Marcopolis presents the Saudi Arabia Report focused on the investments, doing business, economy and other topics featuring interviews with key executives. The sectors under review in this issue are industry, real-estate, ICT, investments, banking sector, telecom sector and many more.
Ahmad Ibrahim Bin Saedan is GM for Real Estate Development at Al Saedan Real Estate.
Interview with Ahmad Ibrahim Bin Saedan, GM for Real Estate Development at Al Saedan Real Estate
Let’s talk about your iconic projects and your compounds. How are they unique? How do you differentiate yourselves in the market?
We have just finished Addiyar compound which is a compound in the Second Industrial City. It is the first compound to be developed in the Second Industrial City located on the new South Ring Road of Riyadh. It consists of 1,088 units. The development components include furnished apartments, a labour camp, a compound for families and a compound for bachelors, health clubs, a spa, and a central kitchen and a central supermarket which mainly serves the employees of the Second Industrial City as well as the labourers and their families.
There is a lot on offer in the market so what makes this compound different?
What makes it different from other compounds is that it is an integrated compound. If you have a factory for example, you can have the executives living with their families, and have the bachelors, technicians and the labourers also in the compound. We serve the labourers 3 meals a day at the central kitchen and we have a laundry to wash their clothes. The factory administration doesn’t have to worry about the labourers who work in their factory because we offer a fully-fledged service to their labourers.
Also we have put in place High Standards of facilities management systems with processes and procedures established by CBRE International to assure the safety and wellbeing of the residence. With regular independent performance audits to guarantee high standards of property management. Also an occupier care program to ensure swift problem solving and tenant satisfaction.
What is the overall value of the project?
The value of the project exceeds 500 million Saudi riyals. It has phases. The first phase was the labour camp which is completely finished now. The second phase was the family section and the bachelors’ section which is about 90% finished, the hand over phase has been initiated and anticipated to be concluded by the end of the year 2015.
The value of the project exceeds 500 million Saudi riyals.
What were the major challenges that you encountered when making this happen?
The challenges were mainly the utilities so electricity, water and sewage because this is a compound with more than a thousand units. It is a unique compound that is like a little town in itself so there were a lot of challenges having the utilities connected to the compound. In the end everything was connected and the compound should be 100% ready in a month’s time.
What was the original idea behind this compound? Why did you decide to do this project instead of doing something else?
The Second Industrial City was developed purely as an industrial city with no residential compounds and most people working there had to commute to Riyadh. It didn´t even have any labour camps as they were outside of the Industrial City and labourers had to commute to the factories. The idea was to have a camp that serves labourers, technicians and families where they can stay in the Industrial City living close to where they work to save time commuting.
What makes you think that this concept will be successful? Do you already feel there is a lot of interest in it?
We have been having lots of requests regarding the compound. Lots of corporates are asking to have 100, 200 or 300 labourer units. We have even had requests for 500 units. The total capacity of the labour section of the compound is in excess of 4,700 labourers and this can easily serve the Industrial City.
Once everything is done, how many people will work/live in the area?
The total population of the compound will be in excess of 8,000 residents including the fringe departments.
What are the demographics that you are targeting?
We usually aim for corporates or factories that are working in the Industrial City so we target their technicians and families. However since we are on the New South Ring Road of Riyadh we also have fringe departments that can serve the consultants and advisors that are visiting the factories and we can serve the Ring Road itself so people travelling from East to West Saudi Arabia or vice versa.
Let´s now talk about the other compounds that you have.
We are also developing a compound in Al Nafal district which consists of 42 units. We are developing a compound in Rehab with 246 units between villas and apartments. We are developing a compound in “Al Taawun” with 155 units. Our other developments include an office space tower called Elegance Tower. It consists of 28 storeys and 5 levels of underground parking with a total capacity of more than 733 parking spaces.
Which of the compounds would you like to focus on more?
Al Rehab Compound is located in the Rehab district. It is right after Al Diriyah before King Salman Road. It consists of 246 units, most of which are two bedroom apartments. It is going to be highly secured with high barriers all around it. It has a health club, squash courts, tennis courts, basketball courts, a Kindergarten, and it serves foreigners from Europe, America or Asia that are working in Saudi Arabia.
There is a real problem finding quality accommodation for foreigners. What criteria did you take into consideration when you conceived the project?
