The average value of the Fund's property portfolio, assessed by two independent appraisers, was estimated at SAR 2,298.1 million, a slight decrease of 2.16%. Acquire developed and ready-to-use properties to generate regular rental income and distribute at least 90% of the Fund's net profit to unitholders throughout the Fund's tenure. During the period, the Fund Manager has successfully increased the total asset value of the Fund by purchasing (“Atelier La Vie”) which is an income generating property located in Jeddah, Saudi Arabia.
A part of the balance will be used for dividend distribution and to pay the Fund's obligations. Invest not more than 25% of the total value of the Fund's assets, according to the most recent audited financial statements, in real estate development activities, whether owned by the Fund or not, or to renovate or redevelop those assets. Annual SAR income represents 4.88% of the total rent of Tenant Amjad Qortuba for Educational Services Co.
Annual SAR income represents 1.29% of total rent Tenant Abdulmohsen Al Hokair Group for Tourism and. Annual SAR income represents 14.64% of total rent Tenant AlOula Real Estate Development Company Weighted Average Rent.
Properties – Dammam & Khobar
Fair value vs. Purchase Price and Book Value
Summary of Leased and Non-leased Assets, Occupancy Rate, and Weighted Average Lease Expiry (WALE
Acquisition Vs Current Market Value (SAR M)
Dividend Distributions
Portfolio Occupancy Rate
Transactions with Related Parties
Changes to the Fund’s Documents During the Period
Summary of Fund’s Performance
Subsequent Events
Material Development During the Period
Stock Performance
Topics Discussed and Resolutions Issued by the Fund Board
Financial Performance
Services, Fees and Commissions Charged to the Fund Throughout the period
Performance Record
Leverage (Borrowing percentage of the Fund's total asset value and maturity date)
Special Commissions Received by the Fund Manager
Socioeconomic and Demographic Overview
Saudi Arabia holds an estimated 15% of the world's proven oil reserves and has the largest economy in MENA, making it a critical player not only in the region but also on a global scale. Saudi Arabia initiated Vision 2030 as a comprehensive strategy to promote economic development and reduce dependence on oil. There is currently a current account surplus that is reaching its highest level in a decade, and inflation is well under control.
In 2022, Saudi Arabia emerged as the fastest growing G20 economy with an impressive overall growth rate of 8.7%. Saudi Arabia's real GDP grew 1.1% in the second quarter of 2023 compared to the same quarter in 2022, driven by a 5.5% increase in non-oil activities and a 2.7% increase in government services activities. The Saudi economy expanded by 8.7% in 2022, the fastest among G20 countries, as high oil prices boosted revenues and led to the Kingdom's first budget surplus in almost 10 years.
However, World Bank estimates show that after impressive GDP growth of 8.7% in 2022, the economy of the Kingdom of Saudi Arabia is expected to slow down to a projected growth rate of 2.2% in 2023. This is mainly as a result of the decline in oil production as Saudi Arabia. Arabia sticks to OPEC+. The main driver of inflation in June 2023 was rental prices due to their large relative importance in the Saudi consumption basket (21.0% weight). Compared to June 2022, actual residential rents increased by 10.8% in June 2023, reflecting a 22.8% increase in residential rents.
Public consumption accounted for 20.4% of nominal GDP in March 2023 against 25.4% in the previous quarter. Saudi Vision 2030 is the long-term economic plan for Saudi Arabia that recognizes that a diverse market-based economy, high output/production and investment in human capital are essential for growth. Vision 2030 must create growth opportunities in several key sectors of the economy through various programs.
Saudi Arabia has recently expressed its intention to become one of the most technologically advanced economies in the world and is committed to increasing its investment in research, development and innovation to 2.5% of GDP by 2040. Vision 2030 has shown remarkable success in reducing the economy's heavy dependence on oil as a major source of national income. Saudi Arabia's reforms have had a wide-ranging impact on public and private life, including sports, tourism, entertainment, arts and culture.
