Logo of Jarir Marketing Co.
Jarir Marketing Co. (JMC) sold its eight-floor building at Al Rakah Al Janoubia district, Al Khobar governorate, to one of Riyad Capital’s funds, for SAR 178 million, excluding the real estate tax, the company said in a bourse statement.
The building consists of residential, commercial and office spaces, in addition to Jarir bookstore showroom.
The deal does not have any related parties, the statement added.
Under the contract, the company will lease back the 4,101- square meter showroom for 25 years, including a binding period of seven years on the seller, for SAR 3.44 million, with an increase of 5% every five years.
The asset’s book value is SAR 166.43 million, the statement said, adding that the company recorded capital gains of nearly SAR 10 million, excluding the unrecognized profit related to the right to use the showroom being leased back.
The sale is consistent with Jarir’s current strategy of disposing of large real estate properties and focusing on the main activity.
The deal will achieve a better return for the company, as it will lead boost the return on assets.(ROA).
The expected financial impact from the deal includes the cease of the property’s rental income and depreciation. In addition, the company will start calculating the rent of the leased showroom.
Jarir will use the sale proceeds in its activities, which will likely enhance ROA.
The following table illustrates the financial statements of the sold building over the past three years:
|
Financial Data of the Building over the Last Three Years (SAR mln) |
|||
|
Period |
2019 |
2020 |
2021 |
|
Rental Income (SAR mln) |
2.7 |
8.49 |
8.83 |
|
Depreciation (SAR mln) |
(4.77) |
(4.83) |
(4.76) |
|
Operating Expenses (SAR mln) |
(0.44) |
(0.26) |
(0.40) |
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