Rikaz for Development & Planning L.L.C. (“Rikaz”), a leading Saudi Arabian real estate company, and Shamil Bank of Bahrain B.S.C. (“Shamil Bank”), the Bahrain-based Islamic commercial and investment bank, have announced the launch of the Royal Amwaj Real Estate Development Fund (the “Fund”), the first Saudi Riyal denominated, regulated real estate development fund for investment in the Saudi Arabian real estate market.
The Fund was approved for launch and marketing by the Bahrain Monetary Agency (“BMA”) on 3 April 2005. The Fund, which will be regulated by the BMA, was structured and will be managed by Shamil Bank. The project, in which the Fund will invest, the Royal Amwaj Resort, will be developed and marketed to potential buyers by Rikaz. The Fund represents an opportunity whereby, for the first time, both Saudi and non-Saudi investors can invest in development projects in the Kingdom through a regulated investment vehicle. Further, it also underscores Rikaz’s ongoing objective to bring about modernisation and greater transparency and regulatory supervision in the Kingdom’s real estate market.
The SR 465.9 million (US$124.2 million) Fund is a Sharia’a compliant, three-year, closed-end investment fund that will finance the delivery and marketing of the Royal Amwaj Resort, a ground-breaking, mixed-use development on a one million square meter waterfront site to the south of the city of Al-Khobar, in the Eastern Province of Saudi Arabia. The scheme will comprise a new residential community of high-quality villas, townhouses, a boutique hotel and other amenities on an extensive waterfront with three man-made bays that will provide direct sea access to each villa.
The Fund is initially targeting investors from Saudi Arabia and the Gulf region but is open to international investors looking for exposure to the Kingdom’s emerging real estate market. The Fund’s projected returns are anticipated at an ROI of more than 43% and an IRR of 18.1% over the Fund’s term.
The Royal Amwaj Resort is one of a new generation of mixed-use communities planned by Rikaz as part of its real estate development programme, which is expected to set a new precedent for large-scale urban development in the Kingdom.
Speaking at a press conference to mark the launch of the Fund, President and CEO of Rikaz, Sheikh Khalid Al Gahtani, said, “The launch of the Royal Amwaj Fund heralds a new era in the development of the Saudi Arabian real estate industry, which has to date been characterised by unregulated, private investment and short-term, speculative land deals. The structure and transparency provided by such a fund should encourage Saudi and non-Saudi investors alike to participate in major urban developments that respond to the changing pattern of demand for real estate in the Kingdom. We are delighted to offer this opportunity to investors and thank the Bahrain Monetary Agency and Shamil Bank for their cooperation and support.”
The Head of Investment Banking at Shamil Bank, Mr. Ahmad Tayara, said, “It is time to even further raise standards in the rapidly advancing Islamic banking industry by providing the investment community with greater opportunities wrapped in regulated financial products such as the Royal Amwaj Real Estate Development Fund. Shamil Bank is focused on offering a greater number of regulated fund products to investors and has welcomed Rikaz’s bold move to be the pioneering real estate development company in Saudi Arabia to act in this regard. We are delighted to have been approached and selected by Rikaz and hope that others will follow suit as the growing level of investor sophistication comes to demand increased levels of transparency and disclosure.”
A regulated investment product ensures that investors are provided with a higher degree of transparency both as a result of the supervisory function carried out by the regulator but further through the role played by independent parties that are responsible for the oversight of various aspects of the fund and its proper management. While this process does not eliminate the intrinsic risks of investments made through a regulated fund, it guards against the misuse of the proceeds raised and provides investors with the relevant information at the onset whereby they can make more informed and educated investment decisions.
Mr. Tayara continued, “We would also like to extend our appreciation to the Bahrain Monetary Agency and acknowledge the importance of the swift and accurate manner in which they have reviewed and approved the launch of this Fund. This efficient process should serve to encourage other potential regional companies to take advantage of the strong regulatory environment that exists in the Kingdom of Bahrain and which continues to support its position as the region’s leading Islamic financial hub.”
Further commenting on the Fund, Mr. Jamal Tartir, Group Head of Private Banking at Shamil Bank, stated, “Shamil Bank is always looking for opportunities to broaden the investment horizon for its customers and has taken this innovative step to create the Sharia’a compliant Royal Amwaj Fund. We see this as a huge opportunity for investors from the GCC – and the world at large – as the real estate sector in Saudi Arabia is poised for continued, unprecedented growth supported by the economic bull cycle being experienced in the region, as well as the inherent need to urbanise a growing population that is resulting from and fuelling its remarkable economic growth.”
Sheikh Khalid Al Gahtani concluded, “Rikaz is a company that strives to combine a modern real estate vision with the security of regulated investments and broader investor participation and projects like City Fanar, Rikaz’s flagship development, and the Royal Amwaj Resort represent a new stage in the evolution of a maturing Saudi real estate industry. We are confident that today’s launch of the Royal Amwaj Fund sets an important precedent and will provide significant opportunities and open the door to new levels of investor interest and confidence in the Kingdom. Rikaz is committed to acting as the foremost exponent of change in the Saudi Arabian marketplace, leading the campaign for higher architectural and building standards, the regulation of real estate finance and the creation of environmentally sensitive, socially-inclusive urban communities.”