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First Bahrain is close to signing a Memorandum of Understanding with a Saudi partner with which it will launch a Riyadh-based equivalent of its Majaal warehousing project, CW can reveal.
The Kuwaiti developer, which had an original focus on the Bahrain market, is hoping to build on the success of the Majaal project, based in Bahrain Investment Wharf, which has seen a steady stream of companies lease storage and manufacturing space in the first phase of the development in the last year.
“It’s always been our intention to have the ability to franchise the Majaal brand around the GCC, and we are close to signing a joint venture with a Saudi company in Riyadh,” Amin Al-Arrayed, CEO of First Bahrain, said this morning.
Al Arrayed explained that the company considered two key factors when assessing the viability of a Saudi Majaal, which will target small-to-medium businesses as in Bahrain. The first is the growth potential of the industrial sector in Saudi, which he estimated is likely to rise from 10% to 20% in the next five years, which includes the full supply chain of logistics and manufacturing.
“The other aspect is finding the right partner, and we are close to announcing who that is. The key is with the right partner is that it will need to be well-established in a way that can facilitate growth; knows the regulatory system and has the legal framework in place. So a key consideration is that it has that established network.”
Al Arrayed said the company may consider borrowing money from Saudi creditors to fund the new development, in a similar manner to the $1.5m three-year loan from Kuwait Finance house that the company repaid in April. “We’ll be looking at what’s available … I anticipate that there may be some debt component.”
Majaal has leased around 85% of the space in the first 6.5ha warehouse that forms the first phase of development, built by local contractor Abdullah Al Darazi & Sons. The contract award for the second phase was delayed during February and March this year as civil protests in the country escalated and businesses saw a halt in their operations.
“What happened affected the economy across the board,” Al-Arrayed said of the civil protests, “and there were a few prospective tenants [of Majaal] that put their move on hold.” But he added that the development also saw a few more tenants leasing space in the warehouse in a bid to safeguard their assets that were previously stored in older facilities in the centre of Manama, the capital.
Majaal has always promoted its high security standards, which includes multiple identity checks and CCTV.
This month the company announced it had made a $225,039 profit for 2010, mainly from the cash flow from Majaal leasing. The company also has an investment portfolio of around KD8m in the money markets that generates income, Al-Arrayed said, and also has land ownership in prime real estate areas such as Seef.
He is now excited by the prospect of providing a service in Saudi Arabia, which he said has strong government support to develop its industrial sector. “They have a huge demand for facilities, for all sizes of business,” he said.
