Al Majdiah, KEC to develop SAR 2.8B project in Madinah

Dar Al Majdiah Real Estate Co. (Al Majdiah) signed a memorandum of understanding (MoU) with Knowledge Economic City Co. (KEC) and Capital Hill Co. to develop a residential and commercial real estate project in KEC, Madinah, through a closed-ended real estate investment fund.

The MoU outlines the initial commercial, investment and development framework for the project, the two companies said in separate statement to Tadawul.

The project comprises residential units for sale and a ground-floor commercial component, which will be leased and operated until stabilization and later sold.

The project’s developable area stands at approximately 97,000 square meters (sqm).

Based on the initial plan, it will comprise around 2,700 residential apartments for sale, in addition to a ground-floor commercial component with a net leasable area of approximately 8,000 sqm and more than 3,500 parking spaces.

The project’s preliminary total cost is estimated at approximately SAR 2.8 billion, excluding fund fees and related expenses, while KEC expects the project’s revenue to exceed SAR 4 billion.

Under the MoU, KEC will contribute the project land as an in-kind contribution, while Al Majdiah will make a cash contribution and act as the investor and development manager. Capital Hill will establish and manage the proposed fund as fund manager, subject to completing regulatory requirements and executing the final agreements.

KEC will hold approximately 80% of the fund’s rights, compared with approximately 20% for Al Majdiah.

The preliminary value of the project land is approximately SAR 875.4 million, of which KEC will receive SAR 89 million in cash from Al Majdiah for the corresponding interest in the land. KEC will receive fund units equivalent to the remaining SAR 786.4 million of the land value.

Al Majdiah’s total contribution will amount to approximately SAR 200.7 million, including SAR 89 million for acquiring the corresponding interest in the land, in addition to SAR 111.7 million to be paid in cash into the fund structure according to the payment schedule set out in the MoU.

Under the preliminary arrangements, Al Majdiah will receive fees for development, sales, marketing and property management services, in addition to a share of the performance incentive, subject to the applicable eligibility conditions and the execution of the final agreements.

The figures, areas and commercial assumptions set out in the MoU remain preliminary and are subject to completion of due diligence, finalization of the design, obtaining the necessary approvals and permits, fulfilling regulatory requirements and executing the final agreements.

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

Al Majdiah said the project’s financial impact on the company cannot currently be determined, as it depends on the outcome of due diligence, execution of the final agreements, and completion of the required approvals and regulatory requirements. The company will announce any material developments in due course.

It added that Capital Hill is a related party, as Al Majdiah board member Abdulaziz Al-Mousa is its manager and a partner, giving him an indirect interest in the arrangements to be entered into under the MoU through any fees and performance incentives that Capital Hill may be entitled to, as agreed in the final agreements.

KEC, for its part, said the financial impact will be recognized in the company’s financial statements in accordance with International Financial Reporting Standards (IFRS) after the applicable accounting recognition criteria are met and the land transfer procedures are completed. It noted that there are no related parties.

The project remains subject to completing the aforementioned procedures, with binding commercial obligations arising only upon execution of the final agreements, except for provisions expressly deemed binding under the MoU.

KEC said the project primarily targets non-Saudi Muslim customers, in line with the recently issued non-Saudi real estate ownership regulations.

The project is part of KEC’s strategy to accelerate the development and investment of its land portfolio through partnerships with specialized developers and institutional investment and financing structures. It also complements the company’s existing and planned projects.

The new project will connect with City Hub 2, for which the company recently signed an MoU with KADEN Investment to develop more than 1,500 residential units.

It will also connect with Multaqa Residences, which is being developed in partnership with Al Rashid Properties.

Together with Multaqa Hospitality, in partnership with Albilad Capital; Multaqa Residences, in partnership with Al Rashid Properties; City Hub 2, in partnership with KADEN Investment; and City Hub 1, comprising commercial, hospitality and residential components, the new project will form an integrated and interconnected urban development network.

The company aims to create an integrated urban and social destination in KEC, bringing diverse uses together in one district.