Rentals drive mixed fortunes for Tadawul-listed Saudi developers
Red Sea International Co revealed a 23.2% decline in rental sales during Q3 2017, while Alandalus Property Co posted a net profit after an "increase in rent revenues"
Saudi Arabia's rental property segment has been a key determinant of the third-quarter performances of two listed real estate developers in the kingdom.
Red Sea International Co revealed in a filing to Tadawul that a 23.2% decline in rental sales was partly responsible the reduction in its gross profit margin for Q3 2017.
The developer's revenues decreased due to a 29.9% reduction in building sales, compared to corresponding quarterly figures for 2016, thus leading to a reduction in gross profit, from 24.1% in Q3 2016 to 12.6% in Q3 2017.
Overall, Red Sea International Co reported a net loss of $3.4m (SAR12.7m) in Q3 2017, a significant drop compared to Q3 2016's net profit worth $2.8m (SAR10.5m).
In sharp contrast to Red Sea International Co's performance, Alandalus Property Company, also listed on the Saudi bourse, recorded a marginal hike in its net profit for Q3 2017.
The developer posted $7m (SAR26.4m) as net profit for Q3 2017, 0.2% higher than corresponding figures for 2016.
Alandalus Property said its net profit increased "mainly because of [an] increase in rent revenues, which led to an increase in gross profit and operating profits".
In Q3 2017, the company earned revenues worth $10.3m (SAR38.85m), a 13.27% improvement over Q3 2016 revenues, worth $9.2m (SAR34.3m).
This August, a subsidiary of Red Sea International Co inked a memorandum of understanding (MoU) with Aecom Middle East.
The MoU, between Aecom and Red Sea Housing Services, would see both firms cooperating on housing projects in the kingdom.
Red Sea Housing Services is registered in Dubai's Jebel Ali Free Zone.
As part of the MoU, Aecom will provide services covering project management and construction management; master planning, including urban and infrastructure planning; sustainability and energy conservation; infrastructure design; buildings and landscaping design; modular construction solutions; and cost consulting and value engineering.
The 12-month MoU would "explore housing opportunities presented by the Ministry of Housing and identify ways to deliver innovative affordable housing solutions that meet the expectations of the stakeholders, and can be delivered on fast-track basis", Red Sea said in a filing on Saudi bourse, Tadawul.
Meanwhile, Alandalus Property Co completed hotel operator IHG's Staybridge Suites Jeddah Alandalus Mall property this May.
Worth approximately $38m (SAR143m), the hotel comprises 164 studios, and one- and two-bedroom suites.