Saudi Arabia’s Dar Al Majed Real Estate Co. drew 135 billion riyals ($36 billion) in orders for its $336 million initial public offering, as liberalized foreign ownership rules spark interest in the kingdom’s property market.
The developer, better known as Almajdiah, priced the offering at 14 riyals per share, the top of the marketed range, it said in a statement. Shareholders are selling a 30% stake, or about 90 million shares, with the pricing implying a valuation of 4.2 billion riyals.
The institutional tranche was 107 times oversubscribed, according to the company. The retail subscription period runs from Aug. 14 to 18.
Almajdiah had demand for all shares in its Riyadh IPO within minutes of books opening last week, Bloomberg News reported. Sinad Holding has committed to subscribe to over 2% of the company’s capital as a cornerstone investor.
Real estate developers such as Almajdiah look set to profit from Saudi Arabia’s push to increase local homeownership under its Vision 2030 reform program, as well as a new law allowing foreigners to buy property in designated zones.
“Local developers, especially those with a strong land bank and that have active projects in tier-1 cities, stand to benefit significantly” from the reforms, said Prasad Chari, senior managing director for equity capital markets at Emirates NBD Capital.
The regulatory changes have also fueled renewed interest from developers exploring IPOs or structured real estate investment funds, Chari said.
Fellow developer Al Ramz has secured regulatory approval to list, while building materials supplier Marketing Home Group is set to raise as much as $109 million with its IPO in the coming weeks.
For listed players, the reforms could translate into re-rated valuations and better access to capital markets, according to Chari. Shares of Retal Urban Development Co. and Saudi Real Estate Co. rallied following the rule changes but have since trimmed some of those gains amid broader weakness in the kingdom’s stocks.
Saudi Arabia remains the Middle East’s most active market for IPOs this year, with firms raising more than $3 billion. Still, performance has been uneven as valuations face scrutiny in a subdued oil price environment. Recent listings by low-cost airline Flynas Co. and hospital operator Specialized Medical Co. remain below their offer prices.
Founded in 1999, Almajdiah builds residential communities primarily in Riyadh. BSF Capital is arranging the offering.
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