Al Saedan Real Estate aims to offer the best services in the compounds. The plan for the compounds is to have the best quality of finishing. In Saudi Arabia, compounds have offer unsatisfactory level of service and low quality finishes. Al Saedan Real Estate picks the materials and import them directly from where they are manufactured whether it is from Europe or China, to have the best quality finishing in addition to the services that we provide like the multipurpose areas, the central kitchen and the health facilities.
In terms of location is it strategically located?
The compound is strategically located; it is on King Khalid Street, less than 1km from King Salman Street. It takes you directly to the diplomatic quarter and King Saud University with no traffic lights and directly to the airport on the highway. It is very accessible and yet it is away from Riyadh’s traffic.
Do you intend to sell the units or rent them?
The units will be rented because usually compounds here are rented and not sold.
This creates a very straight forward and convenient structure and a constant cash flow. What is the essence of the compound? Would you like to create a Western style of living or a soft touch of Arabia?
We expect foreigners like Europeans or Americans to be living in the compound however the finishing will have some Arabic essence. There will be some calligraphy on the walls and some wooden designs and crafts. Generally speaking it will be for Westerners but with an Arabic touch.
What is the value of this project?
The value of the project is about 250 million Saudi riyals.
The value of the project is about 250 million Saudi riyals.
What about Al Nafel compound?
Al Nafel compound has just been finished. Al Nafel Compound consists of 42 units which are all villas with four bedrooms. It has a large swimming pool, gym, spas, steam baths and a multipurpose area. We did think about the children living in the compound giving them the space and freedom by building two playgrounds each one for a different age group and a day care centre. It also has a central kitchen that can serve the compound and can cater outside the compound as well. It was furnished from Italy. The kitchens have all the appliances and so the villas are ready for people to move in. The design of the compound is a semi closed compound where you have your own carpark and all services are connected to the backyard of the villa.
What are the demographics for this compound?
It is a luxury compound; we are targeting executives that don’t need too much security because this is not a closed compound. Each villa has its own entrance, a driver’s room and a maid´s room so it is aimed mostly at Saudis, Arabs, and Asians who are usually looking for these types of compounds.
What about the location of this compound?
The compound is located next to Exit 5 in Al Nafel district. It is accessible as well. From Exit 5 you go directly to SABIC and to the airport or to the business gate. The North Ring Road has lots of corporate headquarters also.
How would you like to brand these three compounds that we have talked about?
Addiyar Compound in the Industrial City was the first compound and the largest by far. It is the most integrated compound. There is no other compound that has such furnished apartments for families, bachelors and labourers. Al Nafel Compound is kind of like a boutique compound because it is small with just 42 units that are four bedrooms units that are more luxurious. It is a compound for executives that need less security and more facilities. Al Rehab Compound is a large compound that is very secure with lots of facilities as well. It has nice walkways for people to walk around it.
We also have “Al Taawun” Compound which we didn’t talk about. It consists of 155 units, most of which are apartments. It also has 26 villas. It is a semi closed compound where only residents can access the compound however each villa has its own access to the outside of the compound. It has a swimming pool, a tennis court and small supermarket.
What is the investment value of this?
The investment is about 200 million Saudi riyals. It is located next to the new government developments on the East Ring Road of Riyadh. The units there are smaller so it is more for people who need less unit space and who don’t require the same levels of quality as the other compounds.
What are the demographics for this?
It is aimed at executives and middle management. Often Arabs like this kind of compound as they don’t normally like the closed, high security compounds. They like the facilities, the green areas and the swimming pools and as they have visitors more than the westerners do they are the target market of this kind of compound.
Al Saedan switched strategy; about ten years ago you were master developers and you developed infrastructure but now you are developing your own compounds. We can say that you are becoming a leader in your field. You are a private company. What led you to this change of strategy?
Al Saedan has been in the real estate business since 85 years and evolving since then but the past forty years when my father started the company as the first generation developing infrastructure developments. The strategy was to buy large plots of land and develop the infrastructure to sell individual plots of land. The demand has shifted from plots of land to units. Al Saedan Real Estate is a market driven company and thus switched the strategy to developing units whether they are residential or office space. The plan is to concentrate on compounds as the market has enough office space. Al Saedan has a new strategy, a new business plan and we increased the capital of the company to 1.3 billion Saudi riyals. The company has invited new directors and the aim now is to be listed in the next three to four years.
Can you tell us more about the listing? What is the percentage of capital that you want to list?
