Saudi Finance Hub Bigger Than Canary Wharf Seeks $700 Million

Saudi Arabia’s main finance district — almost three times the size of London’s Canary Wharf — is looking to raise about $700 million from equity investors to fund further development of its Riyadh real estate complex.

The King Abdullah Financial District, or KAFD, is planning to raise the money by putting some of its income-generating buildings into a real estate investment trust and offering a stake to investors through a listing on the Saudi stock exchange, according to people familiar with the matter. 

The final amount raised could be closer to $750 million, one of the people said, asking not to be named discussing information that isn’t public. 

Citigroup Inc., HSBC Holdings Plc, and Al Rajhi Capital have been hired as advisers on the deal, the people said, asking not to be identified as the information is private. No final decisions have been made on terms, including the size of the potential fundraise, they said.

Some of the proceeds from any deal would be used to fund further development of the district that’s been under construction for over a decade, the people said. The move comes as the Public Investment Fund looks to encourage its portfolio companies to find new sources of finance, and not rely on cash injections from the sovereign fund.

Revitalizing  Saudi Arabia's REIT market

The transaction also attempts to revitalize Saudi Arabia’s REIT market to investors, one of the people said. 

KAFD and Al Rajhi Capital didn’t respond to requests for comment. Citigroup and HSBC declined to comment. 

Saudi Arabia’s powerful sovereign wealth fund took over KAFD in 2018 as part of plans to turn around the project, which at the time was years behind schedule and without any major tenants. The government had said it planned to turn the district into a special economic zone, although that has not happened yet. 

Instead, KAFD has benefited from the influx of foreign firms looking to expand in the country after the government said this year that it would only work with firms that established so-called regional headquarters in Riyadh. Since then, firms including Goldman Sachs Group Inc., Lazard Inc., and Mizuho Financial Group Inc. have received HQ licenses in Riyadh, although not all of them have opened offices in KAFD.

Plans for the REIT deal could be delayed after KAFD Chief Executive Officer Gautam Sashittal unexpectedly left the role earlier this month. Mohammed Turki Alsudairy, portfolio head for the local real estate investment division at the PIF, is currently acting CEO. 

KAFD occupancy levels for completed buildings are now running at over 95%, although there are still several towers under construction in the district. It’s already home to many government-linked institutions including the PIF, the National Development Fund, and Saudi National Bank.