Sobha commits USD 600 mn to Texas housing, eyes Houston and Austin next

Sobha plans USD 600 mn US investment: Dubai-based developer Sobha Realty plans to invest USD 600 mn to build around 700 single-family homes in the Dallas-Fort Worth area over five phases and five years, Sobha Realty US CEO Vipin Das told The National. The company has acquired some 105 hectares across Celina (64 hectares) and Frisco (40 hectares). Sales of the first 34 homes in Celina are set to begin next year, priced at USD 1-1.5 mn each.

The funding: We’ve previously reported that the land would be bought with Sobha’s own equity, and Das now says the projects will be funded through a mix of debt and equity, with the first development loan already secured from Bank7 and CCB last week. The size of the facility hasn’t been disclosed. EnterpriseAM could not reach Sobha Realty in time for dispatch.

What’s next: Sobha is “seriously exploring” Houston and Austin, with Nashville, Phoenix, and Florida also on the list as it builds a “national presence.” It has also acquired land in Brisbane and the Gold Coast in Australia, with construction slated to begin next year.

A scaled-back ambition? Last year, founder PNC Menon told The National that Sobha was aiming for USD 1 bn in US sales in its first year and USD 10 bn over a decade, with Virginia pegged as the next stop after Dallas. By our math, the full 700-home Texas program at the quoted price range comes to roughly USD 0.7-1.05 bn in gross sales, spread over five years. That’s about what the company had targeted for year one. For context, Sobha is pitching premium move-up homes at roughly three to four times the Texas average sale price of USD 342.9k in June, by our math.

A tough patch to launch into: Sobha’s homes will be priced at three to four times the Texas average in a suburb where prices are falling. Celina’s median sale price fell 9.3% y-o-y in the three months to August, according to Redfin. The high end is softening too: homes in upmarket Mustang Lakes now take around 100 days to sell, up from 64 a year ago. The upside is demand from corporate relocations to North Dallas, including Goldman Sachs and AT&T.

Why now? USD-denominated revenue is an obvious hedge at a time when the market at home cools. Dubai residential values are down around 10% since late February, per ValuStrat, and 2Q transactions fell 19% q-o-q as a near-record wave of handovers landed, according to Savills. Sobha has felt it: 1H net income fell 8% y-o-y to AED 1.8 bn on revenue down 8.9% to AED 6.6 bn. Still, it’s moving full steam ahead with its expansion plans, with AED 90 bn in new Dubai and Abu Dhabi projects in the works.