We are thinking of floating 30% of the company which is the least you can do by law. We are working with lots of international advisors to reach that level. We are expecting to be listed within the next three to four years.
Do you feel that Al Saedan is one of the best private developers in the country?
Al Saedan has always led the market in terms of development since the company started developing large plots of land. When you enter our developments themselves, in Rehab for example, you feel that there is a difference in the development itself. Al Saedan Real Estate always goes the extra mile in its developments and to create an added value. For example, our compounds offer superior services compared to other similar compounds. The Elegance office space offers more parking spaces than what is required. Al Saedan Real Estate is the leader in services and quality.
Al Saedan Real Estate is the leader in services and quality.
You are the 3rd generation of Saedans that are working in real estate development; your grandfather started developing in Riyadh when it was just a small city. There is a lot of continuity in Saedan. Can you talk a bit about the history of the company and about the restructuring of the company?
The family first started the business with my grandfather 85 years ago. It was a small business, he used to build small houses and sell them. My father used to help him in building these houses. Then my father started the company with this existing CR by developing infrastructure. My eldest brother then led the company and I see myself as the 3rd generation and we are now preparing the 4th generation for the company. Al Saedan Real Estate has grown. The upcoming strategy is to structure the company and institutionalise it. The plan is to go IPO in order to sustain the business. Usually 20% of family businesses survive until the 3rd generation. By listing the company, Al Saedan will become more structured and more regulated by the Saudi capital market. That is what we aim for now. We have increased our capital and reformed the board of directors. We have corporate governance and different types of committees. We also have middle management in the company and we are trying to isolate ownership from management.
You have already defied the odds as your company is 85 years old. The average life expectancy of family companies in Australia for example is just 30 years. You have surpassed that!
85 years is taking into account the three generations but we have been registered for a bit less than that.
Let’s talk about the Elegance Tower. There is a surplus of office space but this is a landmark development.
Although the market is flooded with office space, Elegance Tower is different from any other development. It has 12 lifts, two of which are large enough to handle hospital beds so it can be turned into a hospital. It has two core parts to the building so it could be separated into a building at the bottom and another at the top with different entrances. The tower had a helicopter landing pad and a swimming pool at the 14th level. Parking space is a problem in Riyadh; lots of people are moving from well-developed office spaces because they don´t have any parking space. We exceeded the requirements of the municipality by having in excess of 733 parking spaces. There is a mosque just next to the building which is important for whoever works in the tower. We think that these things really differentiate the Elegance Tower from all other developments either currently being developed or already finished in Riyadh.
The north of Riyadh is becoming a commercial hub for the entire region; there is the King Abdullah Financial City which is a multibillion dollar development and Elegance Tower is just next door.
Actually lots of the companies that will be working with the King Abdullah Financial District don’t have to be located within it, so Elegance Tower is a great option. We are also developing a Courtyard by Marriott next to Elegance Tower which should be finished by 2017. It is a 4 star hotel operated by Marriott Courtyard with 200 keys. We always try to integrate what we develop so that means office space next to a mosque next to a 4 star hotel.
How many people work for Al Saedan?
We have around 60 employees. We are not aiming to have hundreds of employees because we outsource most of what we do from contracting to design. We don’t want to be exceeding 100 employees even in the next five years.
What type of contractors do you use?
The strategy is to manage contractors and not have a one turnkey contract with one contractor. We like to have more control on the development and the quality of each contractor.
What is the overall value of your investments?
The capital of the company is about 1.3 billion and the total developments of the company exceed 2 billion Saudi riyals.
Is there anything else you would like to highlight?
We also have some other small developments that are scattered around Riyadh. We have two developments in Othman Ibn Road Street, one development in Abu Baker Alsiddek road, and these developments are shop malls that are between 2,000 and 5,000m2. We also have a mall in King Salman road and a development on Exit 6 of the North Ring Road of Riyadh.
There is a lot of demand for retail space in the commercial centres There are 200,000 GLAs. There is a shortage in the market of almost 1 million GLAs in the next 5 years. Saudi Arabian market will have more shopping centres in the coming years.
The demographics here are changing; Riyadh has lots of little towns nearby and usually at the weekend many people from these towns come to visit Riyadh. Five or ten years ago if you went to a residential district you would find very small shops for groceries or you would have minimarkets but now this is changing and people want to go to a mall whether it is an outdoor mall or an air-conditioned mall. They like to go with their families and children and spend a day or an afternoon in the mall shopping and buying what they need for the week.