Leverage Capabilities for Growth Annual Report 2023 – Riyadh Development Company
Riyadhdev
“Riyadh has everything it needs to create jobs , investments , and opportunities for growth and development. To that end , the Riyadh Strategy aims to propel the capital to be amongst the top 10 city economies in the world from its current ranking at the 40th spot and to lead in excellence in tourism, services, and quality of life.”
“What I like about our nation and our people is our constant ambition; wherein , we are not always satisfied with what we have achieved. Rather , we aspire for more. We are a persevering country with a persevering people working in harmony.”
Custodian of the Two Holy Mosques King Salman bin Abdulaziz Al Saud
His Royal Highness Mohammed bin Salman Al Saud Crown Prince , Prime Minister
Board of Directors 2023
Mr Majed bin Nasser Alsubeaei Vice Chairman of the Board
Eng Ali Abdullah AlHassoun Member of the Board
His Royal Highness Prince Faisal bin Bandar bin Abdulaziz Governor of Riyadh , Honorary Chairman of the Board
Mr Abdullah Mohammed AlBahouth Member of the Board
Mr Fahad Abdullah AlKassim Member of the Board
Mr Abdul-Ilah Abdul Rahman Al-Hussein Member of the Board
Mr Sulaiman Nasser Al Hatlan Member of the Board
His Highness Prince Faisal bin Abdulaziz bin Ayyaf , PhD Mayor of Riyadh Region , Chairman of the Board
Mr Nayef Ibrahim Al-Hadithi Member of the Board
Mr Abdulrahman Ayed Alqahtani Member of the Board
Table of Contents
01 Introduction
5
03 Financial Results 2023 Key Results & Indicators
25
Foreword
6 7 8
26 27
Board of Director ’ s Letter
Company Performance
Glossary of Terms
04 Governance
34
02 Overview
9
Governance
35 46 47 47 48 48
Our Journey
10
Disclaimer & Transparency Policy
Our Business Sectors
11
Risk Management
Our Projects Our Strategy
14 15 16 24
ARDCO’s Potential Risks
Dividend Policy
Highlights & Achievements Opportunities & Challenges
Internal Audit Results
2023 Facts & Figures
50 51
Conclusion
05 Financial Statements
52
Disclaimer This Annual Report covers financial and operational aspects of ARDCO and is issued in both Arabic and English The print version is identical to its PDF counterpart , which is available at riyadhdev The Arabic version prevails in the event of any discrepancy The images in this document are representative of the services provided by ARDCO
01 Introduction
5
Foreword
“Thirty Years of Successful Legacy... And Prosperous Thirty to Come.” ARDCO celebrates 30 years since its establishment as a key building block of the inspiring vision of the Custodian of the Two Holy Mosques , King Salman bin Abdulaziz , may God protect him. ARDCO was established as a strategic partnership within the private sector , enabling it to make its mark in the Kingdom’s economic renaissance , and allowing Riyadh to become a global standard of urban prosperity as a model of welfare and quality of life. The Board of Directors of Riyadh Development Company anticipate a bright future for our beloved country in light of the Kingdom’s Vision 2030. as we transition from a thirty-year journey filled with achievement and success , which witnessed the company’s successive boards of directors and its executive teams succeed in harnessing all its capabilities and resources to build a titan of industry that not only brought about positive social impact , but did so while maximizing total shareholder return for its investors. Accordingly , at the beginning of 2023 , the board launched our company strategy under the theme of “Invest for Growth” to actively participate in the growth and development witnessed by the Kingdom and its capital , Riyadh has shown particular success and continues to be a vital contributor to the Kingdom’s economy. Through this , we seek to launch more key real estate investment and development projects and initiatives , while establishing , operating and managing public good service projects , deeply aware of our role and responsibility in contributing to the Saudi economic renaissance and working towards sustainable growth. ARDCO possesses a great commitment to our vision , mission and values , adopting a comprehensive strategy that invests with clear goals , builds on our rich heritage , and carries us towards an ever brighter future. “Development for a sustainable future…” As we launched the company ’ s strategy at the beginning of 2023 , we were determined to harness our capabilities to invest in growth. We worked to develop a slogan for this stage based on “Leverage Capabilities for Growth” by meeting the desired strategic objectives , and utilizing our capabilities and resources in the most optimal manner. Therefore , we directed the executive management to invest in building capabilities and competencies in order to achieve sustainable growth and prioritize knowledge transfer through project partnerships.
