Riyad Capital's real estate team consists of people and experience in multiple fields within the real estate sector, covering investment, development, asset management, property management and finance. This allows Riyad Capital to implement differentiated strategies in the real estate investment arena with a fundamentally long-term view of maximizing cash flow and the value of real estate assets. As of the date of this report, Riyad REIT has invested in eighteen (18) properties, including one development and two value-added projects.
Riyad REIT's business activities focus on sustainable diversified cash generation as well as optimizing the value of the asset portfolio in order to generate strong overall returns (income and long-term value) for unitholders. Riyad Capital, as the Fund Manager of Riyad REIT, uses its in-house expertise in multiple real estate disciplines to manage the diversified real estate portfolio. The fund continues to generate additional portfolio value through active asset management, maintaining close relationships with multiple tenants and remaining responsive to their needs, establishing relationships with strategic partners in the real estate sector, and addressing proactively addressing operational risks and implementing organic growth opportunities.
Riyad REIT is a leading Real Estate Investment Traded Fund (REIT) with a diversified business model that provides investors with exposure to stable income and value-oriented opportunities from a broad real estate portfolio consisting of local and international assets.
Portfolio Highlights Snapshot of RIYAD REIT
Properties 16 16
Letter from
Two of our assets - Tamayiz (representing 2% of our portfolio's net leasable area) and Alshatea (representing 4.2%) - exhibit long-term pressures due to oversupply in the immediate environment of a high level. Leasing activities, tenant relations, property management, operations and deal creation are all key components of our business. We pride ourselves on Riyad Capital's in-house expertise in multiple real estate disciplines in the areas of investment and asset management.
The completion of our development project – Ascott Corniche Al Khobar – is another value play milestone achieved in 2019. The opening of Ascott in December 2019 marks the first luxury serviced apartment product in the Eastern Province. This is especially true for the Eastern Province, which is home to Aramco – the largest company in the world.
The execution of a 20-year management agreement with Hilton for our Fursan Plaza property reflects another link between one of our properties and one of the largest hospitality companies in the world with over 5,700 properties.
Portfolio’s Geographic Distribution
From Riyad Capital: Our Strategy
Saudi Property Overview
Market Snapshot
Riyadh
Supported by initiatives to support the development of cultural, entertainment and leisure projects in Riyadh, the hotel market is expected to experience stable performance in the long run. In Q3 2019, average rental prices in Jeddah's office market stood at 1,048 SAR/sqm and 749 SAR/sqm across the Grade A and Grade B segments. Knight Frank) Office rents fell further during the year and are likely to remain under pressure as more completions are expected in the near term.
Jeddah
In the third quarter of 2019, average rents in the Jeddah office market were SAR 1,048/m2 and SAR 749/m² in the Class A and Class B segments, respectively. Knight Frank) Office rents decreased further during the year and are likely to remain under pressure as expects more completions in the near term.
Eastern Province
Dallas•
US Real Estate Office Market
Washington DC (District of Columbia)
Washington DC (Suburban Maryland)
The unemployment rate fell to 2.8% in October 2019, historically low for this cycle and an indicator of a robust regional economy. The construction pipeline reached its lowest level in the fourth quarter of 2019 since early 2016 and fewer starts are expected in 2020. Total asking rents increased in 2019 on a full-service basis, with trophy rents seeing the largest year-over-year increase, driven partly by supplying a new Trophy product that offers the best market prices.
In San Francisco, the labor market remains healthy as the metro area posted 2.7% year-over-year growth in total nonfarm employment, largely driven by continued hiring in the information and professional services sector. San Francisco's unemployment rate was just 2.0% at the end of October 2019, which favors the state rate of 3.9% and the national rate of 3.6%. The city recorded robust leasing activity in the last quarter of 2019, with more than 2.2 million square meters of closed transactions (Colliers).
The vacancy rate is expected to remain low in the near term as there continues to be a shortage of supply.
San Francisco
In San Francisco, the labor market remains healthy as the metro area posted 2.7% year-over-year growth in total nonfarm employment, largely driven by continued hiring in the information and professional services sector. JLL) San Francisco's unemployment rate was just 2.0% at the end of October 2019, which favors the state rate of 3.9% and the national rate of 3.6%.
