Built to last

One year after paying off its $1bn sukuk, Saudi Arabia’s biggest listed developer is preparing to cash in on the kingdom’s housing boom. In an exclusive interview, Yousef Al Shelash, the founder and chairman of Dar Al Arkan, talks diversification, financing and how the firm can become the Gulf’s biggest developer in a decade’s time

On the last afternoon before the holy month of Ramadan begins, Al Qasr Mall is a hive of activity. On all four floors of the cavernous shopping complex, families are rushing to complete their last-minute shopping, and retailers’ tills are ringing. Although the mall has been open for just over a year now, its official launch took place at the beginning of last month. The governor of Riyadh, Prince Khalid Bin Bandar, was on hand to cut the tape, underlining the importance of the mall to a fast-growing local community.

The key to Al Qasr Mall lies in its location, in southern Riyadh. Almost 85 percent of the city’s malls are based in the northern, developing part of town. But more than 70 percent of Riyadh’s population live in the southern, more mature, but less upmarket part of the city. With the Saudi capital growing at breakneck speed — the latest estimates put the population at well over 7 million, which is almost equivalent to the total population of the UAE — further development of Riyadh’s infrastructure is sorely needed.

It’s also vindication for the man behind the mall, Yousef Al Shelash. He is the chairman and founder of Dar Al Arkan, Saudi Arabia’s biggest real estate company, which has masterplanned the entire Al Qasr community, as well as a series of other developments throughout the kingdom.

When Al Qasr Mall opened to the public on 12 June last year, Dar Al Arkan was facing an unprecedented degree of scrutiny, as bourse observers queried whether the firm would be able to pay off its $1bn sukuk by mid-2012. Those doubts were quashed when the developer made the full payment, bang on time, in the middle of July last year.

“In June, we opened one of the biggest malls in Riyadh, and in July we repaid one of the region’s largest debts to the international debt market,” says Al Shelash. “There was a lot of pressure on this company, especially when you consider that a lot of high-value invoices had to be paid off before the mall opened, like the finishing of the mall, and final payments to contractors. So that shows our strength, the resilience of our business model and the ability to generate cash.”

Right now, the mall has around 85 percent occupancy, and features some of retail’s biggest brands. The Alshaya portfolio is there in force, with Mothercare, Debenhams and Victoria’s Secret all present. And Dubai’s Majid Al Futtaim Retail is also represented, via a large Carrefour hypermarket on the mall’s first floor.

“Carrefour has fourteen branches in Riyadh, but they are paying their highest rate in Al Qasr Mall,” says Al Shelash. “They paid this high rate because they see the feasibility and they see the crowds.”

The mall is also symptomatic of Dar Al Arkan’s five-year plan to diversify its revenue streams. The firm recently hired PwC to carry out a study assessing its structure and business processes. It began implementing the restructuring plan earlier this year, and the chairman says he hopes that this will be complete by the end of 2013.

The company has already said that by 2017, it is aiming to diversify its revenue mix by increasing its leasing portfolio and reducing its reliance on land sales. Building and leasing retail space is clearly part of that diversification plan.

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