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Interview with Ali Mohamed Al-Obaidli, Group Chief Executive Officer, Ezdan Holding Group

The real estate sector is pegged to be one of the biggest drivers of capital markets activity in Qatar and the wider GCC over the next three years, with new and exciting initiatives and events like the World Cup 2022, Dubai Expo 2020 and Saudi Arabia’s Vision 2030 putting commercial, hospitality, and residential real estate at the heart of these countries’ development and diversification efforts. At the same time, stabilisation of the broader macro environment is providing new opportunities for the region’s real estate developers to move beyond their traditional remits into new countries and segments. With this in mind, we sat down with Ali Mohamed Al-Obaidli, Group Chief Executive Officer of Ezdan Holding, Qatar’s leading real estate company and winner of the Bond / Sukuk Deal of the Year by a Debut Issuer, to discuss the its landmark US$500mn 5-year sukuk transaction, and where the company is looking to grow its business over the next few years.

Jan 19, 2017 // 5:28PM

Ezdan did a debut syndication last year, followed by a structured finance loan before finally issuing sukuk. What were some of the drivers behind those transactions?

Ezdan embarked on a financing program in 2014, which aimed to diversify liquidity pools for the company and ensure that it had access to markets that provided them with an optimal structure and pricing. Our financial objectives are driven by the company’s desire to continue developing real estate in residential, commercial and hospitality segment.

It was our desire to access the syndicated loan market, to provide optimal profile to our balance sheet and get an investment grade rating for the company from the leading rating agencies. This 5-year US$500mn senior secured syndicated facility was initially launched at US$300mn, and was marketed only to GCC and international banks outside Ezdan’s home market of Qatar. The syndicated facility closed in August 2015 was the second of such deals launched by Ezdan.

The transaction received an overwhelming response from the market and was over- subscribed by more than 2.5 times the initial facility size. Our US$2bn sukuk program was developed off the back of these efforts, and it will be central to our funding strategy going forward.

How did Ezdan prepare for the sukuk and make sure that the company attracted high demand for the notes when issued?

Over the last few years, Ezdan has implemented several important strategic initiatives to enhance its financial profile and optimize its balance sheet in order to attract high quality regional and international investors. The company has a market cap of circa US$12bn as of Sep 30th, which puts us amongst the highest ranked GCC corporates on the MSCI Emerging Markets Index gives us an edge in attracting a great deal of interest from international  equity investors.

The company has twice tapped the syndicated loan market prior to issuing its first sukuk, diversifying its sources of funding outside Qatar, while both strengthening and creating new relationships with key financial institutions within and outside the country. We also worked in close cooperation with the rating agencies to successfully secure strong ratings, BBB- and Ba1 from S&P and Moody’s, respectively.

Our reputation also played a crucial role in the success of the deal. Ezdan has over many years built a track record of successful master developments across Qatar, giving the company a portfolio of fully developed investment properties which provide it with very stable cash flows year-on-year. Our investors understand the significance of Ezdan in the real estate segment in Qatar.

Along with our coordination banks, we worked hard to evaluate the right timing and pricing needed to attract high demand for the notes. We timed our issuance just after oil prices lifted from their historically low levels, which increased the level of optimism around the region and its credits.  We identified and engaged key investors in Europe and Asia that understood Qatar and Ezdan’s contribution to the country’s economy, and identified the most appropriate structure and tenor for the pricing we wanted to achieve with our debut issuance.

Our debut issuance was oversubscribed and is performing very well in the secondaries, which demonstrates optimal print volume, pricing and timing.

Why did Ezdan decide to issue in RegS format, and not go for 144A format to target US investors?

As part of the funding diversification strategy that Ezdan has implemented over the last 3 years, the company has expanded its funding base in phases. The first step was to expand outside Qatar through market-based transactions, and the second step was to reach out to Middle Eastern, European and Asian investors.

Given the strong credit metrics and fundamentals of the company, an investment grade rating by S&P and the contemplated issue size, we were of the view that targeting 144A investors was not required at this stage. This was evidenced by the competitive pricing secured and the quality orderbook of over US$800mn across Europe, Asia, and Middle East.

How does the capital raised from the sukuk help your business, and enhance your balance sheet?

Ezdan has two primary business lines: real estate and strategic investments. The real estate division builds, owns and operates a highly diversified real estate portfolio within Qatar including residential units, malls, and hotels. These are by their very nature long term assets which require long term financing – with instruments like sukuk. That said, the US$500mn sukuk proceeds will be used to repay existing debt, and will significantly extend the debt maturity profile of Ezdan. The sukuk trading price also sets an important benchmark for future transactions.

Ezdan was fortunate that the State of Qatar had tapped capital markets in the past, and is one of the most sought after credits in the market. Being aware of this, we developed and executed a strategy to define the company’s profile in Qatar based on existing investor knowledge about the country.

We, along with our coordination banks, had our share of challenges as pioneers in the sukuk market from Qatari private sector. We had to evaluate an optimal sukuk structure with our banks which would allow us to issue sukuk to foreign investors and be compliant with the legal framework of the country.

After much deliberation, we opted for a Wakala structure with a real estate component issued out of Qatar, given the legal constraints around owning real estate assets in Qatar that we had to comply with.

Another challenge, which we thoroughly enjoyed managing, was encountered during the marketing phase. As the first private sector corporate to issue out of Qatar we had to update the investors on the history and profile of Ezdan. As most investors in Europe and Asia have only engaged with the State of Qatar and government-related entities and not with private sector Qatari corporates, and add to that the fact that there are only a few truly private sector issuers from the GCC, we had to explain our business model and our contribution to the Qatari economy – which includes a mix of real estate companies and investments in blue chip Qatari corporates – in considerable depth.

One of the biggest challenges we encountered was our convincing the investors of the stability of revenue generation and our concentration in Qatar. The AA rating of the country was key to demonstrating a stable political – and attractive operational – environment within which Ezdan operates, and positioning Ezdan as a highly diversified company operating and investing in strategic sectors of Qatar’s economy.

What can you tell us about Ezdan’s strategic and financing strategy moving forward?

We are extremely excited about what the future holds for Ezdan. We recently announced the launch of a new company, Ezdan World that will focus and own projects in the recreation and tourism sector. The company’s addition will complement our existing endeavours with our first-of-a-kind entertainment hub, the ‘Magical Festival Village’ project in Katara, a mixed-use concept that includes shopping, entertainment and festivals in one place.

In terms of the group’s financing strategy, we will continue our efforts and engage with new and existing pockets of investors and keep them abreast of our activities and financial performance. While we are keeping an eye on financial diversification, we are also looking to make de-leveraging a priority over the coming years, in an effort to rebalance our debt-to-equity ratio, maintain a healthy balance sheet, and ensure we maintain appropriate headroom for future capital market transactions and investment into other ventures.

Mr. Ali Mohamed Al-Obaidli currently serves as Group CEO of Ezdan Holding Group. Before serving as Group CEO at Ezdan, Mr. Al-Obaidli was previously Director & Managing Director of Ezdan Holding Group.  He has held the role of Senior Advisor on Finance & Investment to the Chairman of Barwa Real Estate Company, and has previously held executive and senior management positions at Qatar International Islamic Bank and Qatar Islamic Bank.

Middle East

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