In our strategy , we have committed to maximizing the return on our current assets, while exiting underutilized or low-performing assets. As an example , an agreement was signed in order to establish a joint venture between ARDCO and Riyadh Holding Company to centralize all operations in the markets owned by the two companies (AlTameer , AlMeaigliyah , and AlDirah) , which would contribute to maximizing the return on assets. We also aimed to invest in new projects that fuels growth and contribute to establishing sustainable income and profits streams. The first of these investments was the signing of a 25-year framework agreement with the Misk Foundation to develop a number of educational complexes for their use. “We harness today... to harvest tomorrow” Leveraging our past achievements and aiming for our future goals, we express our sincere gratitude to our leadership for their unwavering support in propelling our beloved country forward. With unwavering optimism and a commitment to growth, we embark on this journey together. We recognize the tireless efforts of our employees, partners, and shareholders who are instrumental in achieving our shared vision and ambitions as we navigate our transformation.
Faisal bin Abdulaziz bin Ayyaf , PhD Chairman of the Board of Directors
6
Board of Director ’ s Letter
Implementation of the first phase also saw an improvement in operational performance and a review of pricing strategies in public good services markets and the AlTameer Public Transportation Center. This led to an increase in rental and operational revenues , diversification of revenue sources , and the introduction of new units in the market as well as new sources of income , which recorded an increase of 16% in recurring revenue compared to the previous year. Work was also done to utilize an area of 100 thousand m2 within AlTameer International Car Auction through contracting with a driving school , which is expected to bring an annual revenue ranging between 5-12 Mn SAR , through rental income and profit sharing. These efforts have contributed to raising the quality of the company’s recurring revenues in line with its objective towards achieving sustainable growth. Regarding investment and real estate development , the company inked a 25-year framework agreement with the Misk Foundation , through which the company will develop educational facilities to be operated by Misk in a BTS (Built-to-suit) arrangement. The first of these projects will be the development of the first educational facility on lands owned by an ARDCO-led consortium in Tilal AlRiyadh , AlMalqa district. The company also signed a memorandum of understanding with Riyadh Holding Company to establish a new entity charged with investment , management , development and centralization in the operation of all markets owned by the two companies in AlDirah district (AlTameer Wholesale Market , Al-Meaigliyah Commercial Center , AlDirah Markets) as well as improving the city’s urban landscape and developing it into a tourist destination. Through this , the agreement seeks to maximize the return on asset. In terms of human capital , ARDCO is proud of the increase in its Saudi workforce from 52% in 2022 to 75% in 2023 , as well as the doubling of female employees in our organization from approximately 4% of the workforce in 2022 to 8% in 2023. We look to continue efforts to improve our work environment and culture as well as enhance inclusion and diversity within the organization. The company achieved revenues amounting to 339 Mn SAR for our main business in the fiscal year ending December 31 , 2023 . This is an increase of 31% over the previous year , while total revenues amounted to 486 Mn SAR , an increase of 3% over the previous year. This comes despite the decrease in income from Tanal , an associate company , by 49% , as a result of the decrease in the volume of land sales compared to 2022 , regardless of the increase in average selling prices. This contributed to achieving profits of 271 Mn SAR in 2023 compared to 300 Mn SAR for the previous year. In conclusion , we would like to express our gratitude to all who contributed to achieving all the successes we have witnessed in 2023 , particularly all our valued customers and suppliers for their constant cooperation. And to our shareholders , we extend our sincere gratitude for your trust and support.
