SUMMARY OF RISK FACTORS
D- Risks Related to the Offer Shares
5. ORGANIZATIONAL STRUCTURE AND CORPORATE GOVERNANCE
5.6 Conflict of Interest
5.6.1 Transactions and Contracts with Related Parties
5.6.1.1 Mimar Emirates and Arac Engineering Consultancy Services Agreement
On 17/05/1442H (corresponding to 01/01/2021G), the Company entered into a service agreement with Mimar Emirates and Arac Engineering Consultants, a Related Party, as 26.25% of the shares capital thereof is indirectly owned by Abdullah Al-Braikan, a member of the Board.
Under such agreement, the Company offers IT, human resources, and government relations services, as well as financial and legal management services to Mimar Emirates and Arac Engineering Consultants. The Company charges time- based fees charged for the work performed by the service provider, with a fixed rate ranging between SAR 30-145 per hour, as per the professional experience of the service provider. The agreement expires on 31/12/2021G. The service agreement is concluded on an arm’s length basis.
5.6.1.2 Related Party Leases
The following table shows the details of substantial real estate leased by the Company from Related Parties:
Table (5-11): Lease Agreements with Related Parties
Description of the Leased
premises City Lessor Lessee Lease Start Dura-
tion Renewal Annual rent
1
Lease for a residential unit to be used as a family residence
Al Khobar
Nesaj Real Estate Development
Compound*
The
Company 23/07/2020G One year
Renewable for a similar period or periods unless one of the parties notifies the other of its unwillingness to
renew.
SAR 148,000
2
Lease for a residential unit to be used as a family residence
Al Khobar
Nesaj Real Estate Development
Compound*
The
Company 17/08/2021G One year
Renewable for a similar period or periods unless one of the parties notifies the other of its unwillingness to
renew.
SAR 168,000
3
Lease for a unit on the fifth floor of Retal Business Center
Al Khobar
Mimar Emirates and Arac Engineering Consultancy**
The
Company 05/07/2020G 3 Years
By mutual agreement between the two
parties, unless one of the parties
notifies the other party of its unwillingness to renew at least six (6) months prior to
the expiry of the contract.
SAR 61,100
4 Commercial building lease
contract Al Khobar United
Homeware Company Ltd.
The
Company 01/01/2020G 10 Years
Automatically renewed for a similar period unless one of the
parties notifies the other of its unwillingness to renew two months
prior to contract expiry.
SAR 3,850,000
Annual Rent Total SAR
4,227,100 Source: the Company
* Deemed a Related Party, because the following members of the Company’s Board of Directors, Mr. Abdullah Abdullatif Al-Fozan, Mr. Ali Abdullatif Al-Fozan, Mr. Fozan Muhammad Al-Fozan hold indirect ownership percentages of 8.1%, 8.1% and 4.5% of the capital thereof, respectively. While Board member Mr. Abdullah Al-Braikan, currently occupies the position of Chairman of the Board of Directors in Nesaj Real Estate Development Compound.
** Deemed a Related Party, because Board member, Mr. Abdullah Al-Braikan, owns an indirect ownership percentage of 26.25% of the capital thereof.
*** Deemed a Related Party, because Mr. Abdullatif Ali Al-Fozan, Chairman of the Board of Directors of United Homeware Company, is a relative of Mr. Abdullah bin Abdullatif Al-Fozan, Chairman of the Board, and Mr. Ali Abdullatif Al-Fozan, Vice Chairman of the Board Administration.
5.6.1.3 Investment in Al-Ahsa Real Estate Fund
The Company invested SAR 100 million in the Al-Ahsa Real Estate Fund on 20/02/1443H (corresponding to 27/09/2021G) in exchange for units in the Fund. It should be noted that the Saudi BlomInvest is the manager of the Al-Ahsa Real Estate Fund, and it is a Related Party, as Mr. Abdullah bin Abdullatif Al-Fozan, who is the Chairman of the Board of Directors, holds a 1.95% indirect ownership therein, and Mr. Ali Abdullatif Al-Fozan, the Vice Chairman of the Board of Directors, also holds 1.95% indirect ownership, and Board member Mr. Fozan Al-Fozan holds 1.5%. In addition, Mr.
