First Avenue exits La Perle, ups Al Shati stake to 81.6%

First Avenue for Real Estate Development Co. signed an agreement with Awj Real Estate Development and Investment Co. to sell its entire 38.6% stake in La Perle Real Estate Fund in exchange for Awj’s 48.9% stake in Al Shati Real Estate Fund and a cash payment of SAR 6.35 million to First Avenue.

The transaction is valued at SAR 130.96 million, First Avenue said in a statement to Tadawul. Following the deal, its stake in Al Shati Fund will increase from 32.7% to approximately 81.6%, while it will fully exit La Perle Fund.

The consideration comprises Al Shati Fund units valued at SAR 124.62 million and a cash settlement of SAR 6.35 million.

Al Shati Fund’s total assets are valued at approximately SAR 255.1 million. They comprise a 15,600-square-meter plot of land in Jeddah’s Al Shati district, with a floor area ratio of 6.25, in addition to cash liquidity of approximately SAR 45 million. The fund has no outstanding financing.

First Avenue said the transaction aligns with its strategy to redistribute its real estate investments and improve capital allocation efficiency. This involves exiting an income-generating real estate asset that has reached an advanced stage of investment maturity and increasing its investment in an asset with greater development and growth opportunities.

The company plans to assess several options for utilizing the Al Shati Fund land, including developing a real estate project or deploying the asset through other investment and financing solutions, subject to feasibility studies and the necessary approvals.

First Avenue expects to record a profit of approximately SAR 3.56 million from the transaction. The final financial impact will be determined upon completion of the transfer of units and settlement of the investment in the fund.

The company noted that its full exit from La Perle Fund will terminate its investment in the fund and its related relationship involving the management and development of its assets. This includes the existing development agreement, in accordance with the relevant contractual terms and termination procedures.

It also explained that increasing its stake in Al Shati Fund to approximately 81.6% may result in a change in the accounting treatment of the investment. This could include consolidating the fund’s financial statements into the company’s consolidated financial statements if the requirements for consolidation under the applicable accounting standards are met.

In such a case, intercompany transactions and revenue between the company and the fund, including revenue generated under the existing development agreement with Al Shati Fund, may be eliminated during the preparation of the consolidated financial statements to the extent that they qualify as intra-group transactions.