Subsequent to the announcement by Saudi Economic and Development Securities Company (SEDCO Capital) that was published on 07/04/2020 related to a specific event, in which the Fund Manager has received several requests from multiple tenants to suspend of rental values and/or to defer and/or to temporarily reduce due rents of their contractual obligations as a result of the latest developments associated with the COVID-19 pandemic, as SEDCO Capital, in its capacity as the Fund Manager of SEDCO Capital REIT Fund, wishes to disclose and clarify the details of these requests and how it will manage them until the date of this announcement. In addition, the Fund Manager confirms to all investors that it is dealing with these requests in a manner that protects the interests of both unitholders and tenants.

 

To date, the total value of requests received from tenants for a temporary reduction of their contractual obligations and/or suspension of rental values and/or deferral of rental receivables, represents approximately 14.80% of the fund’s total annual rental income (“total income”). The Fund Manager rejected requests (equivalent to 4.74% of total income); and accepted to extend the grace period for a new tenant (equivalent to 0.12% of the total income), and to defer a rent payment (equivalent to 0.32% of the total income).

In conclusion, the total value of requests received from tenants affected by the precautionary measures is approximately 9.27% of the total income, noting that the fund manager has not received requests for contracts termination up to date.

 

The fund manager has taken the following actions towards these requests:

  1. Tenants excluded from precautionary measures were notified of the rejection of the applications received,
  2. The new tenant who requested to extend the grace period and affected by the precautionary measures has been notified of the acceptance of his request, for a period of no longer than two months, to enable him to work and complete the development of his rented unit,
  3. Tenants requested to defer their due payments were granted a maximum of three months, considering that they will be collected during the fiscal year in which they are due,
  4. Tenants affected by the precautionary measures have been notified that the impact of these actions and the amount of actual damage, if any, will be assessed on each case, after the end of this pandemic and the decision of the stakeholders to resume back operations factoring in the contractual interests of all parties, and in accordance with the regulations enforced in Saudi Arabia,
  5. The Fund Manager will follow the same procedures with any upcoming requests in accordance with the above principles.

The Fund Manager clarifies that the values illustrated in this announcement do not consider any other future requests nor other unforeseen developments. Concerning the impact on the dividends, the Fund Manager aims to maintain the stable distribution of cash dividends as mentioned in the fund’s terms and conditions depending on the rental fee’s receivables. Not to mention, that the implications of the precautionary measures are continuing and the actual financial impact on the Fund’s distributions cannot be assessed until the time of their due date.

The Fund Manager embarked some initiatives and yet under the process of considering other measures to mitigate the negative impact on unitholders as follows:

  1. Announced the reduction of the annual facility cost, which improved the operational performance of the fund,
  2. Considering the possibility of entering a hedge contract to stabilize the price of SAIBOR and take advantage of the price dropdown, which will reduce the risk of interest rate fluctuations,
  3. Study the reduction or deference of the fund’s operating expenses, which will also improve the operational performance of the Fund and increase the fund’s liquidity,
  4. Study the possibility of benefiting from the initiatives of the General Authority for Zakat and Income in filing tax returns.

The Fund Manager is constantly monitoring the situation and will announce on any further material development in relation to this matter.