King & Spalding has advised a private equity fund owned by the Saudi Arabian firm SHUAA Capital, on its acquisition of land to be used to develop a 140m-tall luxury hotel in Jeddah, at a cost of US$133m.
Partner Nabil Issa led a cross-office legal team of three, with assistance from Abu Dhabi-based counsel Timothy Tucker, Riyadh-based associate Fahad AlMalki and Dubai-based associate James Stull. The transaction was the first land acquisition by a hospitality fund in Saudi Arabia. The firm originally helped SHUAA set up the US$533m shariah-compliant fund in 2008 and will remain its counsel on future acquisitions and JVs to develop properties under the Rotana Hotel brand in Saudi Arabia.
Issa said the team overcame challenges in structuring the acquisition on behalf of the fund manager, as PE funds do not have licences to conduct transactions on their own. “Saudi funds are also relatively new so there are challenges in creating a workable structure and explaining such to the various authorities who have not previously dealt with a Saudi fund,” he said. “There was also [the issue of] structuring the acquisition of land in Saudi Arabia by an entity that is not 100% Saudi-owned.”
Issa also expects private equity activity to pick up this year. “We’re finding tremendous interest in investments by PE groups in the real estate, hospitality, food & beverage, healthcare and education industries in Saudi Arabia,” he said. “There is also strong interest in creating funds domiciled in the GCC to benefit from local ownership rules and lower taxes.”
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