Abdullah Al-Braikan, a Board member, is also a member of the Board of Directors of the Al-Ahsa Real Estate Fund. The investment is on a purely arm’s length basis.
5.6.1.4 Preliminary Development Agreement for the Retal Business Park
On 20/02/1443H (corresponding to 27/09/2021G), the Company entered into a development agreement in principle with the Business Park Fund, which is represented by the fund manager, BLOMINVEST Saudi Arabia, which is a Related Party, as Mr. Abdullah bin Abdullatif Al-Fozan, who is the Chairman of the Board of Directors, holds a 1.95%
indirect ownership therein, and Mr. Ali Abdullatif Al-Fozan, the Vice Chairman of the Board of Directors, also holds 1.95% indirect ownership, and Board member Mr. Fozan Al-Fozan holds 1.5%.
Under this agreement, the Company will develop and supervise the development of the real estate project owned by the Fund, which is the construction of a complex containing offices and other facilities with a total area of 33,579 square meters according to the plans and designs proposed between the two parties. The fees for services due to the Company are calculated at a specific percentage of the development costs based on invoices approved by the consultant and the Business Park Fund, in addition to the fees for good performance with a specific percentage of the net profit. The term of the agreement expires 24 months from the date of receipt of the first financial payment. The concluded development agreement is on a purely arm’s length basis.
5.6.1.5 Joint Acquisition of Land Agreement in a Retal Business Park Project Property
On 07/01/1443H (corresponding to 15/08/2021G), the Company entered into a real estate partnership agreement, as amended by Appendix (1) on 16/12/2021G with BLOMINVEST Saudi Arabia, which is a Related Party, as Mr. Abdullah bin Abdullatif Al-Fozan, who is the Chairman of the Board of Directors, holds a 1.95% indirect ownership therein, and Mr.
Ali Abdullatif Al-Fozan, the Vice Chairman of the Board of Directors, also holds 1.95% indirect ownership, and Board member Mr. Fozan Al-Fozan holds 1.5%.
The Company and the BLOMINVEST Saudi Arabia purchased a plot of land with title deed number 396426002202 for a total amount of 60,237,007 Saudi Riyals, and participated therein for 50% to contribute in kind to the land in the Business Park Fund in exchange for 60,000,000 units (where the Company owns 30,118.5 units) of the Business Fund units Park, managed by BLOMINVEST Saudi Arabia. The concluded partnership agreement is on a purely arm’s length basis.
5.6.1.6 Investment in the Business Park Fund
On 16/05/1443H (corresponding to 20/12/2021G), the Company invested in the Business Park Fund an amount of SAR 60,237,007.95 in consideration of 60,000,000 units in the Fund. It should be noted that the manager of the Business Park Fund is BLOMINVEST Saudi Arabia, which is a Related Party as Board Chairman Mr. Abdullah bin Abdullatif Al Fozan owns 1.95%, Vice Chairman Mr. Ali Abdullatif Al Fozan owns 1.95%, and Board member Mr. Fozan Al Fozan owns 1.5% of the shares in BLOMINVEST Saudi Arabia, in each case, indirectly. The investment is on a purely arm’s length basis.
5.6.1.7 Commitment to Purchase Real Estate Agreement for the Nesaj Town Al-Ahsa Project
On 23/01/1443H (corresponding to 31/08/2021G), the Company entered into a commitment to purchase real estate agreement with the Al-Ahsa Real Estate Fund, which is represented by the fund manager, BLOMINVEST Saudi Arabia, which is a Related Party, as Mr. Abdullah bin Abdullatif Al-Fozan, who is the Chairman of the Board of Directors, holds a 1.95% indirect ownership therein, and Mr. Ali Abdullatif Al-Fozan, the Vice Chairman of the Board of Directors, also holds 1.95% indirect ownership, and Board member Mr. Fozan Al-Fozan holds 1.5%. In addition, Mr. Abdullah Al- Braikan, a Board member, is also a member of the Board of Directors of the Al-Ahsa Real Estate Fund.
