Logo of Mulkia Gulf Real Estate REIT Fund
Mulkia Gulf Real Estate REIT Fund was notified by Gulf Real Estate Co., the main tenant of the West Avenue property owned by the fund, of its unwillingness to continue the existing lease contract, starting from the end of the contract’s mandatory period, which expires on Nov. 1, 2022, Mulkia Investment Co., the fund manager, said in a statement to Tadawul.
The property is currently sub-leased by Gulf Real Estate to several sub-tenants. The main components of the property are leased to several tenants, including Saudi Company for Hardware (SACO), Saudi Carrefour Co. and other tenants with contracts extending from five to 15 years in the future.
The occupancy rate for the entire property (sublease contracts) stands at nearly 93%, according to the data available to the fund manager. During the coming period, the fund manager will appoint a property manager for the property or rent the property under one main contract to a single entity that will manage, operate and sublease the property according to the offers received.
If a property manager is appointed, the contracts of the existing tenants (subcontracts) will be transferred to the fund, starting from Nov. 1, 2022,
The fund expected a decrease in annual revenue, starting from Nov. 1, by no more than 5% on an annual basis, as a result of the presence of unleased areas in the property, in case that they are not leased in the coming period.
On the other hand, the fund will have the possibility to increase rents in the coming years, unlike the elapsed contract, which does not allow the fund to raise the rent according to market conditions during the 20-year contract term, starting from the effective date on Nov. 1, 2017.
Mulkia Investment expected an accounting adjustment, represented by a reduction in the rental income item, based on the accounting treatment of IFRS 16 (lease contracts). This treatment will not affect the fund’s expected cash flows or cash dividends, as It is considered a non-cash accounting settlement, the fund manager concluded.
Comments
{{DisplayName}}
{{ElapsedTime}}