Musharaka REIT begins procedures to acquire new 4-star Riyadh hotel for SAR 85.5 mln

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Musharaka REIT Fund is planning to acquire a new, fully-furnished, four-star hotel in Riyadh at a total cost of SAR 85.5 million, fund manager Musharaka Capital said in a bourse filing.

The acquisition price was decided after obtaining fair valuation reports from two independent real estate evaluators and after completing the technical and legal due diligence.

The property, which the fund plans to acquire, is leased for 10 years to a leading Saudi company whose business model is hotels operating for an average annual lease of SAR 7.78 million.

The property consists of 94 rooms and hotel suites, a gym, wedding and conference halls, a restaurant, swimming pools, and parking space for 80 cars.

Musharaka Capital expects to complete the required administrative and legal procedures related to property title deed transfer within 90 days. The fund manager will use a Sharia-compliant credit facility to finance the planned acquisition.

The acquisition is expected to have positive impact on the fund as its portfolio will grow and become more diversified geographically through investing in Riyadh and in a growing hospitality sub-sector.

It will witness more financial diversification as the planned acquisition will improve the fund’s ability to generate cash flow and leverage its net income. In addition, the longevity of tenancy contract will help to stabilize the fund’s long term dividend policy, the statement added.

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