United States
Saudi Arabia
Diversi�ed Revenue Base
Diversified Asset Base
Local Portfolio
The Residence
Braira Hittin Hotel Villas
Saudi Electronic University
Vivienda
The Academy
Burj Rafal Hotel
Olaya Tower
Altamayuz Center
Alizdihar Center
King Fahad Road 147 room keys, 8 meeting rooms and commercial rental space at King Fahad Road.
AL Shatea Towers
Ascott Corniche Al Khobar
Omnia Center
Ascott Tahliya
International PortfolioInternational Portfolio
Pioneer Headquarters
The Presidential Building
350 Rhode Island North
Two Washingtonian
The Fund's performance could be adversely affected if a substantial number of tenants are unable to meet their rental obligations. In addition, if a tenant resorts to bankruptcy, insolvency or similar proceedings, it may terminate its lease, which in turn will result in a decrease in the Fund's cash flow. If a large number of tenants default on their obligations or declare bankruptcy, the Fund's cash flow and the Fund's ability to make distributions to unitholders could be adversely affected.
The cash flow generated by the operation of the real estate portfolio is the main source of liquidity used to pay the fund's regular overhead and administrative costs. Therefore, the fund manager must ensure that it has sufficient funds for the timely and efficient payment of all obligations. In addition, the fund manager will use excess funds in short-term deposits in accordance with cash management policies and procedures.
In addition, the aforementioned risks are mitigated through geographic diversification, diversification of tenants and asset classes, and continuous assessment of tenant credit ratings and lease arrears. The Fund Manager will monitor economic conditions, the real estate market, competition from similar assets and various other factors, with the aim of mitigating the impact of these factors on the Fund through diversification of asset classes that add stability to the asset portfolio. real estate reducing exposure to economic volatility. There is no guarantee that the Fund will be able to achieve returns for its investors or that the returns will be commensurate with the risk of investing in the Fund.
It is possible that the value of the units in the Fund may decrease or that investors may lose some or all of the invested capital. There is no guarantee that the expected return or objective of the Fund will be achieved. The Fund Manager will carry out a valuation of the real estate portfolio twice a year to take the necessary precautions to protect the value of the underlying assets.
Main Risk Factors Description Assessment
Risk Assessment
However, the Manager may use financial instruments to limit the impact of financing risk on the Fund, as the Manager recognizes that financing risks can lead to unforeseen losses. The Fund Manager also aims to mitigate these risks by carrying out the development work after carrying out all necessary technical, financial and legal due diligence. The level of risk to which the Fund is exposed increases if it mortgages any of its assets in favor of an external financier.
Under any mortgage agreements, the Fund may lose title to its mortgaged assets, subject to the terms of any financing documentation. In addition, a default under any financing arrangement may allow the lenders to dispose of the mortgaged assets to recover amounts owed, which in turn affects the Fund's performance and expected returns. The Fund Manager takes an effective approach to monitoring regulatory requirements and any changes thereto that affect the management of the Fund, such as changes affecting compliance and risk management requirements relating to the Fund.
Such practices by the Fund Manager are intended to establish appropriate controls to avoid non-compliance by the Fund or the Fund Manager. The fund manager studies the markets in which the fund invests using advisers specializing in the target markets to examine the markets in general and potential investment risks. After acquiring the property, the Fund Manager takes an effective approach to monitor the level of activity in the real estate markets in which the Fund invests, in addition to regulatory requirements and any modifications thereof.
This contributes to the establishment of appropriate control measures that enable the Fund Manager to take appropriate decisions that ensure the interests of the Fund and shareholders. In this regard, valuations carried out by the Fund Manager are for guidance purposes only and are not an accurate measure of the value that can be obtained when the relevant property is sold. The final verification of the market value of a property largely depends on negotiations between a seller and a buyer which may be affected by economic conditions and other circumstances beyond the control of the Fund and the Fund Manager.
The Fund Manager values the Fund's properties based on valuations carried out by two independent valuers authorized by the Saudi Authority for Chartered Valuers. The average of two appraisals is accepted, and in the case of a significant discrepancy between the two appraisals, the fund manager appoints a third appraiser.
Disclaimer
The REIT operates in accordance with the Real Estate Investment Trust Regulations and the REIT Guidelines issued by the CMA. The REIT has a tenure of 99 years, which can be extended at the discretion of the fund manager with the prior approval of the CMA.
Corporate Head office