In 2023, the Riyadh Development Company experienced a significant turning point in its journey, after 30 years of success and progress. At the beginning of the year, the company launched its “ Investing for Growth ” strategy, culminating all the efforts made towards institutional development in 2022. Some of these efforts included the modernization of the company ’ s basic infrastructure, digital & regulatory systems, and attracting exceptional talent to lead and implement the transformation journey. The company’s new strategy aims to achieve sustainable growth and strive towards excellence in real estate development and development management , as well as to strengthen our leading position in the fresh produce sector and public good service markets through their development and expanding into its value chain. This will allow us to raise our operational efficiency and property management , aiming to diversify our investments and maximize the return on our asset portfolio , ultimately maximizing total shareholder return. We are committed to achieving our objectives with a business model that seeks to create positive impact around us and our community as well as achieve sustainability in its broadest sense , reflecting positively on our clients , colleagues , partners , and shareholders. The strategy also establishes a set of key targets for the company , including doubling our net income to more than 500 Mn SAR , raising recurring revenues to one Bn SAR , and restructuring investments to shift from an all-equity structure to one that comprises of a 28% leverage of the value of assets within 5 years , reaching 23% by 2032. This is a key enabler in allowing the company to enter into new projects worth more than 6 Bn SAR by 2032. The company’s strategy outlines a roadmap with three main phases towards achieving its objectives. The first phase includes improving the operational performance of current assets. The second phase will include the diversification and development of its investment portfolio in target sectors. The third phase seeks to achieve sustainable growth and explore promising opportunities. In 2023 , the company focused its efforts on executing the first phase of the strategy. In particular , it worked towards improving the operational performance of the company’s current assets by raising operational efficiency and upgrading its business infrastructure , maximizing the return on the value of its current assets , and exiting underutilized and low-performing assets. As a result , the company invested in maintaining , restoring and improving all of the company’s real estate assets and centers in 2022 and 2023 , obtaining necessary civil defense certificates and safety licenses. This was followed by the issuance of municipal licenses necessary to carry out various activities and contributed to an increase in the occupancy rate to 94% in 2023 , driven mainly by an increase in the occupancy rate in Oteiqah Central Market from 67% to 95%. It also led to an increase in market revenues in 2023 by 39 Mn SAR in 2023 compared to the prior , as it rose from 259 Mn to 298 Mn. This was achieved despite the termination of the AlBatha Meat & Vegetables Market operation , which was exited due to its lack of economic feasibility as a result of the dilapidation of its infrastructure. In its stead , work is underway to establish a high-standard meat market in Oteiqah Central Market. Investment was also made in a multi-purpose area in Oteiqah Central Market to host our fresh produce seasons throughout the year. This allowed us to host the second edition of the Oteiqah Dates Season in the market , where it attracted 800 thousand visitors , compared to 300 thousand visitors in the previous edition; saw the trade of over 14 thousand tons of dates; and rented space to more than 70 traders , with a marked rise in trader and customer satisfaction and sentiment compared to the first edition.
Board of Directors Riyadh Development Company
7
Glossary of Terms
T ERMS & A BBREVIATIONS
D ESCRIPTION
T ERMS & A BBREVIATIONS
D ESCRIPTION
ARDCO
Riyadh Development Company.
Sector providing the daily needs of the community , such as food , livestock , etc.
Public Good Services
The Company
Riyadh Development Company.
Integrating digital technologies , processes and strategies across the business to enhance performance , efficiency and value delivery , often involving innovations such as artificial intelligence , cloud computing , and data analytics.
Digital Transformation
The strategic objectives on which the company’s strategy is based upon , under the slogan «Invest for growth…»
Strategic Objectives
Managing the organization in an environmentally , socially , and economically responsible manner in order to satisfy current needs without impeding on the ability of future generations to meet theirs.
Digitization
Creating a digital counterpart to a physical object or process.
Sustainability
The use of technology in various industrial , commercial and service applications to automatically and accurately manage the procedures and actions efficiently with the least possible error.
The systems and controls that regulate stakeholder relationships and achieve the principles that the company operates upon.
Automation
Governance
Management of the flow of goods , services , and information from origin to destination. It includes transportation , warehousing , and inventory management within the supply chain.
Business Sectors
The company’s three sectors: development , operations , and leasing.
Logistics
Leasing Income
Revenues generated from the company’s leasing activities.
The partnerships that bond ARDCO with the public sector , private sector , and third sector.
Partnerships
8
02 Overview
9
Our Journey
1994 Establishment With King Salman Bin
1997 Development Meat & Vegetable Market in Al Bathaa Inaugurated 1997
2016 - 2019 New partnerships ◊ Otaiqah Central Market Partnership with Riyadh Municipality 1st phase inaugurated 2016 2nd phase inaugurated 2019 ◊ Tanal Real Estate Development & Investment project partnership Land in-kind contribution worth 69.38% of the company ’ s equity in the partnership 1999 - 2000 Inauguration of Riyadh Market & AlTameer Wholesale Center ◊ Riyadh Market Inaugurated 1999 ◊ AlTameer Wholesale Inaugurated 2000 ◊ Commencement of Tilal Al Riyadh land development
ARDCO’s journey began in 1994 , built upon the grand vision for the future from King Salman bin Abdulaziz , during his time as Governor of Riyadh. We ventured into our first mandate to develop the Qasr AlHukm area in central Riyadh , followed by the Batha Meat & Vegetables Market in 1997 , the Riyadh Market in 1999 , and Tilal AlRiyadh in AlMalqa district. Between 2001 and 2007 , our business underwent a significant expansion through real estate development , investment , as well as the establishment , operation , and management of public good services. This period witnessed the opening of the Public Transportation Center in 2001 , the Aziziyah Fruits & Vegetables Market in 2005 , and AlTameer International Car Auction in 2007. As our ambitions grew , we sought to facilitate our expansion by raising ARDCO’s capital from 1 Bn SAR to 1.3 Bn in 2014. This constituted a significant leap in our sector , with which we were able to acquire land in AlThumama to begin a new phase in our company’s development. In 2016 , we entered into a partnership with the Riyadh Municipality to operate the Oteiqah Central Market under a BOT framework , with which Oteiqah Market saw significant stages of growth throughout the years. We also entered a partnership with a real estate partner in the Tanal Real Estate Investment and Development Project , with our AlThumama property as an in-kind contribution equivalent to a 69.38% share of the project. 2023 saw the beginning of a new phase in our transformation wherein we launched our new corporate strategy , focusing on legacy , diversification , growth , sustainability , and digital transformation. As one of our first steps in bringing our strategy to life , we established a partnership with Riyadh Holding Company to establish an entity to manage our key real estate assets in AlDirah in central Riyadh. Immediately following , these early stages of growth we signed a framework agreement with Misk Foundation to develop educational facilities , with an estimated cost of around 275 Mn SAR , including the value of the land owned by a coalition led by ARDCO and a binding lease contract for a period of 25 years , subject to renewal. This key development will contribute to maximizing shareholder return as well as supporting the Kingdom of Saudi Arabia’s Vision 2030 into the future.
