Red Sea Global seeks more credit and considers IPO

October 2, 2024, 4:22 AM

The St Regis at The Red Sea is one of Red Sea Global's 79 hotels across two locations

2030 IPO on the cards
Seeking second credit facility
‘We’ll be better than the Maldives’

Saudi giga-project Red Sea Global is looking for a second credit facility and may consider an initial public offering by 2030, a senior official said this week. That will come after it has two dozen hotels in operation by the end of next year.

“An IPO or real estate investment trust, you tend to begin to contemplate once you have two or three years of significant operating income under your belt and when you have an equity story that shows that you’ve executed on your business plan,” group chief legal officer and group head of investments at Red Sea Global Greg Djerejian told AGBI.

“These are early days. The main event for us is at the end of next year when we’ll be opening 11 hotels on Shura island and eight hotels in Amaala.

“At that point, you take stock and hope they’re operating very robustly and seeing a lot of demand. It’ll be more at that juncture when we begin to look at how the operating performance is going.”

An official said earlier this week that the total value of contracts awarded so far was SAR73.33 billion ($19.55 billion), including SAR27.3 billion in 2023. Real estate consultancy Knight Frank has estimated the total value of the giga-project at $23.6 billion.

Red Sea Global is one of the lead projects owned by the Public Investment Fund that are at the centre of Saudi Arabia’s ambitious $1.25 trillion economic development plan. The government wants tourism to account for at least 10 percent of GDP by 2030.

Greg Djerejian says Red Sea Global will have a middle market tourism offering 'in the fullness of time' — Greg Djerejian says Red Sea Global will have a middle market tourism offering ‘in the fullness of time’

Speaking on the sidelines of a travel forum in Dubai, Djerejian said the company was thinking ahead to diversify its hotels – numbered at 79 at two main locations, The Red Sea and Amaala, by 2030 – so that they have an appeal beyond the luxury tourism market.

“I do think it’s incumbent upon us in the fullness of time to have a broad product offering that will also tap into more of the middle market and upper middle market,” he said. “In three, four, five years, yes you will see more segmentation across the product offering.”

But as a luxury destination it is reminiscent of the Maldives, with additional benefits.

“We feel the hotels that are currently on the market are fairly priced in the broad scheme,” Djerejian said. “They’re comparable to the Maldives and we’ll be better than the Maldives – we’re closer to Europe, it’s a shorter flight, less of a time zone differential.”

Tourism is central to the Neom giga-project. It includes a group of 12 resorts collectively called Magna, which have been designed by international architects and have a futuristic theme.

An official for Neom said Magna would be aimed at the ultra-rich and that the 12 resorts would begin to open from 2027, with Jaumur and its superyacht marina likely to be first. A model of Jaumur was on display at a Neom pavilion at the Dubai forum.

Red Sea Global has come out of the gate early, as some of the PIF projects face funding constraints because of low oil prices and lower than expected foreign direct investment.

It plans to launch a second green debt financing which will be valued similarly to a previous credit facility of SAR14.1 billion ($3.76 billion), Djerejian said.