How has ALARGAN in Kuwait grown to its current position today?
The company was established simply to serve the purpose of providing young Kuwaitis with suitable homes. We started out as a construction company with a small amount of capital; however, over a period of about three years, we were able to increase our capital and form new partnerships. Our first project began in 1996, providing 18 homes below $330,000. When we first started, the least expensive house in the private sector was about $826,000, which most people could not afford. We provided all the specifications and architecture of our homes to our buyers, as well as warranties; a service which had not been offered before. There was a high demand in the market for affordable homes and we allocated prices based on what the buyer could potentially afford after receiving subsidized government loans. We maintained this service up until 2003, when land prices skyrocketed, at which point ALARGAN looked into other markets. We established ourselves in Oman in 2003, ultimately transitioning from a family-owned company to a shareholder company, upon which we were able to increase our capital to KWD10 million. In 2005 we further increased it to KWD25 million and managed to expand into Bahrain in the following year, then lastly in Saudi Arabia in 2007. We keep our capital small, although our assets are incessantly growing.
What are the fundamentals of the mid-market segment that make it a good investment?
We invest in secure properties that generate consistent revenues. The mid-market has been underserved for a long time, and it is the largest. After the crash, many companies realized the focus should not be solely on the high-end market. The Middle East has the highest growth per capital in the world, so there will continue to be an influx of buyers. We have been focused on the mid-market segment for 20 years and know it quite well. Over this time ALARGAN has built up on experience, aligned itself with the right partners, and added value to markets in new territories. In every market we enter, we raise the bar in terms of service, and we lower prices. We are in an advantageous position and claim to be the leader in a niche market.
What qualities do you look for in choosing local partners?
We unlock land value through strategic partnerships. Local partners are a must to have, because we cannot assume we know everything when we enter a market. They not only show us a map and explain the way locals are thinking, but help us logistically with the government sector. We look for partners that share our mentality i.e. they must be straightforward and interested in serving the community before making a profit. Our partners should not be developers or contractors, or competitors in the same field; they should be in banking or other industries of interest. We should add a new dimension, so that we add value to their portfolio rather than matching it.