Saudi Realty Developer Dar Al Arkan Closes its Tenth International Sukuk with Latest US$400 Million Issuance

Dar Al Arkan Real Estate Development Company, the leading and largest publicly listed Saudi Arabian residential property developer, successfully closed its latest Sukuk offering – a 7-Year US$400 million (SR1.5 billion) Regulation S senior unsecured Sukuk.

In a disclosure to Tadawul (the Saudi Stock Exchange), Dar Al Arkan confirmed: “Further to the announcement made by Dar Al Arkan Real Estate Development Company on 16 February 2020, the company is pleased to announce the successful closing of the seventh tranche Sukuk issuance under its US Dollar denominated Trust Certificates Programme with a size of SR 1.5 billion (US$400 million).”

Dar Al Arkan, rated B1 by Moody’s (with a Positive Outlook), had mandated Alkhair Capital, Citi, Deutsche Bank, Dubai Islamic Bank, Emirates NBD Capital, Mashreq Bank, Nomura, Standard Chartered Bank and Warba Bank as Joint Lead Managers and Bookrunners and to arrange fixed income investor meetings in the UAE and London, commencing on 17 February 2020.

The order book for the Sukuk was opened on 19 February 2020 and closed on the same day, with the tenor set at 7 years and the trust certificates priced at a profit rate of 6.875 % per annum. The issuance, according to the developer, received significant interest from international market participants with the order book reaching SR4.31 billion (US$1.150 billion).

This latest US$400 million Sukuk, which mature on 26 February 2027, was issued through Dar Al-Arkan Sukuk Company Ltd, incorporated in the Cayman Islands with limited liability and a wholly-owned subsidiary of the Obligor, Dar Al Arkan Real Estate Development Company, and comes under its US$2 billion Trust Certificate Issuance Programme. The Programme was established on 12 September 2019 and was arranged by Alkhair Capital (Dubai) Limited and Deutsche Bank.

Prior to this transaction, Dar Al Arkan last issued a benchmark Regulation S senior unsecured Sukuk in October 2019 – a 6-year US$600 million Sukuk offering maturing on 15 February 2025. That transaction was priced at a profit rate of 6.750% per annum payable semi-annually. The issuance was 2.5 times oversubscribed with the order book reaching US$1.67 billion.

The US$400 million Trust Certificates were listed on Nasdaq Dubai in February 2020. The listing, according to the Bourse, brings Dar Al-Arkan’s total Sukuk value listed on Nasdaq Dubai to US$2 billion dollars, following the listing of a US$600 million Sukuk in October 2019 and listings of two Sukuk of US$500 million each in 2017 and 2018.

Dar Al-Arkan’s activities include residential, mixed use and commercial developments in Riyadh, Jeddah, Mecca and Medina and other cities across in Saudi Arabia, as well as the ‘I Love Florence Tower’ in Downtown Dubai.

The company’s latest Sukuk, said the Bourse, “underlines Dubai’s expanding role as one of the largest global centres for Sukuk listings by value with a current total of US$68.355 billion.” The certificates were also admitted to trading on the Irish Stock Exchange (Euronext Dublin’s) regulated market in February 2020.

The proceeds of the sale of the Certificates (the Sukuk Proceeds) will be invested in a single portfolio of investments comprising an Ijara Agreement and a Murabaha Agreement entered into between the Investment Manager and the relevant Restricted Subsidiaries of Dar Al-Arkan in accordance with its Investment Plan. The Investment Management Agreement provides that a minimum amount corresponding to 51 per cent. of the face amount of the Certificates outstanding must be invested in Ijara Agreements at all times, except during the period necessary for the replacement of any Ijara Agreement which is terminated as a result of the occurrence of a Total Loss (as defined in the relevant Ijara Agreement).

Dar Al Arkaan is a regular issuer of Sukuk and user of Islamic finance facilities. Over the last decade, Dar Al Arkan has issued ten Sukuk in the international market. Last year the company became one of the 30 Saudi companies that have joined the MSCI Emerging Markets Index as part of Tadawul’s recent inclusion into this index.

According to Yousef Al-Shalash, Chairman of Dar Al Arkan Real Estate Development Company, ” the inclusion of Tadawul into the MSCI EM Index reflects the strength of the Saudi stock market which will now be classified among the leading global emerging markets allowing it to attract more investors in line with Vision 2030 and under the umbrella of the Financial Sector Development Program.  As Saudi Arabia’s largest real estate developer, Dar Al Arkan is already seeing the benefit of joining the MSCI EM index which has enhanced the visibility of Dar Al Arkan to investors around the world and is helping to broaden its shareholder base.

“This inclusion gives us a great opportunity to highlight the company’s capabilities globally in terms of the company’s financial strength and operational durability and allows foreign investors to take advantage of investing in the Kingdom’s fast growing real-estate sector”.

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