Abdulaziz ’ s vision. ARDCO was established with His Majesty as the 1st honorary Chairman of the Board , setting the foundation for the company ’ s 1st mixed-used development in the center of Riyadh (AlTameer Wholesale Center)
2001 - 2007 Expansion of Activities ◊ Bus Terminal Inaugurated 2001 ◊ Alaziziyah Fruits & Vegetable Market Inaugurated 2005 ◊ AlTameer International Car Auction Inaugurated 2007
2014 - 2015 Increase the company ’ s capital ◊ Capital Increase Capital increase from SAR 1 Bn to SAR 1.3 Bn. ◊ AlTameer Plaza 3 inaugural and commencement of its operations. Purchase of a 2.5 Mn sqm super plot in Thumamah. 2021 Memorandum of Understanding ◊ A memorandum of understanding with the Ministry of Environment , Water and Agriculture regarding public benefit markets.
2020 Tanal Sales Commence ◊ Launch of Thumamah land sales (Tanal] through Tanal Real Estate Development & Investment Company.
2022 Strategy development ◊ Starting the work of developing the company ’ s new strategy.
2023 Quality Partnerships ◊ Launch of ARDCO’s new corporate strategy under the name “Invest for growth”. ◊ MoU with Riyadh Holding Company to establish an entity to develop AlDirah district assets. ◊ 25-year framework agreement with Misk Foundation to develop educational facilities
10
04. AlTameer Cold Storage Located over 27 , 000 m2 near AlTameer fresh produce markets , the company’s cold storage warehouses are instrumental in meeting the markets’ logistical needs. The first unit was leased out in 2013 , after 4 years of development beginning in 2009. 05. AlAziziyah Plots Parcels of land with a total area of 46 , 000 m2 strategically located along the South Ring Road. These plots are are leased out in a build- operate agreement. Initially acquired in partnership with several investors in 2004. 06. Office Building Acquired in 2022 , and consists of 12-story office space with two-story parking , developed over a 3 , 346m2 plot , with a total of 10 , 500 m2 leasable area.
Our Business Real Estate Investment and Development
Since 2001 , ARDCO has invested in developing infrastructure and raw land for various residential plans and communities in north and northeastern Riyadh. It has also developed numerous retail , residential , and public good services projects in central Riyadh , as well as leading development in multiple residential plans and communities within the city. ARDCO has established itself as a leading entity in real estate investment and development in Riyadh and the Kingdom. With this sector being one of the main drivers of growth for ARDCO’s new corporate strategy , we have identified key real estate sectors for investment which will maximize shareholder returns in the years to come. ARDCO’s strategy is founded on investment and economic acumen that delivers sustainable financial returns for investors. It achieves this by diversifying its income in leasing within its assets and centers , as well as leasing available space within projects that the company operates and manages. They are as follows:
01. AlTameer Wholesale Center Developed in 2000 and considered ARDCO’s first and largest project to date. A mixed-use complex with retail , office , and residential units , located in AlDirah area on a plot in excess of 105 , 000 m2. 02. Oteiqah Central Market Built on an area of over 196 , 000 m2 , phase one of Oteiqah Central Market was inaugurated in 2016 , with phase two following three years later in 2019. Developed in partnership with Riyadh Municipality as the landowner on a B.O.T agreement , Oteiqah is a historically significant landmark that offers a multitude of food options , from fresh produce to dates , meat , fish , and legumes to individual consumers and SMEs. 03. Riyadh AlTameer Market Opened in 1999 , over 38 , 000 m2 of property situated near the intersection… between AlBatha Street and South Ring Road , it is a multiuse complex with retail and office units. The market is part of a larger development along with the nearby AlAziziya central market that evolves into a singular comprehensive service complex.
