Riyadh Towers: SAR 450 million Project Slated for 2016

Interview with Dr Mohammed A. Al-Ajlan, CEO of Ra-yek Real Estate

Can you present your business, both the holding company and the real estate company?

Alajlan Allied Group is divided into two sectors, trading and real estate. Our business is shared equally between trading and real estate.

In real estate, we have many companies, one of which is Ra-yek Real Estate. We have developed many projects including Sky Towers and Nakheel Towers. We are working on another project, which will be the Riyadh Towers, and is due to begin construction in 2015 or early 2016 and should be concluded by 2017.

We are working on another project, which will be the Riyadh Towers, and is due to begin construction in 2015 or early 2016 and should be concluded by 2017.

In terms of trading, we have a brand called Richy, which deals with textiles, garments and fabrics. This brand has been developed locally; it is not something that was brought in from abroad. My father founded Alajlan Allied Group in 1957 and we have been working in the fabrics industry since 1965. We created the brand in 2003. I believe that in this era without a brand you cannot succeed. A product is made in a mini factory but the brand is made in the customers’ minds. We spent a lot of time and money, investing in creating this brand to compete in the market. Now, Richy is a leader in the fabrics market and we are in a good position to develop this brand outside of Saudi Arabia and in the GCC countries. We are also planning to expand the brand even further in the future.

Can you tell us a bit more about the real estate sector in Saudi Arabia? What are the challenges and the opportunities that you see at the moment?

There are many opportunities in Saudi Arabia, especially where the population in Saudi Arabia is growing. Here in Saudi Arabia, 70% of our population is under 30 years of age, which is quite a unique situation. Consequently, these people need education, healthcare, and housing.

My opinion is that there is a bright future for the real estate sector. In the past, the real estate sector suffered from speculation and bad investment but that is now changing. In the past, if you bought a piece of land and kept it for a while you would see profits of 500% within ten years, without you doing anything to that land. If you have a good plot of land but do not invest. The speculation going on in terms of land and real estate is going to have to shift from just keeping a plot of land or a building to investing in that land or building. This means we have to choose the right opportunities.

The future is bright for the real estate sector, especially in the commercial and residential sector. Many people think that our real estate here has reached very high prices because between 2006 and today, some real estate prices have doubled three or four times. Thus, some people think we may reach a real estate bubble. Some land is overvalued but in general there is a lot of potential in the real estate market, especially when you choose the right project in the right location at the right time.

Richy is one of the leading brands manufacturing men´s clothing. What makes Richy one of the best brands?

Richy is one of the best brands because we do not compete with our products but with our services. We have tried to make Richy a luxury brand. We are not just selling a piece of fabric because anybody can do that. We are selling facilities, services, quality, in essence a brand. Therefore, with Richy, customers feel they are getting an overall luxury brand and they are satisfied customers.

The fabrics and garment market is keen for luxury brands. If you go to the fabric market, you will see that there is a fabric tradition here; you will see many people are selling textiles. However, if you sell a piece of fabric with facilities, services, quality guarantee etc. the customer will keep your name in their mind. We try to use this rule and in doing so, we have been very successful from 2003 until now and we have plans to expand in the future.

How big is the market for these garments and how do you position a brand of these proportions?

That is a good question and it is our secret! Competing in the textiles industry in Saudi Arabia is very difficult because it is open for everybody. There are no barriers, it is easy to get inside the market. You can get fabric from China, Korea and Japan for example and you can sell it here. It is an unorganised market. We try to play in another line. With our brand Richy, we try to build up our reputation based on our brand and experience. We have over 40 years of experience in textiles ever since my father founded this group. In fact, my father began importing textiles from India and Korea in the 1970s. Based on all of this experience we wanted to create a new brand. It is hard work and it takes a lot of time but we have reached our position as one of the top three leaders in the market because of the quality of Richy products and our credibility with our customers.

Tell us about the real estate company. You are building some signature projects such as Sky Towers, which is recognised by everyone. What is your philosophy when it comes to real estate?

We believe you have to have a competitive advantage. You have to add value to your service or your product. In real estate, we tried to create something new. For example, in 2002 when we built Sky Towers, there were no other luxury towers or offices in the market. We tried to create something unique.

We try to add something new to the market. We have a long-term strategy, where we concentrate on added value. The occupation of Sky Towers now is 100%. Other competitors might have 60% or 70% occupation, some of them less. We have 100% because we concentrate on quality. My personal philosophy is that whereby if you compete only on price I believe you will lose your market share, because people are not only looking at price, they are looking for more than that. You need added value, which of course will cost you a lot of money but it is an investment. Financial advisors see marketing as a kind of expense but marketers see it as an investment. We invest today to make a lot of money in the future. Nakheel Towers has an occupation of 90% comparable to the market, which on average has just 60% occupation.

You mentioned that one of your key projects would be finished in 2017…

Riyadh Tower was designed by a well-known English design company called Atkins. The project was scheduled to start in 2012 but we postponed it. There is no exact date for it yet but I would say that we should start this project in 2015 or the beginning of 2016. The construction timeline is 3 years. It is a big project: the tower has 50 stories. It will be comparable to the Al Faisaliah Tower or the Kingdom Center. In 2010, we won the prize for the best commercial project in Saudi Arabia for the design of this project. The English company Atkins designed the Tower; they have also designed Burj Al Arab in Dubai and the World Trade Centre in Bahrain.

You are not obliged to disclose any financial figures but we are interested in how Saudi companies are doing in the current economy. How are you surviving or how are you thriving at the present moment?

We are not dependant on finance from the banking loans because the leverage is sometimes very low for us. We consider ourselves conservative to some extent. If you exaggerate your business or make propaganda about your business, exceeding your abilities, you are going to lose your market. However if you have solid bases and you study the market, making sure that you don’t start any project without a feasibility study to see what the opportunities are in the future, then you should be ok. It does not matter if you have to postpone a project. We postponed Riyadh Towers in 2012 because we thought that it was not a good time to build the project. Being aggressive and taking risk is good sometimes but other times you have to take a good look at the risk and other factors to help you make the right decisions to survive in the future.

You are making steady profit now, at about 5 or 6% a year.

Yes, that is very important.

Regarding the size of the company, how many employees do you have? What is the value of your projects?

I cannot disclose the amount of our total investment projects but when we start a project, we announce the project value. For example, Riyadh Tower is going to be an investment of 400 to 450 million riyals. That was the figure we came to in 2012, but now it might be +/- 5%.

That was the figure we came to in 2012, but now it might be +/- 5%.

We have more than one hundred employees. Alajlan Group is not a contracting company. For example, Ra-yek Real Estate is a development company, where we try to connect people; we bring in the designer, the contractor, the project manager, and we try to be in the middle. 

Is there anything you would like to add about Saudi Arabia, its people, its economy or its future?

Saudi Arabia has a bright future. There is a lot of expansion going on. The government is spending a lot of money, especially in the western areas of Mecca, Medina, Jeddah and the King Abdullah Economic City. There is also a transportation project going on that is considered to be the biggest such project in the region. I think that all of these government-spending projects will create many opportunities for the private sector in the future. I also believe there are going to be many opportunities here in the future compared to other countries.