Atif Abdulmalik, CEO of Arcapita Group Holdings (Arcapita), a global Sharia-compatible alternative investment company, outlined Arcapita’s strategic transformation plan for the next five years. The strategy aims to increase the size and volume of Arcapita’s transactions in the private equity and real estate sectors by introducing new product offerings. This new phase of expansion is based on Arcapita’s experience of 100 transactions totaling $ 31 billion over the past 25 years.
Abdulmalik explains that Arcapita’s business is a mix of direct investment in private capital and real estate with a particular focus on industrial real estate in the GCC’s main markets (GCC), mainly in Saudi Arabia and the United Arab Emirates. emirates, and the United States. Through its transformation strategy, Arcapita intends to further diversify its asset base and minimize risk exposure through the acquisition of real estate and private equity in sectors that demonstrate solid long-term fundamentals.
Abdulmalik added that Arcapita is expanding its logistics activities in the Kingdom of Saudi Arabia, creating a logistics-focused real estate fund with investments of up to $ 1 billion. Combined with other funds in Saudi Arabia and the UAE, this will lead to the company’s total investment in the industrial sector of up to $ 1.6 billion.
These investments reflect the growing demand among foreign and institutional investors for attractive investments in the Saudi market, with many growth opportunities driven by Vision 2030 and the changing investment approaches of a new generation of investors.
Arcapita has been investing for the past 25 years. What are your plans for the next phase of the company?
In the last 25 years, Arcapita has completed 100 investments worth a total of $ 31 billion. For our next phase, we adopted a five-year transformation plan based on making further quality investments in promising markets, increasing the size of our private equity and real estate transactions and introducing new product offerings. We are also looking to consolidate our presence in important strategic markets, including the opening of our offices in Riyadh in April. This new office is an important milestone in the development of our business in the region and will help us take advantage of the opportunities generated by Saudi Vision 2030.
What are the goals of Arcapita’s strategic transformation plan?
Arcapita’s investment strategy focuses on private capital and real estate, and with the transformation plan we will increase our operations in both sectors. With regard to real estate, Arcapita intends to diversify its asset base and minimize risk exposure by focusing on assets in defense real estate sectors with strong long-term fundamentals such as the industrial sector and the long-term rental market. In private equity, we seek to acquire active technology companies with light assets that have the potential to grow organically and through emergency acquisitions.
In addition, Arcapita supports socially responsible investments with selected product and service offerings, including investment in transactions, investment funds and managed accounts. Arcapita also combines its interests with those of its investors, striving to invest a 5% to 10% stake in each investment opportunity.
What are Arcapita’s main investment segments in the private equity sector?
Private equity investment has been at the heart of Arcapita’s investment strategy over the past two decades. In this area, we largely focus on acquisitions in the business services, logistics and consumer segments, each of which has its own characteristics, growth potential and return profile.
The external business services sector has significant growth potential and Arcapita is acquiring companies in areas such as waste management and property valuation. For example, we recently acquired Nationwide, which provides valuation services to large mortgage institutions in the United States. Logistics companies and consumer services are also benefiting from the growth of e-commerce, last mile delivery services and technology retail; trends that have been accelerated by the COVID-19 pandemic.
How about Arcapita’s real estate investment?
Arcapita’s real estate investment strategy focuses on the industrial, multifamily and student housing sectors.
In the industrial space, we focus on properties that are rented to a long-term tenant or rented to various smaller tenants for a shorter period. The sector has proven to be sustainable and has historically maintained high employment levels during recessionary periods, given the vital importance of storage and distribution facilities in supply chains. This was clearly demonstrated during the COVID-19 pandemic, as demand for industrial space was boosted by e-commerce activity. Overall, the industrial sector outperformed offices, retail and hospitality during the pandemic.
Within the multifamily sector, Arcapita strategically invests in markets with strong employment and population growth rates and concentrates on Class B properties with a selection of Class A properties.
In student housing, we are looking for properties serving major US public universities with over 10,000 students and located relatively close to campus. Arcapita recently left the Quarry Trail student property at the University of Tennessee after keeping employment at almost 100% despite the challenges posed by the pandemic and rising net operating income by approximately 24% over a two-year period.
Does this expansion of global markets support Sharia-compatible products?
As you know, Arcapita has been committed since its inception in 1997 to providing Sharia-compliant investment services and products. The core values and ethical standards we have adopted are reflected in all our transactions and activities so far and this will not change.
We opened our first international office in Atlanta, Georgia in 1998, when Arcapita was the first Sharia-compliant private investment firm in the United States. Since then, we have witnessed a growing global demand for Sharia-compliant products, especially in key international markets, where we are now focusing our expansion plans.
The reports show growing growth in many sectors of the US market. What is Arcapita’s private investment in the United States?
Arcapita has invested more than $ 17 billion in US private equity and $ 13 billion in US real estate over the past 25 years, including in some significant deals.
For example, a success story was our relationship with Caribou Coffee, the global coffee chain. Following the acquisition and expansion of the business, Arcapita made the company public, making it the first Sharia-listed listing in the United States. We also partnered with Prologis, a leader in logistics real estate in the United States, and jointly acquired approximately 80 industrial properties across the country and successfully abandoned this investment in 2006.
We have built experience in investing in business services companies and currently have a significant controlling stake in a number of US companies with light assets. One such example is Nationwide Property and Appraisal Service, the second largest independent valuation management company in the United States, which serves mortgage institutions in all 50 states. Nationwide is the market leader with a network of over 15,000 licensed appraisers, with more than 100 blue-chip lenders and 21 of the top 25 wholesale lenders in the United States. This investment is a continuation of Arcapita’s US private equity strategy, which focuses on light asset and technology services business services companies.