Discussing Real Estate Development in Saudi Arabia with Riyadh-Based Interdisciplinary Developer RAFAL

Interview with Elias Abousamra, CEO at RAFAL Real Estate Development Co.

Can you give an overview of the real estate sector in Saudi Arabia and how RAFAL is active within the sector?

The real estate market in Saudi Arabia has been undergoing lots of change and quite quickly as well. The market is shifting from a very local market driven by demand for housing, primarily classical, suburban, low-rise villa type of housing, into an international market which means skyscrapers, brick, super regional malls, mixed-use developments. Riyadh is about to have its Metro operational after seven years of work and that would open the opportunity for transit oriented developments. The local population is starting to migrate from villa residences to apartments and lofts in a mixed-use environment. Walkability is becoming key. All this is meant to change the urban fabric of Riyadh, the capital of Saudi Arabia. But historically, Riyadh has been the laboratory for change in and across Saudi Arabia. Whatever we are seeing in Riyadh should cascade into other secondary cities and other major cities like Jeddah, etc. Urban mobility is driving change. The social and cultural renaissance that has been brought by Vision 2030 is also another factor that is driving the change. We at RAFAL are at the forefront of this change. The company has started several breakthroughs over the past 15 years. It was the first company to build gated communities in Riyadh, for instance, with clubhouses and amenities. This was unseen at the time in 2007 and 2008. Also, over the last 10 years, two high-rise mixed-use developments were launched with international operators and high-end F&B. This high-end corporate style living was introduced by RAFAL to the city and now we are upgrading our offering to fit the new momentum in the market. We are directing new projects to infill district development within the city. We are not following scale in that we do not want to be the tallest and the biggest; rather, we want to remain niche. But we want to serve this affluent population that is growing through a number of projects that we have coming up.

How is RAFAL Real Estate Development Co. contributing to those goals for Vision 2030 specifically?

RAFAL is an innovative and interdisciplinary developer. In real estate development, being interdisciplinary is key for innovation because you cannot innovate single-handedly. To achieve innovation, you need to bring experts from different backgrounds, different walks of life, with deep understanding, and experts that are rooted in the local culture. Real estate is a local play. As we look at international markets, we do not want to lose the local aspect. This is where we tie into Vision 2030. Vision 2030 celebrates what Saudi has to offer in terms of culture, heritage, trade industry. My personal experience with Vision 2030 and what makes me amazed by the quality of this change is the coordination between all aspects of the economy – be it the Ministries, the private sector, the new authorities that are coming, the mega projects, the leadership itself, the digitization of the economy – these are all enablers for our new projects. Some projects we would have loved to do 10 years ago, but we had no fertile soil so to speak. Today, the market is ready for these projects.

What are the core activities of RAFAL, including your products, services and business philosophy?

RAFAL is a 15 year old company. It picked some of the most challenging moments of Riyadh’s real estate history and here we are still innovating, still bringing new projects to the city. Historically, RAFAL had two verticals which we have delivered: high-rise, mixed-use developments and gated communities. Today, with the changes in the market, we are looking into merging our products. We do not see projects as residential or commercial. We see destinations, we see urbanized districts, we see walkable districts around urban mobility. This is the future. RAFAL has lined up four of the most prime locations in Riyadh to offer these projects. We refer to them as infill developments because we see ourselves as fixing in a patchwork game the urban fabric of Riyadh, which is our foothold. We are also by the same strategy expanding into Jeddah soon. Hopefully, within six to seven months we should be groundbreaking on one of our first developments outside Riyadh, the capital of Saudi Arabia. What is also shifting is our business model. Now that we have defined our product for the next five years, we look at the delivery modes. As the Vision and the entities that are related to the new Vision are creating several platforms, being those mega projects, we realize that as a niche developer, we cannot be serving all the projects at once. Scalability is key and to achieve scalability, we need to bring an asset management service-oriented aspect to our projects. While the product is moving from a specific product to a mixed-use project, our business model is also migrating from a classical own-build-operate to a service-oriented model. The market in Saudi Arabia has become very favorable to this model because we have a very active market so when we scale up, the exits are there and almost guaranteed. It is the most liquid and the most sophisticated real estate market in the region. We just need to sharpen our product and then you will be as sophisticated as the major cities like London, New York, Singapore. Riyadh is getting ready to play in this field.

What are your competitive advantages? What makes RAFAL stand out?

When we speak about our competitive advantage, it is multifold. I will answer from the angle of the end user because this is what really matters for our audience. We associate ourselves with lifestyle, be it an office, an apartment, or a stay at one of our hotels, we like to show our visitors that they are taking much more than the product or service that they are buying. It is the whole experience: the mix of F&B facilities, the art of the lobby of the hotel, the valet parking that is receiving the guest, the added services and the amenities, the speed of these amenities, but also the affordability and the quality versus price offering that we have. It is mainly lifestyle. When you combine all these aspects, how happy and content and fulfilled is the end user once they have been to one of our projects?

