Al Rajhi Capital and Arcapita announce launch of USD500 million Real Estate Income Fund

Al Rajhi Capital, the investment banking subsidiary of Saudi Arabia’s Al Rajhi Bank, and Arcapita Bank B.S.C.(c), an international investment firm headquartered in Bahrain, announced today the launch of a USD 500 million (SAR 1.875 billion) fund, the ARC Real Estate Income Fund.

This Fund represents the first collaboration in private equity between Al Rajhi Capital and Arcapita and the two companies will seed the fund with a joint investment of USD 50 million (SAR 187 million). They will combine their resources and expertise to source and acquire investments for the fund in high-quality, income-generating real estate assets, in the Kingdom of Saudi Arabia and other countries of the GCC. The focus will be towards logistics warehouses, as well as healthcare and education related assets.

Simultaneously, Al Rajhi Capital and Arcapita announced the completion of the first acquisition for the fund, the largest logistics and distribution center in Riyadh. The logistics facility is the main distribution hub for Azizia Panda United Company, a leading supermarket company in Saudi Arabia. It was acquired for USD 79.7 million (SAR 299 million) and will be leased back to Azizia Panda for a period of 18 years.

Jorge Cantonnet, Managing Director and Head of Private Equity at Al Rajhi Capital, commented “As the economic downturn shows signs of bottoming out, we are beginning to see good opportunities for investors with available capital for investment. We believe that this fund is launching at a time that will allow us to deploy our financial resources to gather a portfolio of prime real estate assets at attractive valuations. Our partnership with Arcapita creates a powerful execution capability to leverage these investment opportunities, both in Saudi Arabia, and the rest of the GCC. Early responses from investors have been very positive.”

Hisham Al Raee, Executive Director of Investment Placement at Arcapita added “We have worked closely with investors in developing the fund mandate.  Investors are exhibiting good appetite for high-quality yielding investments within the GCC, and in particular in Saudi Arabia, where economic growth has remained strongly positive throughout the economic downturn.  Economists predict that over the next decade, GCC growth will outpace global growth, and this income fund offers diversified exposure to the regional growth story.”

Al Raee also pointed out “Our alliance with Al Rajhi Capital is an excellent fit, and Al Rajhi Capital’s extensive network in Saudi Arabia provides an excellent deal-sourcing capability.”

Nael Mustafa, head of Arcapita’s Middle East real estate group emphasized the quality of the first asset acquired for the fund.  “The acquisition of Azizia Panda’s distribution centre in Riyadh is an outstanding start for the fund and a clear demonstration of the quality of assets becoming available.  It’s an excellently located and fully modernized facility, and benefits further from an 18-year lease agreement with a solid, blue-chip tenant.  We believe that our partnership with Al Rajhi Capital will be advantageous as we identify and acquire similarly attractive sites across the GCC.”

Al Rajhi Capital will serve as fund manager for the fund.  Deal sourcing and execution capability will be provided to the fund manager by a newly-formed real estate advisor, jointly owned by Arcapita and Al Rajhi Capital.  The real estate advisor is staffed with senior real-estate professionals from both Arcapita Bank and Al Rajhi Capital.  The fund will be offered to qualified institutional and high net worth investors within the GCC.