Article 47: Conditions for Offering REITs

Article 47: Conditions for Offering REITs

a) The following conditions must be satisfied when applying:

1) The fund type: the REIT fund must be a closed-ended fund.

2) The minimum requirement for establishment: the fund's total assets value must be 500 million Saudi Riyals at least, upon establishment, to offer its units in the Main Market, and not less than (100) million Saudi riyals to offer its units in the Parallel Market.

3) The nominal value per unit: the nominal value per unit must be (10) Saudi Riyals.

4) Subscription fees: public unitholders may only subscribe by way of cash contributions.

5) Subscription limit: the minimum subscription must not exceed (1000) units per unitholder.

b) The fund manager must comply with the following at all times:

1) Investment policy: the fund's investments value in constructionally developed real estate, and qualified to generate periodic rental income must not be less than (75%) of the fund's total assets value according to the last audited financial statements.

2) Distributions: the distributed profits on unitholders must not be less than (90%) of the fund's net profits annually.

3) Asset restrictions:

a) the fund manager may not invest in white lands. the fund manager is allowed to invest up to 25% of the fund's total assets value, according to the last audited financial statements, in any of the following:

1. Real estate development, whether the real estate is owned by the fund manager or not. If a REIT traded in the parallel market, it may invest in real estate development upon the establishment of the fund without adhering to the stated percentages in Investment Policy and Asset restrictions as stipulated in Paragraph (b) of this Article

2. Renovation and re-development of real estate.

3. Real estate re-purchase agreements.

4. Cash and such, units of investment funds licensed by the Authority and real estate companies.

5. In case of RIETs traded in the Main market, Usufruct rights.

6. Treasury units

7. Debt instruments

b) The manager of REIT traded in the parallel market must, upon completion of the development of the real estate under investment, ensuring that the real estate becomes a constructionally developed asset capable of generating rental and periodic income, comply with the investment in real estate development shall not exceed )25%( of the total value of the fund's assets, whether or not owned by it.

c) The fund manager is prohibited from investing more than )25%( of the fund's total assets value, according to the last audited financial statements in real estate outside the Kingdom.

d) A REIT may not own a percentage exceeding (20%) of the net assets value of the fund that its units were owned

e) The investments of the REIT fund manager on the Parallel Market in usufruct rights shall not be subject to the restriction stipulated in sub-paragraph (a) of sub-paragraph (3) of paragraph (b) of this Article.

4) Fund's assets requirements: with regards to Articles (36) and (37) of these Regulations, the fund manager must ensure the provision of valuation reports for the real estate, prepared by two accredited valuers, with the Saudi Authority for Accredited Valuers’ fellowship, and publish them during the offer period on its website and the Exchange’s website. The reports shall contain an assessment of market rents (where applicable) and the assessment period shall not exceed three months of the offering commencement date. Where more than two accredited valuers were appointed, the fund manager must publish all the accredited valuers' reports.