An Update from the CEO of Jabal Omar Development Company to Shareholders

Dear Shareholders,

At the start of 2020, Jabal Omar Development Company began executing a holistic transformation strategy with the aim of enhancing our ability to overcome current and future challenges by making us more resilient, enabling us to continue realizing our vision and goals. The key pillars of the strategy are to strengthen the company’s financial position, reconfigure its technical and commercial operations and streamline the organizational structure. I am very pleased to report that – by the grace of God – and thanks to the effort of the employees, the implementation of the strategy led to a positive impact on our cash flow profile and reduced financial obligations and expenses in 2020.

And we continue to make significant progress.

In 2021 the focus of JODC is on executing a comprehensive capital structure optimization plan while continuing to optimally manage our hospitality, retail, and other operating assets as we navigate the various restrictions related to Covid-19 on our business. As for the outstanding phases of our master plan, we are making steady progress; with phases 2, 3, and 4, 78%, 86%, and 63% complete, respectively. We will update the market in due course on how we are getting along with the development in those critical phases of the project.

As one of the leading real estate developers in the Kingdom, our strongest assets are our people. That is why we have also focused this year on developing local talent, by investing in building their capabilities and refining their expertise in order to support the management team in executing the holistic transformation plan and taking the company towards sustainable growth.

For the remainder of this note, I would like to zoom in on the critical capital structure optimization plan. To that end, I am pleased to say that we have made major progress. At the beginning of the year, we engineered a plan to optimize the capital structure by reducing multibillion riyal worth of liabilities to deleverage the balance sheet, renegotiating the terms of existing loans with the banks to help improve cash flow profile, and monetizing a very small portion of landbank – which so far has been met with great success and has proven the high value and trust that real estate investors have in Jabal Omar as an investment opportunity. Some of the key achievements of the capital structure optimization program to date have been:

  1. In March we signed a SAR 1.6 billion credit facility with Banque Saudi Fransi, which is guaranteed by the Ministry of Finance. Jabal Omar project is considered a strategic project and a key enabler for some of the goals of Saudi Vision 2030. As such, it is crucial for us to continue ramping up construction and complete the outstanding phases of the project. This credit facility, with a tenor of 15 years, will be used to complete the remaining work of Phase 3 within Jabal Omar, which is expected to be delivered by end of 2022.
  2. In mid-September we made a non-binding offer to the Alinma Makkah Real Estate Fund, to convert unitholders’ stake in the Fund into shares in Jabal Omar via a new share issuance. If this proposed deal is approved, then we will reduce our liability as of 30 September 2021 – after deducing JODC’s own stake in the Fund – by SAR 5.3 billion. Moreover, the income generated from those assets, which are currently being used to settle the SAR 540 million annual rental income owed to the Fund, will go towards more value-enhancing uses which will enhance return on equity, such as completing the outstanding phases of the project. We believe this deal will give unitholders in the Fund exposure to JODC’s full assets base including its valuable landbank and portfolio of operating assets. This is why, in our opinion, this is an optimal solution and a win-win for both you, our shareholders and the unitholders of the Fund.
  3. In late September we made SAR 517 million after selling a 2,600.32 SQM land parcel within our masterplan via a public auction. We are pleased to welcome a new strategic partner that shares our vision of developing a prime destination in the heart of Makkah for worshipers, pilgrims, and visitors. The proceeds from the land parcel sale will go towards deleveraging our balance sheet and towards the completion of phases 2 and 4. It is worth mentioning here that our strategy to activate our infrastructure-enabled landbank through a sale will make up a very small portion of the total size of the project.
  4. In early October we announced the restructuring of an existing SAR 4.7 billion syndicated loan with SABB and SNB with an additional SAR 1.2 billion credit limit to be drawn down, taking the total financing to SAR 5.9 billion. The key terms of the agreement were that we extended the loan’s final maturity by three years with an option to extend another three years, subject to certain requirements. We also have scope for a step-down profit rate based on progress made in phases 2 and 4.

We are also in active negotiations with other lenders to adjust the terms of our existing loans, enabling us to better manage our cash flow. 

As I look to the future, I am optimistic and confident that we are on the right track towards overcoming this challenging period because we own and operate one of the most unique assets in the world a, 235,000 SQM masterplan that is strategically located in the dynamic and popular central area of Makkah, a short distance away from the Grand Mosque. We are the largest developer and luxury hotel operator in Makkah and are set to benefit from the many great initiatives under Saudi Vision 2030, in terms of attracting a greater number of pilgrims and facilitating homeownership for citizens of this great nation. Finally, and importantly, we have a team of experienced professionals that are driven, eager, and excited to be part of a company that is shaping the central area of Makkah’s urban landscape into a contemporary prime destination that is true to our Islamic roots and delivers world-class experiences to worshipers, pilgrims, and visitors. 

I very much look forward to providing you with further updates in the near future and would like to take this opportunity to thank you, our dear shareholders, for your support and commitment to Jabal Omar Development Company.

Warm regards,

Khalid Al Amoudi
CEO of Jabal Omar Development Company

Head Office +966125106100

Makkah: Jabal Omar Project – Al-Shubaikah District
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