Far from being off, as one news agency had suggested on Wednesday evening, the world’s largest IPO remains very much on course: plans to list shares in state-owned energy giant Aramco are unchanged, according to the Saudi Arabian energy minster.
“The Government remains committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum,” says Khalid al-Falih, also chairman of Saudi Aramco. A rebounding oil price and colossal wealth buys you seemingly infinite flexibility and endless time.
Saudi Arabia is changing, though not fast enough on many fronts. Last year’s ascension of Mohammed bin Salman to crown prince heightened expectations of domestic liberalisation and diversification of the country’s wealth. Global real estate – including, perhaps even especially – in London and other UK cities had been expected to be a principal beneficiary.
In truth, whether the listing, worth as much as $2bn, is on or off is moot. If it’s on, much of the proceeds would be likely to follow recent investment activity by the Public Investment Fund of Saudi Arabia (PIF). If it’s off – or delayed, and that delay could be a long one – it still will: the crown prince’s strategy of diversification is unlikely to change.
What has prompted talk of uncertainty is that Aramco is now said to be focused on buying a strategic stake in local petrochemical group Sabic for as much as $70bn. Funded through bank loans or bond issuance, the proceeds would still go into the $230bn Saudi sovereign wealth fund. It would still be invested beyond Saudi Arabia.
And real assets clearly appeal to the fund. In recent months it has taken a stake in Accor’s real estate portfolio, Blackstone’s infrastructure fund and Softbank’s tech fund.
Should it decide to invest in UK real estate, it is unlikely to feel tied to trophy buildings in the capital so favoured by Asian investors. (That’s a trend that shows no sign of abating: this week South Korea’s National Pension Service saw off competition from, among others, another South Korean pension fund Hanwha to agree the £1.2bn purchase and leaseback of Goldman Sachs’s new European headquarters in London.)
Gatehouse Bank, for instance, largely funded by institutional and sovereign shareholders from Saudi’s neighbour Kuwait, is investing more than £100m in PRS homes largely in the north of England via its partnership with Sigma Capital.
As EG’s head of content wrote in April: “The fund managers, advisers and investors that have been making trips to Riyadh and Jeddah could soon see their efforts pay gigantic dividends.” Don’t think about abandoning those efforts now.
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