Arabian Centres Co. amended the lease contract for the U Walk Jeddah Centre, earlier known as Zahra Mall, reducing the total value of land rent over the contract period to SAR 1.075 billion from SAR 1.785 billion – a reduction of SAR 710 million, the firm said in a statement to Tadawul.
The start date of the lease period was also amended to begin Aug. 1, 2022, and end July 31, 2052.
The amendments came after successful negotiations with the heirs of Princess Munira bint Abdulaziz Al Jiluwi Al Saud, the statement added.
The contract was signed between the two parties on July 16, 2015.
In addition to the change in lease term, it was also split into two sub-periods. The first sub-period of 15 years – from Aug. 1, 2022, to July, 31, 2037 – is binding on both parties. Meanwhile, the second 15-year sub-period – from Aug. 1, 2037, to July 31, 2052 – is optional for Arabian Centres.
According to previous agreement terms, the entire period was binding on both parties.
During the second sub-period, Arabian Centres retains the right to terminate the lease contract before the beginning of each five years, provided it submits a letter three months ahead.
If such a letter is not submitted, Arabian Centres shall be considered bound to it.
The annual rent for the first 10 years has been set at SAR 30 million, increasing to SAR 35 million annually for the following 10 years. It will then rise to SAR 42.5 million annually for the final 10 years.
Previously, the annual rent was set at SAR 47 million for the first five years, with an increase of SAR 5 million for each following five-year period, resulting in rent for the final five years at SAR 72 million.
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, the statement said.
The impact is expected to appear on the company’s financial statements during Q3 2020/21.
The U Walk Jeddah project will be the sixth addition to the Arabian Centres portfolio of shopping centers in Jeddah. It is expected to execute the project on the leased land with a total area of 148,000 square meters (sqm).
The expected total gross leasable area (GLA) of the centre upon completion is projected at 60,000 sqm. It is projected to encompass three floors with a build-up area of 73,000 sqm.
The centre will house 190 stores, including retail units, restaurants and cafes, and will include an entertainment section and cinema complex.
Construction is scheduled to begin in Q1 2021 and the centre is expected to open in 2023. The remaining details of the project, its cost and method of financing will be announced later.
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