Arabian Centres Co. — Capital/Financing Update 2020

Nov 25, 2020

Arabian Centres Co. announces amendment to its land lease contract for U Walk Jeddah (formerly Zahra Mall)

4321 · 25/11/2020 08:02:18 · Announcement #61194 · View on Saudi Exchange

Arabian Centres Co. announces amendment to its land lease contract for U Walk Jeddah (formerly Zahra Mall)

Element List

Explanation

Introduction

Arabian Centres (“the Company” or “the second party” or “ACC”) announced on 24 November 2020 the successful conclusion of negotiations with the heirs of Her Highness Princess Munira bint Abdulaziz Al Jiluwi Al Saud (“the first party”) to sign an annex to the Company’s lease contract for the U Walk Jeddah Centre (formerly named Zahra Mall) to amend some its provisions, where the most noteworthy amendments were:

1) The reduction of the total value of land rent over the lifetime of the contract from SAR 1.785 billion to SAR 1.075 billion – a reduction of SAR 620 million; and

2) Amending the start date of the lease period to begin from 01 August 2022 and to end on 31 July 2052. Date of Announcement of the Award 2020-11-24 Corresponding to 1442-04-09 Contract Subject Matter Amending number of provisions of the previous contract signed by the two parties on 16 July 2015 corresponding to 29 Ramadan 1436. Date of Signing the Contract 2020-11-24 Corresponding to 1442-04-09 Contract Value SAR 1.075 billion Contract Details 1) All provisions of the previous contract remain binding except for those amended or added in this annex.

2) The total amount of land rent payable over the thirty years has been reduced to SAR 1,075,000,000 (the amount under the previous contract was SAR 1,785,000,000).

3) The start date of the rental period has been amended to begin from 01 August 2022 and to end on 31 July 2052, with one rent-free year beginning on 01 August 2021 (the rental period was previously beginning from 01 August 2017 and ending on 31 July 2047, with two rent-free years starting from 01 August 2015).

4) The rental period is split into two sub-periods. First sub-period is binding on both parties, whereas the second sub-period is optional for Arabian Centres as outlined below (previously, the whole rental period was binding on both parties).

5) The annual rental amount for the first ten years of the rental period has been set at SAR 30 million, and then SAR 35 million annually for the following ten years. Finally, it is set at SAR 42.5 million annually for the final ten years. (Previously, the annual rental amount had been set at SAR 47 million for the first five years, with an increase of SAR 5 million for each following five-year period so that rent for the final five years of the contract would amount to SAR 72 million). Contract Duration The contract stipulates a rental period of 30 Gregorian years beginning on 01 August 2022 and ending on 31 July 2052, with a one rent-free year beginning on 01 August 2021. The rental period is split into two sub-periods as follows:

First sup-period: 15 Gregorian years, binding on both parties from 01 August 2022 to 31 July 2037.

Second sup-period: 15 Gregorian years beginning from 01 August 2037 and ending on 31 July 2052. During this sub-period, the contract shall be binding on the first party and optional for Arabian Centres. ACC retains the right to terminate the lease contract before the beginning of each five years of this sub-period, provided that it submits a letter to first party before three months of its start. If such a letter is not submitted, ACC shall be considered bound to it. Financial Impact and the Relevant Period Amendments to the lease contract will impact Arabian Centres’ financial statements through the reduction of right-of-use assets and lease contract liabilities within the balance sheet. On the income statement, reductions will be made to depreciation expenses on right-of-use assets and interest expenses on lease liabilities.

It is worth noting that this impact is expected to appear on the Company’s financial statements during the third quarter of fiscal year 2021, ending on 31 December 2020. Related Parties None. Additional Information It is worth noting that Arabian Centres intends to deliver the project according to an Outdoor Shopping Centre model and under the name of “U Walk Jeddah”, similar to its very much successful predecessor the U-Walk Centre in Riyadh which was opened in September 2019. Also, this project comes in line with the Company's broad strategy, which aims to expand within the lifestyle shopping centers that include various entertainment destinations such as cinemas, luxurious restaurants and cafes, in addition to retail stores.

This project is going to be the sixth addition to the Company's portfolio of Shopping Centers in Jeddah. And as outlined in ACC’s prospectus, it is expected to execute this project on the leased land with a total area of 148 thousand square meters. The expected total Gross Leasable Area (GLA) of the centre upon completion is projected at 60,000 square meters. And it is projected to encompass three floors with a build-up area of c.73,000 square meters consisting of both closed areas and outdoor areas overlooking an artificial lake.

The centre will host 190 stores, including retail units, fine dine-in restaurants and cafes, and will include an entertainment section and cinema complex. Construction works are scheduled to begin during the first quarter of 2021 and is expected to open during the year of 2023. The remaining details of the project, its cost and method of financing will be announced later. Attached Documents  

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