry sectors and asset classes the months ahead.
These efforts, over the longer term, will also be supported by recently announced plans at the Bank, which subject to regulatory and shareholder approvals will see a significant increase in its paid up capital. With an enhanced capital basis, the Bank intends to further extend its pipeline of attractive investment opportunities in the region and internationally. Since its establishment only two years ago, IIB has already completed a number of corporate and real estate transactions in Europe, Asia and the Middle East.