11
Operations & Public Good Services ARDCO is the main operator of fresh produce markets , the Public Transportation Center , and the AlTameer International Car Auction. The fresh produce market is a fast growing global sector. Within a local context , we are expected to see the sector grow 6.8% annual by 2026 as we experience continuing significant support through government initiatives under the leadership of the Ministry of Environment , Water , and Agriculture , as well as the inevitable increase in fresh produce consumption with the increase of Riyadh’s population. As a result , ARDCO has sought to identify the best global practices in order to adopt the most effective approach in achieving operational excellence in this vital , everchanging sector. We will also use our deeply rooted experience in this sector to identify and take advantage of key opportunities within the fresh produce value chain to expand our business in a sector that constitutes over 60 Bn SAR annually and sees 60% of its activities in the Kingdom run through ARDCO’s very own AlAziziyah Fruits & Vegetables Market. Shifting our focus to the car auction , where there is a car market that is increasing at a rate of 4% annual from 2021 to 2027 globally. This is due largely to a rise of the global middle class , ease of market entry and operations through digitization , and a vehicle supply shortage as a result of worldwide supply chain challenges. Locally , we expect to see the Saudi used car market to show accelerated growth at 5% annual by 2027 . Saudi growth is outpacing this because of an increase in car ownership , the new influx of female drivers , increased demand in transportation , and the increase of new workforce in the country. Many also view the omittance of VAT from car sales between individuals as a boost to the current used car market. Consequently , ARDCO seeks to utilize its pioneering position in this market
01. Fresh Produce Sector [AlAziziyah Fruits & Vegetable Market] In 1998 , ARDCO began developing the market on around 274 , 000 m2 of company-owned land in AlAziziyah , Riyadh. The market is considered to be among the largest in fresh produce wholesale in the Middle East. It plays a key role in food security in the Kingdom through providing all markets with both local and imported fresh produce , while also exporting to neighboring markets.
Adopting a new organizational structure to manage our markets and attracting top talent.
01
to improve its efficiency in operations and maximize returns. Operation & public good service projects are as follows:
02
Improving and renovating our facilities and cold storage facilities.
Alignment with government authorities responsible for public good services and cooperating with them across multiple initiatives, including Saudization and shifting to an electronic payment system.
03
01 Fresh Produce
Consolidating relationships with traders and dealers in the market by periodically holding meetings to receive feedback and implement suggestions.
04
Studying the market’s current master plan in order to improve operational capacity.
05
02 AlTameer Center
Establishing global partnerships to identify best practices and transfer knowledge.
06
03 AlTameer International Car Auction
Working to establish sustainability principles, raise quality standards, and further support local produce.
07
Developing operational systems to keep pace with market demands and linking them with financial, regulatory, and governmental systems.
08
12
02. AlTameer Public Transportation Center This center is an intercity bus terminal built on ARDCO’s 150 , 000 m2 land in AlAziziya. Commencing operations in 2001 , it is the Middle East’s largest intercity bus terminal , with retail outlets for traveler shopping as well as office spaces for Hajj and Umrah companies. ARDCO is working to raise its operational capacity through:
03. AlTameer International Car Auction Land Established in 2007 and developed over 240 , 000 m2 of ARDCO-owned land in eastern Riyadh , the auction facility comprise nine auction lanes , supported by a 20 , 000-vehicle storage area. The location offers auctioning and sales centers servicing car financing companies. ARDCO is working to further expand our car auction business through:
01
Pricing policies & strategies review
Developing the current auction operation by maintaining facilities, expanding the supplier base , and attracting more buyers.
02
Facilities maintenance
Investing in promising opportunities in underutilized facilities , such as using all nine auction lanes instead of only one , as well as repurposing undeveloped land within the auction.
Repurpose and use underutilized spaces in the most efficient manner
03
Digitizing all supply chains by creating digital channels , enabling infrastructure , and providing value-added services such as car inspection , photography , and car depots , in addition to delivering cars directly to customers.
Developing operational systems to become interconnectable with financial , regulatory and governmental systems
04
Building new partnerships to transfer knowledge and adopt the best international practices in the car auction sector.
