Saudi Red Sea developer weighs public offering as soon as 2026

The company behind a major tourism destination on Saudi Arabia’s Red Sea coast, a cornerstone of the kingdom’s push to attract tourists and diversify its economy, is considering a possible public market offering as soon as 2026.

“There will be some kind of public market event, whether it’s an initial public offering, whether it’s an establishment of a REIT, those are things that we’re currently studying, John Pagano, chief executive of Red Sea Global, said in an interview in Dubai.

For the latest headlines, follow our Google News channel online or via the app.

The firm is in early talks with banks and stakeholders, Pagano said, without disclosing details on advisers, banks or valuation. An offering is likely by 2026 or 2027 once the hotels have been operational for about two years, with a track record of occupancy, cash flow and profitability. The main focus now is to establish a revenue stream that helps underpin value, he said.

“If you look at real estate markets around the world, the idea of public real estate companies has disappeared to a large extent,” Pagano said. “Everybody’s converted into REITs, in large part because of tax efficiency, but also because it gives you access to a broader universe of investors.”

The Red Sea project, first announced in 2017, covers 28,000 square kilometers (11,000 square miles) — an area about the size of Belgium — and will target regional and international luxury travelers. The Red Sea coast includes an archipelago of 90 islands and the government is building new resorts in the region, as well as on the green mountains in the south near Yemen.

The development is key to Saudi Arabia’s plans to transform itself into a top tourism destination. To help achieve its ambitious targets, the kingdom has pledged to spend billions of dollars — including on a new airline and a fresh airport. It’s also planning an entertainment hub near the capital and a new city in the north-west, called Neom, that’s expected to cost $500 billion.

4,200 rooms

Saudi Arabia’s sovereign wealth fund created Red Sea Global by combining two state-controlled developers in 2021, with the Red Sea Development taking over Amaala. The first phase of the project is expected to complete by the end of 2024 and will include hotels and an international airport.

The firm borrowed 14.1 billion riyals ($3.8 billion) in 2021, which will fund construction for the first phase, and Pagano said the company wouldn’t need to raise funds until it starts developing the second phase of the project.

Three resorts are set to open on the Red Sea this year and 13 resorts in 2024. Including other planned properties — part of Amaala project — the hotels will add about 4,200 rooms on the western coast of Saudi Arabia.

The kingdom’s tourism industry has historically consisted of millions of pilgrims traveling to Islam’s holiest sites in Mecca and Medina. Even if a fraction of these visitors were to extend their stays and explore other parts of the kingdom, that could provide an important feeder market, Pagano said.

“Some of those tourists are making a once-in-a-lifetime trip and today they come and they go,” he said. “When we open our destinations, they have a reason to actually make it a once-in-a-lifetime trip: take care of the religious piece, which is obviously important to them, but also add a leisure component.”

Read more: Inside Saudi’s Red Sea Project: First look as mega tourism destination gears to open