Real Estate Sector Overview
Riyadh, Jeddah and Dammam
In particular, smaller shopping centers and community centers outperformed larger super-regional malls. Tenants in the market showed a strong preference for corner locations that offer good street visibility. Looking at rental performance, rents for super regional and regional malls in Riyadh increased by 11% and 8% respectively in the first quarter of this year. Undoubtedly, in the first quarter of 2023, average sales prices and rents in Riyadh increased by 7% and 2% year-on-year respectively.
In the 1st quarter of 2023, no new hotel developments were completed in the capital, resulting in a stable total inventory of 21,000 keys. These initiatives are expected to have a positive impact on the hospitality industry and position Saudi Arabia as a prominent global tourism destination in the long term. It is expected to expand another 478,000 sq m during the remaining nine months of the year. However, with the retail market softening in Jeddah, experts are cautious about timely completion of future projects.
An additional 61,000 square meters of GLA is expected to join the Jeddah market in the remaining nine months of this year. Therefore, the successful implementation of Vision 2030 also depends on the digital transformation of the education sector, the aim of which is to equip young people in the Kingdom with the necessary skills for the future labor market. This is evident in the allocation of approximately US$7 billion under the National Transformation Plan to build new schools and universities across the Kingdom.
The technical and vocational training (TVT) sector is a cornerstone of Saudi Arabia's economic diversification plan, which aims to create several million job opportunities over the next eight years until 2030. Construction has begun on the inaugural SEVEN entertainment destination in Riyadh's Al Hamra district. Registration of the real estate assets of the Fund in the name of the subsidiary company of the Fund Custodian or in the name of the subsidiary company of the authorized financier who provided financing for the Fund.
Prospective investors should read the terms of the fund carefully and consult with a qualified investment adviser about the suitability of the fund as an investment before entering into an investment in the fund. Therefore, prospective investors must be prepared to assume the risks associated with any investment in the Fund. By investing in the fund, the investor confirms that he has read and accepted the conditions of the fund.
Financial Statements
As of 30 June 2023
AND REVIEW REPORT TO THE UNITHOLDERS FOR THE SIX MONTHS PERIOD ENDED
30 JUNE 2023
June 2023
The items included in these condensed interim financial statements are measured using the currency of the primary economic environment in which the Fund operates ("Functional Currency"). These financial statements are presented in Saudi Arabian Riyal (“SR”), which is the functional and presentation currency of the Fund. The accounting judgments, estimates and assumptions used in the preparation of these interim condensed financial statements are consistent with those used in the preparation of the fund's annual financial statements for the year ended December 31, 2022. e) Significant accounting policies.
The accounting policies adopted in the preparation of the interim condensed financial statements are consistent with those followed in the preparation of the Fund's annual financial statements for the year ended 31 December 2022, except for the adoption of new standards which will apply from 1 January 2023 effective as disclosed. in note 2 (f) below. f) New standards, interpretations and amendments adopted by the Fund. The Fund has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments apply for the first time in 2023, but do not have an impact on the interim financial statements of the Fund.
The classification is not affected by the entity's expectations or events after the reporting date (for example, the receipt of a waiver or a breach of contract). Valuations of the investment properties as of June 30, 2023 were performed by Jones Lang LaSalle Saudi Arabia Co. The fair value of investment properties is recorded as the average value between two accredited appraisers.
In 2020, the Fund entered into two Commission Rate Swap (CRS) contracts with a commercial bank to swap its exposure to the variability of cash flows arising from the variable portion of the agreed interest rate (SAIBOR) on financing obtained from the bank (note 7 ). ). This represents rent receivables from tenants of investment properties in accordance with the terms of the associated leases. The fund recorded financing costs based on the effective fee method in the amount of SR 27.09 million (June 30, 2022: SR 12.67 million).
After the end of the period, the Fund declared cash dividends in the amount of SR 25 million, SR 0.1341 per unit. Related party transactions consist of transactions with the Fund Manager and Al-Inma Investment Company (the Fund Custodian), the Fund Board and other subsidiaries of the Fund Manager in the ordinary course of business, undertaken on mutually agreed terms . These transactions were carried out based on the terms and conditions approved by the Fund.
In addition, during the current period ending June 30, 2023, the Fund initiated a capital increase and issued additional units at a discounted price of SR 8.64 per unit. The Fund uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to determine fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
