Musharaka Capital Company announces a fundamental development regarding the Musharaka REIT Fund

Musharaka Financial Company (“Fund Manager”), in its capacity as the manager of Musharaka REIT Fund (“Fund”), and with reference to the non-binding Memorandum of Understanding (“MoU”) signed on 16 Rajab 1442H (28 February 2021), announces the commencement of the Fund’s acquisition process for a new property, a fully furnished 4-star hotel consisting of 94 rooms and suites, a fitness center, event and celebration halls, a restaurant, swimming pools, and parking spaces for 80 cars. The property is located in Riyadh, Saudi Arabia, after obtaining the real estate valuation results from two appraisers and completing the legal and technical due diligence study.

Event / Key Development:

The property subject to acquisition is a hotel leased to a leading Saudi company in the hotel leasing and operation sector. The lease agreement has a duration of 10 years with an annual rental guarantee of SAR 7.77 million, secured by promissory notes. Below are the details of the property and the deal:

• Country: Saudi Arabia
• City: Riyadh
• Hotel Name: Jardino
• Hotel Rating: 4 stars
• Hotel Condition: New and fully furnished
• District: Olaya
• Street: Takhassusi
• Land Area: 3,495.35 sqm
• Building Area: 14,075.7 sqm
• Acquisition Value: SAR 85,500,000
• Average Annual Income During the Lease Period: SAR 7,775,000
• Lease Term: 10 years (binding)
• Lease Guarantees: Promissory notes provided by the tenant in favor of the Fund
• Tenant: Maskan Al-Salam for Development and Commercial Investment

It is expected that the administrative and legal procedures for transferring the property ownership with the relevant authorities in Saudi Arabia will be completed within 90 days from the date of this announcement. The deal will be financed through bank facilities granted to the Fund in accordance with Shariah-compliant standards.

Impact on the Fund:

The Fund Manager believes that this acquisition will have a positive impact on the Fund from various aspects. From an investment perspective, it will contribute to the growth of the Fund’s portfolio and help reduce concentration risk by increasing diversification and expanding geographically into Riyadh, particularly in promising sectors like hospitality. From a financial perspective, it will generate cash savings for the Fund and enhance profits through the use of low-cost leverage for financing the investment. Additionally, the long-term mandatory lease agreement will provide stability in the Fund’s distribution policies and cash flow over the long term.

Additional Information:

The Fund Manager will disclose any further developments regarding this matter.