Alinma Retail REIT acquires property in North Riyadh

Logo of Alinma Investment Co.

Alinma Investment Co., the fund manager of Alinma Retail REIT Fund, concluded an acquisition deal to acquire a new property in exchange for an in-kind portion represented by Al Makan Mall in Riyadh and a cash portion financed through credit facilities, according to a statement to Tadawul.

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The company clarified that Al Makan Mall in Riyadh is valued at SAR 392 million, while the combined value of the new properties amounts to SAR 592 million with a return of 8.64%. The fund will pay SAR 200 million, representing the cash difference between these values.

Following an agreement to amend the deal by canceling one of the new properties, the revised terms maintain Al Makan Mall's value at SAR 392 million. The remaining new property is now valued at SAR 368 million, yielding an 8.82% return. This adjustment includes a cash settlement of SAR 24 million, which accounts for the difference in property values.

Vacating of the property is expected in the third quarter of 2024, with the fund assuming brokerage fees and real estate transaction taxes for the new property.

Alinma Investment noted that Al Makan Mall in Riyadh was sold after considering the asset's fundamentals, market data, current and expected competitors in the region, and changes in market requirements concerning building quality and modern designs affecting expected lease rates.

Al Makan Mall is subject to long-term leases that restrict its ability to adjust rental rates and manage operating costs typical of commercial complexes like malls, resulting in a net yield of approximately SAR 14 million in 2023.

The REIT's board approved the sale of Al Makan Mall for SAR 392 million, acknowledging a recent valuation of SAR 352.64 million, while actively seeking a property that maximizes fund returns to positively impact cash flows and expected distributions, the company said.

The new property is situated in northern Riyadh, near the intersection of major roads, King Salman bin Abdulaziz Road and Abu Bakr Al-Siddiq Road. Recently developed and leased to a single tenant at an annual rent exceeding SAR 32.44 million, it facilitates streamlined collections and reduced operating costs.

This development is expected to significantly elevate the rental yield of the involved asset from SAR 14 million to SAR 32.44 million, up 131%. Moreover, the sale of Al Makan Mall for SAR 392 million, against its latest valuation of SAR 352.64 million, results in a cash difference, enabling the fund to cover real estate transaction taxes for the new asset.

The company anticipates that the deal will positively impact the fund's overall performance.

According to data available on Argaam, Alinma Investment signed an agreement in March with Osus Real Estate Co. to acquire two new real estate properties in exchange for an in-kind portion represented by Al Makan Mall in Riyadh and a cash portion financed through credit facilities.