Bloomberg News

Dar Al Arkan to Repay $1.3 Billion This Year as Land Sales Rise

February 20, 2012

Feb. 19 (Bloomberg) -- Dar Al Arkan Real Estate Development Co. plans to repay about 5 billion riyals ($1.3 billion) of debt this year as the Saudi Arabian developer sells land to build its cash holdings, the chief financial officer said.

“We will repay our debts this year, which amount to about 5 billion riyals and includes our sukuk maturing in July,” Andy Raheja said in an interview at the Bloomberg office in Dubai on Feb. 15. “We have been selling land and not deploying it back into more land and are building up a cash pile in order to repay the sukuk.”

Dar Al Arkan, the second-biggest property company in the kingdom by market value, holds about 35 million square meters of land mainly in Riyadh and Jeddah. It expects to continue making about 800 million riyals every quarter from land sales, Raheja said.

Saudi Arabia announced investment programs valued at more than $500 billion in the past two years to build homes, develop infrastructure and create jobs in the Arab world’s biggest economy. Benefiting from the state’s development objectives, Dar Al Arkan is pursuing a “very large pipeline” of mega projects, Raheja said. The company won’t add to more projects until it sets aside enough cash to cover debts, he said.

“The board has decided that we will not invest in any more land acquisitions, we will not launch any new mega projects, we don’t pay dividends,” Raheja said. “We won’t have any other significant use of cash until enough money is put aside to cover the upcoming debt payments.”

Asset-Backed Financing

The company’s cash reserves rose to 2.5 billion riyals at the end of last year from 1.2 billion riyals at the start of the year, Raheja said. Dar Al Arkan’s fourth-quarter profit beat analysts’ estimates.

The stock has advanced 25 percent this year compared with a 6.4 percent gain for the benchmark Tadawul All Share Index. The price on the company’s $1 billion floating-rate sukuk due in July rose to 96.63 cents on the dollar on Feb. 16, the highest since November 2007, according to data compiled by Bloomberg.

Dar Al Arkan has a 400 million-riyal loan due in the second quarter and may have a capital expenditure of about 250 million riyals, Raheja said.

The company is in talks with banks to raise 700 million riyals in an Islamic financing facility backed by its Qasr Mall, which will be operational in the first half. “We are evolving from a generic borrowing model to borrowing against assets and borrowing to build specific assets or projects,” Raheja said.

The developer is also talking with banks to finance construction of build 500 villas in the Shams Ar Riyadh project, he added.

--With assistance from Shaji Mathew in Dubai. Editors: Daliah Merzaban, Shaji Mathew

To contact the reporter on this story: Dana El Baltaji in Dubai at delbaltaji@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net


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