Dry powder reaches $537mn
LONDON, Feb. 13, 2023 (GLOBE NEWSWIRE) — Preqin, the global leader in alternative assets data, tools, and insights, published its Real Estate in Saudi Arabia 2023: Preqin Territory Guide. The report shows that while fundraising for closed end real estate funds in Saudi Arabia has been slowing in recent years, there may be an increase in activity this year with a number of funds currently open to investment.
The Preqin Territory Guide series gives alternatives investors data-driven insight on the opportunities in a particular market or region.
Monumental investments in real estate planned in Saudi Arabia
Real estate is at the heart of Saudi Arabia’s vision of its future. The Kingdom is rich in oil revenues, but is also cultivating private finance and expertise from both domestic and international sources to deliver its Vision 2030 ambitions. Furthermore, there are developing plans for monumental investments in real estate, such as the $500bn Neom desert city project. While the asset class has long been a core component of investor portfolios in Saudi Arabia, it’s not a fully institutionalized market. Investors have plenty of options to gain exposure to the region, with access routes including real estate investment trusts (REITs), separately managed accounts (SMAs), club and direct deals, and small but ambitious private fund managers.
Offering enhanced insights into the region, Preqin is now tracking 35 real estate fund managers in Saudi Arabia. Data shows assets under management (AUM) in closed-end funds at Saudi Arabia-based managers stand at $3.2bn at the end of June 2022, with dry powder of $537mn, the majority of which is in core strategies.
The pace of fundraising might be slowing, but an increase could be on the horizon
The fundraising market in the region has slowed in recent years, with the number of private real estate funds closing annually from a peak of 11 in 2017. However, there may be an increase in activity this year, with 9 Saudi Arabia-based real estate funds currently open to investment. The largest managers in the region, as measured by funds raised over the past 10 years, are Blominvest Saudi Arabia ($1.0bn), the Investor for Securities Company ($903bn), and Jadwa Investment ($747mn), followed by Alkhabeer Capital ($375mn), Al Rajhi Capital ($336mn), Tharwat For Financial Securities ($317mn), and Albilad Capital ($304mn).
Furthermore, in terms of the prospects for international investors, with its Public Investment Fund (PIF), Saudi Arabia has an entity that can pull expertise and capital into the country. The $620bn AUM sovereign wealth fund, already one of the world’s largest investors in alternative assets, has a strategic goal to provide access to capital from the private sector and its other strategic partners, also with a view to gain exposure to international domain expertise associated with such capital.
However, while Preqin analysts believe a reversal in fundraising trends might be a possibility, it must be noted that this is a particularly opaque corner of the alternatives market and many funds that have closed in the past few years did not disclose the amount of capital they had raised.
David Lowery, SVP, Head of Research Insights, says, “We see strong fundamentals for real estate in Saudi Arabia. This is illustrated by the country’s GDP which was estimated to have increased by 8.6% in the year to Q3 2022, with inflation running at a relatively low rate of 2.5%. While real estate deal activity across all segments is constrained by a lack of supply, the hospitality sector is enjoying a post-COVID-19 boom, underpinned by the recovery in religious tourism and continued growth in entertainment and conferences.”
Key Preqin Real Estate in Saudi Arabia 2023 facts:
- AUM: Closed-end funds’ AUM at Saudi Arabia-based managers reached $3.2bn by the end of June 2022
- Funds: 9 Saudi Arabia-based real estate funds tracked by Preqin are currently raising capital
- Dry powder: Preqin data shows $537mn in dry powder in closed-end real estate funds in Saudi Arabia
For more information, and to receive a full copy of the report, contact Dawn Bowles, Senior Marketing Manager, Regional Marketing, Growth Markets, at dawn.bowles@preqin.com
– Preqin Pro data covers unlisted closed-end real estate funds. The charts and tables in the report are for this segment of the real estate market in Saudi Arabia only
– All reference to ‘$’ is USD
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