Jabal Omar CEO says settlement with Alinma Makkah Fund ‘win-win’ deal

Jabal Omar Development Co.’s CEO Khalid Al Amoudi

Jabal Omar Development Co.’s (JODC) Chief Executive Officer (CEO) Khalid Al Amoudi said Alinma Makkah Real Estate Fund's board decision to allow the option of in-kind exit for unitholders, based on Jabal Omar’s offer, is a key step to settle the obligations owed to the fund according to a specific exchange ratio.

The fund manager is finalizing the approvals required for the deal closure. The fund manager invited unitholders to meet on Jan. 9, 2022, to vote on Jabal Omar’s modified offer, Al Amoudi told Argaam in an exclusive.

The CEO also spoke about several points about the offer and the positive impact expected from the deal on the company and Alinma’s unitholders. Here is the full interview with Al Amoudi:

Q: How did you settle on the offer’s exchange ratio?

A: The offer was studied by the fund’s manager and financial advisor. Various evaluation methods were used to set the exchange ratio, taking into account the deal purposes, the talks between Jabal Omar and Alinma Fund’s manager and the current market conditions, amid the COVID-19 pandemic.

Q: The binding terms of the agreement included a commitment by Jabal Omar to develop the fifth, sixth and seventh phases of Jabal Omar Project and to cap the company’s debt. Will this impact the company’s strategy and performance?

A: We do not expect any impact on the company’s operations and strategy. Contrarily, these terms go in tandem with the company’s near-term plan, as they focus on completing the ongoing phases and the operation of the surrounding assets at the earliest. This move will also reduce the company’s debt and improve its leverage ratio, ensuring more stability of the capital structure, besides the actual results that materialized about the company’s capital structure optimization plan. In any case, these phases comprise the company’s high-value infrastructure-backed land bank. Jabal Omar can leverage on this land bank to generate more value to its shareholders and partners in the long term.

Q: The binding terms of the agreement also included amendments to Jabal Omar’s board formation through the appointment of two members by the fund. Why this step was taken, while the fund will be terminated after the deal closure?

A: This appointment was driven by the fund manager’s aim to ensure the smooth operations of the company, under the agreed terms. We deem this “positive”, as the appointment of new members, representing the fund, will allow the company to benefit from the long experience of the fund’s manager in investment and real estate fund management, which will be reflected positively on the company’s strategies and performance.

Q: What is the next step by Jabal Omar after submitting the amended offer and getting the fund board’s approval?

A: Alinma unitholders will meet on Jan. 9, 2022. If they accept the offer, Jabal Omar will file for capital increase with the Capital Market Authority (CMA). When the market regulator approves the capital hike plan, Jabal Omar’s shareholders will vote on this plan. If approved, the deal will be closed and the new issued shares will be credited to the unitholders’ portfolios.

Q: What are the financial impacts expected upon the deal closure?

A: The settlement is a “win-win” deal for both parties. The fund’s unitholders will make capital gains from their investment in the fund, in addition to the annual returns paid since the fund inception to date.

For Jabal Omar, the obligations owed to the fund will be settled. Excluding Jabal Omar’s holding in the fund, the direct impact on the company’s income statement will be reflected on removing SAR 451 million finance obligations annually until the end of the fund term in 2027.

This will bolster the company’s returns and allow Jabal Omar to use these funds for other purposes that can boost productivity and add more value to shareholders.

Q: Do you expect any negative impact on the deal closure and the company’s results due to COVID-19 pandemic?

A: I believe that the pandemic has a temporary impact. This impact has started to fade amid the increased number of vaccinated people inside and outside the Kingdom. We expect a positive response, backed by higher demand, and strong appetite for Hajj and Umrah in the coming period, as well as the high occupancy rates and prices. Moreover, Jabal Omar sold two land plots at attractive prices during the pandemic, which evidences investor confidence in Jabal Omar Project and reflects the real value of the project’s land.

The company currently focuses on completing the second, third and fourth phases of the project to leverage on the expected increase going forward. These phases include over 4,500 hotel rooms and a leasable area of more than 62,000 square meters. We are optimistic for the medium and long term, as Vision 2030 targets a higher number of Umrah and Hajj performers. The Kingdom’s decision to allow citizens from 49 countries to apply for a tourist e-visa had a positive impact on the company’s hotel revenue in Q1 2020. Jabal Omar’s hotels saw unprecedented turnout and doubled their performance, compared to the first quarter of 2019.