Arabian Centres signs 2 agreements with Riyad Cap to set up SAR 6.2 bln real estate funds

Arabian Centres Co.'s building

Arabian Centres Co. (ACC) signed, on June 14, two agreements with Riyad Capital for the establishment of two closed-end, Shariah-compliant real estate funds valued at SAR 6.2 billion, the company said in a statement to Tadawul.  

The funds will develop Jawharat Arriyadh and Jawharat Jeddah malls, two major projects in ACC’s expansion plan in Riyadh and Jeddah.  

The newly-established funds acquired the Riyadh and Jeddah land plots, previously held by ACC, to develop both projects. The Riyadh-focused fund will complete the development of Jawharat Arriyadh project, which spans a 623,400-square meter (sqm) land plot at the intersection of King Khalid Road and Al-Urouba Road, Al-Raed District. This land had a total market value of SAR 2.1 billion as of Dec. 31, 2021.

The Jeddah-focused fund will continue the development of Jawharat Jeddah project, which lies on a 170,700 sqm land plot at the intersection of King Abdulaziz Road and Al-Salam Road, Al-Muhammadiyah District. This land had a total market value of SAR 1.2 billion as of Dec. 31, 2021.

ACC fully owns the units of both funds, while Riyad Capital will manage the funds, licensed by the Saudi Capital Market Authority (CMA). ACC will retain its right to manage and operate Jawharat Arriyadh and Jawharat Jeddah malls upon the completion of development works, based on the terms and conditions of the two funds.

Moving forward, the two funds will consider exiting this investment, through multiple options, including a possible offering of both funds to the public as traded real estate investment trust (REITs). The impact of ACC’s contribution to both funds will appear in the company’s financial statements from the first quarter ending June 30, 2022.

Both Jawharat Arriyadh and Jawharat Jeddah will embody the utmost cutting-edge global trends and designs to meet the unprecedented range of visitor needs, marking them to be two lifestyle flagship destinations, in line with the objectives of Vision 2030, which aims to continuously improve residents’ standards and quality of living.

And to diversify and enrich the visitor experience, the two centers will combine closed sections with glass ceilings and pleasant open paths overlooking natural landscapes and water features interspersed with walking trails.

To this end, ACC for the first time allocated space in both malls to host branches of the most prestigious luxury brands in the field of fashion, of which some will open their inaugural regional

branches at the two centers. Also, the two centers will allocate a special area for entertainment, which is considered the largest in the Kingdom. It will contain a cineplex and gaming hubs suitable for all groups and ages.

Space at both developments has also been allocated for multiuse facilities, such as offices and hotels, which will be connected to the centers at a later stage. This will further boost the centers’ value proposition and centrality to the surrounding urban fabric.

Jawharat Arriyadh is strategically located in close proximity to a number of prestigious urban landmarks of Saudi Arabia’s capital city, including the Diriyah Gate and the Diplomatic Quarter. Construction at the project has been ongoing since August 2021 and has been 15% complete. The Riyadh fund has already secured the necessary funding for the project and will ensure acceleration of development works to guaranteeing final delivery by H1 2025, as scheduled.

Total development costs at Jawharat Arriyadh were set at SAR 1.8 billion. The centre is expected to generate annual revenue of over SAR 400 million after inauguration. ACC’s leasing department received letters of intent from a large number of tenants interested in leasing spaces at Jawharat Arriyadh. Potential tenants will occupy more than 70% of the center’s gross leasable area (GLA), which amounts to approximately 148,400 sqm. Upon completion, Jawharat Arriyadh is expected to create about 7,000 jobs for the local economy.

Meanwhile, development works at Jawharat Jeddah have been 15% complete. The project is also strategically located in close proximity to King Abdulaziz International Airport and the Yacht Club in Jeddah Corniche District.

The project’s fund also secured the necessary funding and will ensure completion of development works to guarantee final delivery by H1 2024, as scheduled.

Total development costs at the project were set at SAR 1.1 billion. The center is expected to generate annual revenues exceeding SAR 270 million after launch. ACC’s leasing department received letters of intent from a large number of prospective tenants interested in leasing spaces at Jawharat Jeddah. Potential tenants will occupy more than 70% of the center’s GLA, which amounts to approximately 87,200 sqm. Upon completion, the mall is also expected to create about 5,000 jobs for the local economy.

This step is part of ACC’s broader strategy of committing to an asset-light model. ACC will be able to mitigate risks that could arise from keeping all of its operational properties on its balance sheet, which will enhance its financial and operational flexibility needed to roll out new locations in a rapid and efficient manner.