KEC signs MoU with Kaden Investment to develop Multaqa Almadinah 2 project

The project spans approximately 92,040 square meters (sqm), with an estimated total built-up area of approximately 229,120 sqm, the company said in a statement to Tadawul.

The two companies intend to establish a closed-ended real estate investment fund to own, finance and develop the project.

KEC will hold a 75% stake in the fund units in exchange for an in-kind contribution of the project land, while Kaden Investment will hold a 25% stake for its cash contribution.  This is based on the preliminary structure agreed upon and is subject to the final agreements and relevant regulatory approvals.

The project is located directly north of the first phase of the existing Multaqa Almadinah project, overlooking King Abdulaziz Road and adjacent to the Boulevard in the KEC development in Madinah.

The project aims to develop an integrated extension of the existing Multaqa Almadinah, comprising residential, commercial and office components, as well as supporting facilities and services, to enhance integration across the destination.

Under the preliminary concept, the project will include approximately 1,527 residential units across three residential areas, in addition to commercial and office components with a net leasable area of almost 31,110 sqm. It will also include parking facilities, clubs, recreational and service facilities, as well as landscaping and greening works for the central park adjacent to the project.

The residential component is targeted for sale, including off-plan during construction, while the remaining units will be sold after completion of the development works and handover.

Meanwhile, the commercial and office component is targeted to be developed, leased and operated until it reaches a stable operating level and occupancy rates. Thereafter, it will be exited through a sale.

The company said the MoU includes a 90-day exclusivity period from the date of signing, during which the two parties will conduct negotiations, studies, due diligence and work to complete the final agreements related to the project.

The statement said there are no related parties to the deal.

KEC expects that, after executing the final agreements, it will receive approximately SAR 67.7 million in cash, in addition to units in the targeted fund valued at SAR 624.6 million. The estimated cost of the land is SAR 64.2 million.

The company will recognize the financial impact in its financial statements in accordance with International Financial Reporting Standards (IFRS) after meeting the applicable accounting recognition criteria and completing the procedures to transfer ownership of the land.

The company explained that, under the preliminary project structure, the initial value of the project land contributed by KEC as an in-kind contribution is approximately SAR 692.3 million.

This includes SAR 536.9 million for the residential-sector land, based on SAR 9,000 per sqm and SAR 155.5 million for the office-sector land, based on SAR 4,800 per sqm.

The total equity required for the project is initially estimated at approximately SAR 832.7 million, of which approximately SAR 624.6 million represents KEC's 75% share of the fund units and approximately SAR 208.2 million represents Kaden's 25% share.

Under the proposed preliminary structure, KEC will retain units in the fund with an estimated value of approximately SAR 624.6 million against part of the value of its in-kind contribution of the project land, while receiving approximately SAR 67.8 million in cash against the remaining portion of the value of its in-kind contribution.

The company said the total project cost is initially estimated at approximately SAR 2.5 billion.

The project is targeted to be financed through a combination of equity, bank financing, and proceeds from off-plan sales, subject to the final financing structure and relevant approvals.

Kaden Investment will serve as the development manager, including managing development, leasing, property management, and residential unit sales activities, in accordance with the final development and management agreements to be entered into between the parties.

KEC said the MoU also includes an agreement between the two parties to appoint Capital Hill as the proposed manager of the real estate investment fund.

The fund will be subject to the rules and regulations of the Capital Market Authority and relevant regulatory approvals.

The MoU forms part of KEC's strategy to develop and maximize the value of its land portfolio through partnerships with specialized investors and developers and by utilizing appropriate investment and financing structures.

This will accelerate the development of the company's projects, diversify its financing sources and broaden the range of uses and real estate products within KEC.

Multaqa Almadinah 2 extends the first phase of the Multaqa Almadinah project, which includes a mall, the Hilton hotel tower, and the Hilton-branded residential tower.

This will enhance the destination's integration and the diversity of its residential, commercial, office, and entertainment components, while supporting KEC’s objectives of developing integrated urban destinations in Madinah.