In terms of our assets under management (AUMs), the number of products presented to market, and the creativity of our solutions, there has been progress. We have always stood at the forefront of the sector for investments in general and real estate in particular. Our firm has been a trendsetter when it comes to sharia-compliant solutions, for which we were recently awarded for having the most creative sharia-compliant solutions. Talking about longevity, over the past ten years our main strength has been being able to ride waves and jump ship at the right time. When it comes to Saudi Arabian real estate, things go in and out of fashion quickly. When we talked about real estate development focus 10 years ago, there were certain trends. If one were to launch a real estate development fund today, it would be suicidal—it is completely out of fashion. Income-generating real estate funds shortly came after that, and I launched the first one in Saudi Arabia through a different company.
Nov. 2, 2018
Dr. Abdulla Rashed Shafeea
Managing Director, the Investor, Securities Company
CEO, Saudi Kuwait Finance House (SKFH)
Sukuk issuance is increasingly becoming a more feasible option for governments and big companies wishing to reduce their dependence on traditional bank facilities or who wish to seek alternative sources of funding. Also, due to its technicalities, i.e. preference for Islamic assets/financing for Shariah-compliance purposes, the demand for Islamic products has seen unprecedented growth as a viable alternative source of financing in recent years. When it comes to Saudi Arabia's new strategy and Vision 2030, sukuk has also become one of the most important sources of financing for the government and state-owned companies like SABIC and the Ma'aden Group. In the GCC region, Dubai, Abu Dhabi, Kuwait, Qatar, Oman and Saudi Arabia have set up their debt management offices in order to perform the cash management functions of the government and raise funds from international markets, taking advantage of the globally low interest rates. As for us, Saudi Kuwaiti Finance House (SKFH) is a CMA licensed investment bank that provides wide range of services across several sectors and industries. We provides financial advisory services, including portfolio management, as well as investment funds.
Abdullah Al Roushoud
CEO, Blominvest Saudi Arabia
We have been planning to launch REITs since 2008, and we have been in talks with the Capital Market Authority (CMA) since then. REITs are a great option for public investors to generate periodic distribution, at 5-8% yields per year. When the CMA approved the REIT regulations, the REIT market went through several stages. First, REITs were opened for everyone as speculative and went up by 130%. The regulations were then halted by the CMA and no approval or licenses were given to launch REITs for months. These actions were basically considered as an intervention in the business, which is beyond where it seems the CMA as a regulator had concerns and fears that not all in the business shared. Because of that, the REITs were treated as speculative tools, and therefore a limited number of REITs were listed in the market. After that “drought period,” the CMA has approved more than four REITs at the same time. The CMA definitely intended to protect public investors, although the frequent changes and interventions were received negatively by investors. Later, many REITs were listed for public offering in the Saudi market but were faced with a very low appetite by both individual investors as well as institutional investors.
Ibrahim Al Assaf
CEO & Founder, Musharaka Capital
2017 was a great year for us. We launched a large REIT fund worth around USD266.68 million. The coverage was over 1,000% the requested amount, which is an indication of the liquidity of the Saudi market. Its closure was extremely successful and on time. Fortunately, the REIT market was introduced to the country at the right time; real estate values are currently not inflated like they were four years ago. We were successful in our first distribution and promised to distribute 7% annually. We have made our semi-annual distribution of 3.5% and plan to distribute the remaining 3.5% on time as well. Not only were we successful in obtaining the Discretionary Portfolio Management license but are also extremely active in the private equity sector. We recently concluded two acquisitions: ARMAS Company, which made a profit in 2017, and a solar energy company called Edimax, which will have good results in 2018. Edimax is located in Jordan, but we plan to bring it to Saudi Arabia. With the increase of the energy prices here it is the right time to do so.
CEO, Gulf Finance Saudi Arabia
The Saudi Arabian economy as a whole, compared to the GCC and the MENA region, is rather large, but the number of banks and installment companies is relatively low. This leaves a number of sectors untapped. Our focus is on SMEs, one of the most untapped segments. The Saudi Arabian Monetary Authority (SAMA) classifies an SME as a company that earns USD53.3 million or less. If a customer, establishment, or company wants to obtain financing from a bank, it would be a challenge for them because banks seek partners that earn over that amount. This is where we come in. There are 37 installment companies in Saudi Arabia, though not many of them lend to SMEs. They instead look at retail, automotive, and mortgages. In terms of the growth in our potential customers, there are more than what we can observe. Our head office is in Jeddah, though we also have a branch in Riyadh and a license to open a branch in the east; that will happen in 2019 or 2020.
Executive Partner, Athman Financial Advisory
Tadawul has already started many initiatives, such as allowing REIT and fixed-income markets, as well as allowing smaller investors to invest in sukuk. Joining the MCSI is another feat expected to improve liquidity levels and decrease restrictions in the smaller, parallel market, also known as Nomu. However, it appears that Nomu is also being used to exit one's business or cash out rather than grow it and take it to the next level. If a company wants to pursue an IPO, it should be as part of its growth strategy; exits should only come later. We need more restrictions on companies' owners in IPOs and less restriction on investors. More generally speaking, the Saudi Arabian economy still relies heavily on oil—for 90% of the government revenue and around 50% of Saudi GDP, to be precise. The oil price and production still act as a major pillar for the economy, though the budget deficit will be covered. Tourism is another difficult area. Islamic tourism is easy to expand, non-Islamic tourism less so—though the new generation is more accepting of other cultures.