COVID-19: Saudi developer Jabal Omar invokes force majeure to stop payment of rent

Suspends rental payments totalling $72mln to Alinma Makkah Real Estate Fund

  
The Jabal Omar project is one of the most important mixed-use real estate developments, located within walking distance of the Holy Mosque, in Makkah Al Mukarramah.

The Jabal Omar project is one of the most important mixed-use real estate developments, located within walking distance of the Holy Mosque, in Makkah Al Mukarramah.

Jabal Omar Development Company / Handout via Zawya

Saudi Arabia's Jabal Omar Development Company announced on Tuesday that it has invoked force majeure resulting from COVID-19 outbreak to cease rental payments totalling of 270 million Saudi riyals ($72 million) to the Alinma Makkah Real Estate Fund

The developer decided to stop paying rent for May to November 2020 period since precautionary measures imposed by the government to combat the COVID-19 outbreak would result in ceasing of operations and revenue at the hotels and retail properties rented from the fund, according to a statement filed with the Saudi stock exchange.

The developer has also demanded refund of rental amount totalling 172 million riyals ($45.8 million) for the period from 10 March to 7 May, including any amount previously deposited as rental returns in the escrow account, as it didn't benefit from the stoppage of operations at the rented properties due to the precautionary measures, the statement noted.

In March 2017, Jabal Omar Development had entered into 6 billion riyals ($1.6 billion) sale and lease back agreement for three hotels and a mall with the Alinma Makkah Real Estate Fund. Under the deal, the developer would lease and operate the assets for a period of 10 years with an annual rent of 540 million riyals ($143.8 million).

In April, the developer had announced that its 2020 revenues would be impacted by the COVID-19 outbreak due to "significant decrease in occupancy rates in its hotels and the temporary closure of its commercial centres and temporary suspension of all development work in the Jabal Omar project."

For 2019, the developer reported a net loss (after zakat and tax) of 393.8 million riyals ($105 million) compared to a net profit of 193.78 million riyals ($51.6 million) in the previous year, mainly due to decrease in revenues from sales of housing units. The accumulated losses at the end of financial year 2019 stood at 181.7 million riyals ($48 million), equivalent to 1.95 percent of the company's capital.

(Writing by Syed Ameen Kader; Editing by Anoop Menon)

(anoop.menon@refinitiv.com)

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