Explore opportunities compatible with the public transportation strategy
13
02. Company-Owned Land
Our Projects
Land
Size (m2)
01 Technical Services City Land Area 7 Land (Qasr AlHukm area) 02 Tilal AlRiyadh Land (Educational) 03 Tilal AlRiyadh Land (Residential) 04 Tanal Development (Affiliate Company) 05
125،000
18،247
10،586
4،860
183،129
Total
341،822
Kingdom Tower
Mecca Road
03. Leased Land Projects
Al Faisaliah Centre
Al Rajhi Mosque
P ROJECT
S IZE ( M 2)
Al Masmak Palace
Oteiqah Central Market 01
186،328 M2
Azizia
King Abdullah Financial Center
Riyadh Development Asset Classification
01. Company-Owned Centers and Markets
Center
Size (m2)
Logistical 24 %
01 AlAziziyah Market for Fruits & Vegetables Wholesale
274،371
02 AlTameer International Car Auction Land AlTameer Public Transportation Center 03
241،495
Offices 14 %
148،303
AlTameer Wholesale Center 04 Riyadh AlTameer Market 05
104،476
Residential 4 %
Commercial 58%
24،377
Offi 06 ce Building 07 Cold Storage
3،346
27،865
AlAziziyah Land - Leased under BOT contract 08
46،657
Residential
Logistical
Offices
Commercial
Total
870،890
14
Our Strategic Objectives
Our Strategy Our Vision We strive to be the sustainable partner of choice to cultivate urban development and elevate human welfare, building on Riyadh’s legacy towards promising horizons. Our Mission We strive for excellence in real estate development and management , and to strengthen our pioneering position in the fresh produce and public good services sector. We are committed to enhancing our operational efficiency in our businesses and aim to diversify our investments , increasing returns on our assets , and maximizing total shareholder return. We will operate within a business philosophy that seeks to create impact all around us and achieve sustainability in its broadest sense. This is for the benefit of everyone across our value chain , including our customers , colleagues , partners and shareholders. Our Values ARDCO prides itself on its steadfast approach in its business through our set of holistic values:
At ARDCO , we strive with all our efforts and resources to achieve the following strategic objectives:
1.
Double our net income over the next 10 years , by 2032.
2. Achieve revenues close to SAR 1 billion within the next 10 years.
3. Improve profit margins from 60% to 68% within the next 10 years
4. Transition the capital structure from all-equity to one that comprises a 28% leverage in 5 years and a 23% in 10 years.
03. Adaptability ARDCO values adaptability in managing a diverse portfolio by keeping a finger on the pulse of global best practices in building sustainable mixed-use projects. We view it as a key factor and a core value that makes us a constant example of progress and prosperity. 01. Commitment ARDCO values commitment to the highest standard of quality in all our initiatives , providing our shareholders with periodic reports on our financial performance and constantly informing them of our corporate decisions. 05. Collaboration ARDCO values the spirit of cooperation and the importance of working as a singular team. As we are responsible for the needs of our employees , we invest in their capabilities through continuous development and training to help achieve their personal and professional goals with the organization.
04. Excellence ARDCO values excellence in all our projects and innovation in all our initiatives. We aim to achieve our vision and mission through our commitment to our values to be the highest standard of excellence for urban architecture that sets the ultimate priority on human well-being. 02. Credibility ARDCO values credibility through transparency and active communication as we consider it to be a key characteristic of the positive , successful relationship with our shareholders as well as our status as the model partner for all. 06. Initiative ARDCO values the proactive initiative of our employees to contribute to our collective success. We care deeply about our employees and support them in taking innovative actions , as they are the key driving force for individual and collective progress.
5. Maximize shareholders total return as an outcome of the strategy through dividend and potential capital gain.
6.
Launching more sustainable projects based on a more balanced mix of real estate , fresh produce , existing and future leasing business , and other investment opportunities.
15
Strategy and Corporate Communications Achievements • Development and launch of ARDCO’s new corporate identity. • Completion of 66% of Phase 1 (2023-24) of our strategic initiatives. • Won the Philip Kotler Award 2023 for Best Entertainment and Culture Campaign in Saudi Arabia for our National Day 93 campaign.
