Abraaj plans $533m multi-sector spree in Saudi Arabia

The Middle East’s largest private equity firm has launched a joint venture entity with Saudi gateway investment body Saudi Arabian General Investment Authority (SAGIA), to invest SAR2bn in the country across sectors including real estate and private equity.

Abraaj Capital, the largest private equity business in the Middle East, is planning a SAR2 billion (€391.7 million; $533 million) investment programme in Saudi Arabia, which will include real estate.

The firm, which was formed in 2002 and has since raised almost $7 billion of equity, said in an announcement it had embarked on a “pioneering initiative” in a country which it said “despite the global financial crisis, the fundamental macroeconomic environment continues to remain robust.”

Abraaj said it regarded Saudi Arabia as a country which benefited from favourable demographic trends, policy reform and had long-term, sustainable growth underpinned by “prudent use of hydrocarbon liquidity”.

The programme, to be managed by a joint entity between Abraaj and Saudi gateway investment body Saudi Arabian General Investment Authority (SAGIA), will also see Abraaj invest in private equity, SMEs and public equities. It is still subject to regulatory approval from Saudi authorities.

Abraaj is expected to be invited to invest in Saudi Arabia on the understanding it has an “active involvement” with those assets and companies it invests in or with. It is expected to provide capital and financial expertise as well as enable Saudi businesses to leverage off its business relationships and capabilities in the wider region.

Arif Naqvi, founder and group chief executive officer at Abraaj, said: “Saudi Arabia is by far one of the largest economies in the region and offers a wide spectrum of investment opportunities in sectors such as healthcare, infrastructure, education, transportation and logistics, food and beverages and more. Additionally, the Kingdom’s real estate and public equities markets offer a compelling value-proposition for investors. It’s a market that has great potential.”

He added the entity would help enable Saudi Arabia to improve on its job creation efforts. According to CIA World Fact Book, the country’s unemployment among males has fallen from approximately 25 percent in 2003 to approximately 10.5 percent last year, but the government is keen develop initiatives to continue decreasing that figure.

Naqvi said: “As this announcement makes clear, we are fully committed to supporting the promotion of a culture of entrepreneurship in the Kingdom and shouldering our share of the private sector’s responsibility to help create jobs in the region.”

Abraaj closed its first real estate focused fund, The Abraaj Real Estate Fund I in December 2004, closing on $113.5 million. The vehicle made six investments and has since exited three of them, generating an IRR of 74 percent, according to company figures. It has since launched a second real estate fund called ASAS but has not, to date, divulged the spending power of the vehicle.