Going from the end user first and working almost backwards seems like a very unique approach, especially compared to other more mature markets such as New York or London. Why have you decided to focus on this aspect especially in your planning?

It is good to draw some analogy between a market like Riyadh and the market of a place like New York. I have done some investments and although I have not done any development projects there, I know the market really well. The New York market is well established compared to a market in Riyadh that is ever changing. When the market stabilizes, on the real estate side, you start getting a sort of repetitive service. Maybe it is better than Riyadh, but you see it as monotonous because it is mature and well established. We have a long way to go to meet the level of services but we hope to get there within the next couple of years. We have seen it in other domains. For example, the e-government and the digitalization. Saudi Arabia went from very low digitization to the most digitized economy in a matter of five years. Other markets who were halfway through have invested in systems and procedures that become a bit sticky, especially being that this domain is very much involved with governments and it is not as agile as the private sector usually. Whereas in Saudi, it was an overarching process and we went from zero to 100 in only a few years.

What are some of the successful projects that you have completed or ones that are coming up that you are very proud of?

RAFAL has already developed two skyscrapers. These are mixed-use high-rise buildings that have hotel, residences, and some retailing. Both are in Riyadh along King Fahad Olaya District, and they were delivered in 2015 and 2017. We have the third coming up soon which is a beautiful development where we are practicing all of what we have learned from the first two developments. We are hoping to deliver the third skyscraper, which is called RAFAL Sky Gardens, within the next 18 months. We had to slow down construction during COVID, but we are retendering some of the packages and hitting the ground running as of September 2022. This will be a project that brings office, residential, and retail developments in a prime location of the city with magnificent views of King Abdullah Financial District and other anchors in the city like Kingdom Tower and Faisaliyah Tower. We are really excited to bring this new project into the market. In terms of the first two developments that are already developed, the biggest challenge when you develop a landmark development is to keep it at the same level five years later and twenty years later. I can speak of five years later, but hopefully in twenty years we will be giving the same sense of pride of our developments. We are working hard on the upkeep and the upgrades. It is not easy managing developments that have thousands of visitors and residents in and out on a daily basis. In Burj RAFAL, we have a new hotel operator now. Marriott will be launching soon. It is already on the reservation platforms as Burj RAFAL Marriott. We are upgrading some of the resident facilities as well, putting a new cigar lounge, a new gym, new services and facilities, and bringing in a spa. In RAFAL Residence, we are bringing the best food outlets to serve the residences and the hotel tenants and the visitors. It has become a destination in the city. Landmark developments are always nice to have. It keeps the brand of the company strong. The new developments will take us to what I refer to as RAFAL Version 2.0 because we are migrating from buildings to districts. I always say if a building gets 2,000 visitors a day a district might get 100,000 visitors a day. So, we bring the name of RAFAL to all members of society, not just our tenants and our visitors. It becomes part of the experience of the whole fabric of this society.

What is your medium-term vision for RAFAL Real Estate Development Co, three to five years? What do you want to achieve?

Our vision for the next five years is to become the partner of choice for all the influx of companies or expats coming to Saudi Arabia. Since the beginning of this year, the figures are very promising. There are so many calls that we are getting from multinational firms who are planning to relocate from Europe or other countries in the Middle East to be headquartered in Saudi Arabia and this is part of an initiative that is led by the leadership of the country. But we as private sector are grasping this momentum and feeding it into our projects. We want to be the partner of choice for multinational firms because among existing local developers, we are not the biggest, but we are the finest. That is why we believe that it is a good opportunity for us. The time has come for us to welcome these companies and offer them our services, which are very much like the services and the products that they are used to in their home countries. We have already two or three success stories of companies that are coming to us to build their headquarters or to integrate them into our mixed-use development because they want their staff to feel at home when they are in Riyadh. The only way we can do this is to offer a range of services that are within walkable distance, just like they are used to in their home countries.

What is your inspiration and what drives you to do what you do?

I was very lucky to have several mentors in my career. As developers, we are very lucky to be in an industry where our work stands the test of time for 50, 60, 70, maybe 100 years, hopefully longer. The way we impact generations in the quality of spaces we present gives us lots of satisfaction. Of course, it is a double-edged sword and this is where most of the stress comes from. Every morning, we say, let’s make the city better. Let’s bring more spice and energy to the future generations, to the people who will live in our developments. The best feeling is when I go to a development that I incepted and I helped deliver and I see kids playing, couples spending a good time together, people visiting and getting impressed with the location. I am very lucky to be living in one of the communities that I have developed. It is like living in outer space. Every day, I walk and I look at how the community is interacting and I remember some of the decisions that were taken on the blueprint and how it is impacting people’s lives. I think this is something that keeps us going on and on.

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