An Overview of Our 2023 Achievements 2023 was a year of significant achievements for ARDCO, with the completion of multiple projects that mark a key milestone in our transformation, ultimately contributing to national economic progress. Our achievements this year fell across 7 key pillars: 01. Strategy and Business Development ARDCO launched its new corporate strategy with the objective of achieving sustainable financial returns for our investors by diversifying our sources of income across multiple sectors. We also launched a new corporate identity and brand consistent with our vision , along with a new corporate website with an investor relations portal. Additionally , we activated our social media accounts to increase engagement , as well as providing full coverage of our strategic partnership signing ceremonies. Stage Strategy Implementation Roadmap Phase 1 2023-24 Expected outcomes: • Improving operational efficiency and business infrastructure. 10 years implementation plan 10 years implementation plan Within the first year of Phase 1 , 133% of our strategic initiatives were achieves (66% of the total Phase 1) Phase 2 2024-27 Expected outcomes: • Strengthening ARDCO’s position as a leading developer in key real estate sectors. • Diversifying via broader operational scopes while accruing revenues on investments in targeted sectors. Phase 3 2027-2032 Expected outcomes: • Expanding investments in targeted sectors. • • Maximizing returns on current assets. • Divesting untapped and/or poorly performing assets. • Further building and developing priority business sectors. 10 years implementation plan 2023 2024 2025 2026 2027 2032 2023 2024 2025 2026 2027 2032 2023 2024 2025 2026 2027 2032
Sustainability ARDCO places the principles of sustainability at the core of our business , setting it at the top of our list of priorities and strategies. We are keen to integrate these principles into all aspects of our activities , as we have created sustainable sources of income that effectively contribute to enhancing our financial stability in the long term. This approach enables us to reconcile our short-term goals , which focus on growth-generating investments , with the long-term goals of maximizing total shareholder return , in step with the ambitious economic renaissance witnessed in the Kingdom. Through this approach , we seek to establish a platform for sustainability , carefully balancing between achieving immediate growth , as well as ensuring continued success and profitability for the future. By adopting these principles , we ensure that every step we take contributes to building a solid foundation for a sustainable future that benefits both our shareholders and the overall community.
Solidifying ARDCO’s position as a top institutional developer and expanding in the fields of development management and property management. Approaching closer towards a holding company business model as business lines continue to mature.
•
16
Investment and Real Estate Development 2023 was a year of preparation and planning for ARDCO , through which we solidified our role as a major player in the real estate development sector in Riyadh. Our efforts this year were crowned by the success in attracting highly competent professionals in the field of investment and real estate development , reflecting positively on investor confidence in the company. We have also introduced real estate development fees for the first time in our history , expected to contribute no less than 10% of our total recurring income in the coming years. We have also conducted a detailed study of all assets and lands owned by ARDCO in order to identify development and investment opportunities with the aim of maximizing total shareholder return and increasing operating efficiency , or make the decision to exit if they are not compatible with our new directions and strategy. Partnerships As part of our endeavor to strengthen our position in the business sector , ARDCO focuses on adopting best practices through building strategic partnerships with key players in both the local and international context. Through this approach , we will be able to achieve the maximum benefit for all stakeholders , guided by our firm conviction in the importance of investing in developing capabilities , as well as by our strong commitment to transferring knowledge , exchanging know-how , and establishing fruitful partnerships with global organizations with extensive experience across various sectors. Among the notable steps we took in this context was the efforts to execute Dirah JV in partnership with Riyadh Holding Company. This agreement represents the type of ideal partnership that our company seeks to achieve , as it aims to develop pioneering projects that contribute to enriching the real estate sector and enhancing the quality of life within the communities in which we operate. We also signed a 25-year framework agreement with Misk Schools , a strategic step aimed at strengthening the educational sector and supporting sustainable development. This partnership allows us to contribute to the development of educational infrastructure and provide high-quality educational facilities aimed at enabling future generations , emphasizing our effective role in supporting and promoting development in various sectors. Key Achievements With the consistent development and remarkable growth we are witnessing in Riyadh , along with the steady increase in the number of residents and visitors , many regional companies have begun to shift their regional headquarters to the capital. This paves the way for us to begin implementing our real estate development and investment strategy on the ground in 2023 , where we accomplished the following: • Prepared a detailed engineering and financial study on the car auction property and the undeveloped land of the technical services property , in which key opportunities were identified to potentially maximize the return on our investment in these properties. • Signed a framework agreement with the Misk Foundation to develop schools throughout the Kingdom of Saudi Arabia through a BTS model , achieving an annual return of at least 8% annually.
17
To develop a group of educational facilities on ARDCO-owned land in Tilal AlRiyadh - AlMalqa. Framework Agreement Signing with Misk Foundation
Development Location
Tilal Al Riyadh Residential Community
Facts & Figures • Development cost of the first project is estimated at 275 Mn SAR , including land value owned by the ARDCO-led consortium. • ARDCO will begin development as per the scope of the framework agreement , which includes a renewable binding lease agreement with a period of 25 years.
• The first project will be developed on two lands in Tilal AlRiyadh in AlMalqa , with a total area of 22 , 000 m2. • The net annual return on investment will be 8%. The financial impact of each educational facility will be announced separately after the approval of the financial structure and ARDCO’s share in each project.
