Arada Developments Seeks Debt Financing Amid GCC Boom

Arada Developments has turned to the debt markets for financing, following its decision to issue a sukuk bond aimed at capitalising on the construction boom within the Gulf Cooperation Council region. With its credit ratings from Moody's and Fitch at B1 and B+, respectively, the company has mandated a consortium of major banks to facilitate the issuance of a five-year fixed-rate sukuk.

The sukuk will be issued under Arada Sukuk 2 Limited's $1 billion Trust Certificate Issuance Programme, a key structure that offers Arada the flexibility to issue sukuk over a period. The bond is expected to receive a combined rating of B1 from Moody's and BB- from Fitch, which is indicative of a relatively higher risk investment but one with potential returns, especially in the current market context.

Several prominent financial institutions have been enlisted to help manage the deal. Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, Mashreq, and Standard Chartered Bank are acting as the joint global coordinators for the issuance. Alongside them, a range of other banks, including Arab Bank, Arqaam Capital, Bank ABC, RAKBANK, Sharjah Islamic Bank, and Warba Bank, are involved as joint lead managers and bookrunners.

The move comes at a time when GCC-based developers are increasingly turning to debt markets to raise funds, particularly as demand for real estate continues to soar in the region. A series of fixed income investor calls kicked off last Thursday, giving potential investors an opportunity to engage with Arada's plans and the offering's prospects.

The sukuk offering is poised to benefit from the strong growth momentum in the GCC construction and real estate sector, driven by both government-led infrastructure projects and private sector initiatives. The UAE, in particular, has seen a substantial influx of investments in the property sector, driven by both foreign capital and domestic demand. Major projects across residential, commercial, and mixed-use developments are fueling optimism about the sector's future.

In the case of Arada, the company has seen rapid growth since its inception. Founded with the ambition to drive innovation in urban developments, Arada has made strides with large-scale projects in key cities like Sharjah and Dubai. The company's flagship projects, such as the Aljada development in Sharjah, showcase its position as one of the leading developers in the region. However, like many other developers, Arada has faced challenges related to financing and liquidity, with the sukuk issuance being a strategic move to secure funds for continued expansion.

The growing reliance on sukuk issuances by real estate developers in the GCC highlights an emerging trend. Developers are increasingly tapping debt markets as a means to fund large-scale projects. Sukuk bonds, due to their compliance with Islamic finance principles, are particularly attractive to investors in the region and beyond. This trend is also a result of the favourable financing conditions that have been available in recent years, with lower interest rates and increased liquidity in regional markets.

As the sukuk market expands, there are concerns over the sustainability of such growth, especially in the context of rising interest rates and economic uncertainty in global markets. However, the demand for high-yielding, fixed-income instruments continues to remain strong among investors looking to diversify their portfolios, particularly those seeking assets that align with Islamic finance principles.

MENAFN26072025000152002308ID1109845250