SHUAA holds first close on $534m Saudi hospitality fund

SHUAA Capital has raised $240m for the first close of its hospitality fund focused on Saudi Arabia, ‘the first private equity fund domiciled in the Kingdom'. The fund will develop 17 hotels, apartments and resorts in the country.

SHUAA Capital Saudi Arabia, a subsidiary of Dubai-based investment bank SHUAA Capital, has raised SAR900 million ($240 million; €164 million) for SHUAA Saudi Hospitality Fund I which is targeting a final close of SAR2 billion.

The Shariah-compliant fund aims to develop and own 17 hotels, apartments and resorts across Saudi Arabia, SHUAA said. In addition, the fund will own a 20 percent interest in a new hotel management company that will be incorporated in Saudi Arabia by Rotana Hotel Management, a pan-Arab hotel management company. The fund’s hotel properties will be managed exclusively by the new company.

Omar Al Jaroudi, chief executive officer of SHUAA Capital Saudi Arabia, said in a statement that the fund presents Shariah-compliant investors with an opportunity to diversify away from traditional sectors to hospitality, “a sector that is otherwise not represented in Islamic-oriented portfolios”. He added that this is the first private equity fund to be domiciled in Saudi Arabia.

SHUAA said that its new fund aims to benefit from the rapid growth being seen in business and leisure travel in Saudi Arabia. As a result of the growth, the demand for hotel rooms currently outstrips supply. It said that overnight visitors to and within the country have increased from 6.6 million in 2000 to 11.5 million in 2007. In this while, the number of hotel rooms increased at a rate of only 1.5 percent per annum to 50,000 rooms.

The first close of SHUAA Saudi Hospitality Fund I closely follows the initial close of the $200 million (€136 million) SHUAA Hospitality Fund I, a pan-regional hospitality vehicle that will invest in hotel developments in GCC, Egypt, the Levant and other selected MENA countries. The pan-regional fund, which raised $165 million for its first close in July, is investing SAR 200 million in the Saudi-focused hospitality fund.

SHUAA Capital, through its private equity arm SHUAA Partners, also manages the $200 million SHUAA Partners Fund I and the $100 million Frontier Opportunities Fund I. 

The firm has made five investments out of SHUAA Partners Fund I and exited from two of them. The current portfolio includes Air Arabia, a regional low-cost carrier; Rotana Hotels; and Drake & Scull International, an electrical, mechanical and plumbing contractor based in the UAE. Investments exited from include Petrofac, a provider of integrated facilities to the oil and gas industry; and Damas, a jewellery business based in the UAE.

It has made one investment so far from Frontier Opportunities Fund I in Syriatel, a mobile telecommunication network with the largest market share in Syria.