Under this agreement, Al-Ahsa Real Estate Fund is obligated to purchase the entire land from the owner of the Fund, and the Company has committed to purchase 350,000 thousand square meters of the land from the Fund for 330,554,000 Saudi Riyals, on the basis that the Fund will grant the Company the exclusive right to develop and
5.6.1.8 Development Agreement for Nesaj Town Al-Ahsa Project
On 02/02/1443H (corresponding to 09/09/2021), the Company entered into a development agreement with the Al- Ahsa Real Estate Fund, which is represented by the fund manager, BLOMINVEST Saudi Arabia, which is a Related Party, as Mr. Abdullah bin Abdullatif Al-Fozan, who is the Chairman of the Board of Directors, holds a 1.95% indirect ownership therein, and Mr. Ali Abdullatif Al-Fozan, the Vice Chairman of the Board of Directors, also holds 1.95%
indirect ownership, and Board member Mr. Fozan Al-Fozan holds 1.5%. In addition, Mr. Abdullah Al-Braikan, a Board member, is also a member of the Board of Directors of the Al-Ahsa Real Estate Fund.
Under this agreement, the Company will develop and market the real estate project owned by the Fund, comprising of residential and commercial lands with a total area of 395,573 thousand square meters in return for the right to exclusively market the project in cooperation with Inovest Real Estate Company for a period of 24 months. During the marketing period, the Company will be paid a 2.5% commission from buyers. The development agreement was entered into on a purely arm’s length basis.
5.6.1.9 Development and Marketing Agreement for Retal Blue Project
On 31/10/2021G, the Company entered into a development and marketing agreement with the AlKhaleej AlArabi Resorts Fund , which is represented by the fund manager, BLOMINVEST Saudi Arabia, which is a Related Party, as Mr.
Abdullah bin Abdullatif Al-Fozan, who is the Chairman of the Board of Directors, holds a 1.95% indirect ownership therein, and Mr. Ali Abdullatif Al-Fozan, the Vice Chairman of the Board of Directors, also holds 1.95% indirect ownership, and Board member Mr. Fozan Al-Fozan holds 1.5%.
Under this agreement, the Company is committed in principle to developing and marketing a resort project, considering that this commitment is related to the establishment of the AlKhaleej AlArabi Resorts Fund, and said Fund’s purchase of the land for the project from the Company and Mohammed Al-Nahdi. The fees for services due to the Company are calculated at a specific percentage of the development costs based on invoices approved by the consultant and the Business Park Fund, in addition to good performance fees with a partial percentage paid to the fund manager and a specific percentage to the Company. This agreement is considered approved from the date of its signature and will remain in effect until liquidation of the fund. The concluded development and marketing agreement is on a purely arm’s length basis.
5.6.1.10 Commitment for Sale Agreement for the Retal Blue Project
On 31/10/2021G, the Company entered into a commitment to sell agreement with Mohammed bin Salmeen bin Mubarak Al-Nahdi and the AlKhaleej AlArabi Resorts Fund, which is represented by the fund manager, BLOMINVEST Saudi Arabia, which is a Related Party, as Mr. Abdullah bin Abdullatif Al-Fozan, who is the Chairman of the Board of Directors, holds a 1.95% indirect ownership therein, and Mr. Ali Abdullatif Al-Fozan, the Vice Chairman of the Board of Directors, also holds 1.95% indirect ownership, and Board member Mr. Fozan Al-Fozan holds 1.5%.
Under this agreement, the AlKhaleej AlArabi Resorts Fund commits to purchase two plots of land with a surface area of 500,000 square meters from the Company and Mohammed bin Salmeen bin Mubarak Al Nahdi for 225,000,000 Saudi Riyals. The concluded commitment agreement is on a purely arm’s length basis.