Pioneering a Sector
Aligning with Vision 2030 • Building an educational experience aligned with Vision 2030’s Human Capabilities Development Program to keep pace with the economic renaissance witnessed by the city and the kingdom’s. • Achieving full alignment with Vision 2030 and relevant government agencies. • Supporting the kingdom’s efforts in attracting the business sector and foreign talents by providing an impeccable educational and family environment. Economic Impact The agreement aims to satisfy the growing need for Riyadh’s growing population , which expects student numbers to grow from 1.5 Mn to 3.7 Mn. The number of international and private schools is expected to double from roughly 1 , 700 schools in 2020 to more than 5 , 000 schools by 2030 based on a study conducted by Strategy&.
This agreement aims to develop a strategic partnership between ARDCO and Misk Foundation by developing BTS educational facilities.
Focused on investing in projects within promising growth sectors to achieve sustainable sources of income by engaging in long-term contracts prior to the development commencement. (Offtake Agreement)
Cooperating with partners in the educational sector , expected to grow in demand with Riyadh’s population growth , and catalyzing institutional investment in the education sector , creating added value to the knowledge economy.
Satisfying Misk Foundation’s current and future requirements in their educational facilities and providing quality solutions to suit their needs , providing an educational environment at par with the highest international standards in the education sector.
18
ARDCO signs an MoU with Riyadh Holding Company to create an entity to develop AlDirah markets As part of our transformation to a holding company
Aligning with Vision 2030 • Contributing to achieving the Riyadh City Strategy goals , which aims to attract over 42 million visitors by 2030 through developing tourist attraction areas. • Achieving full integration with Vision 2030 across government entities. • Creating an entity that strives to develop the Qasr AlHukm area into an outstanding retail and tourism destination. Economic Impact • Improving integration between the three assets will allow for the raising of occupancy rates as well as improving operational efficiency. • Capitalizing on economies of scale in operation and maintenance will lead to lower costs for both companies. • Improving returns for both companies as well as maximizing total shareholder return. Location and Assets • The assets are located in a strategic location in the heart of historic Riyadh , near Qasr AlHukm. • The three assets are situated on a total of 170 thousand m2 of land: AlTameer Center , AlMeaiqliyah Center , and AlDirah Markets. • The assets have a combined total of 88 thousand m2 of office space and 140 thousand m2 of retail space. • The total combined value of the assets is estimated between 1.2 Bn to 1.4 Bn SAR.
Palace of government
Al Masmak Palace
Al-Muaqiliyah Commercial Center
Al-Tameer Commercial Center
Sheikh Mohammed Al Sheikh Mosque
King Fahd Road
The total area of the centers 170,000 m²
Deira markets
m² Residential space 17,000
m² Commercial space 140,000
Office space 88,000
Total number of parking spaces 3500 parking
m²
Pioneering a Sector • This agreement seeks to establish a pioneering entity in the development and property management sector in central Riyadh. • It is the result of decades of experience and the track record of both companies in real estate and asset management in traditional markets. • This partnership aims to contribute to Riyadh in solidifying its position as an economic , trade , and tourism hub.
19
Key Operations & Public Good Services Achievements • Occupancy rate increased to 95% in 2023 from 93% in 2022 , largely due to an increase in occupancy in Oteiqah Central Market from 67% to 95%. • Market revenue increased by 35.2 Mn SAR from 2022 to 2023 (94 Mn SAR in 2022 to 129.2 Mn SAR in 2023). • Increased recurring revenue by 16% from 2022 to 2023 through reviewing pricing strategy , introducing new leasable units , and utilizing coupons. • Obtained civil defense licenses for all our assets , contributing to the raise in occupancy rates. • Launched the second edition of the Oteiqah Dates Season in Oteiqah Central Market , which saw over 800 thousand visitors in comparison to 300 thousand in the first edition , the trading of over 14 thousand tons of dates , renting units to over 70 merchants , and increased visitor satisfaction. This edition also saw an improvement in financial sustainability by obtaining sponsorships amounting to over 1 Mn SAR. We have also consolidated our institutional and organizational efforts through issuing civil defense licenses , reviewing global initiatives to implement best practices , and cooperating with the third sector , signing many agreements to support Saudization in our sectors , and providing electronic payment options for businesses in our market. Finally , the Oteiqah Dates Season launched its second edition in 2023 , attracting more than 800 , 000 visitors within four months. We plan to continue its evolution as it becomes a starting point towards several seasons for various types of fresh produce throughout the Kingdom. Operations & Public Good Services As part of our commitment to our 2023 slogan , “Leverage Capabilities for Growth” , we have been working to cement our values within our practice and build effective governance for our business. We set forth a plan to maximize total shareholder return and raise operational efficiency , which led to raising the occupancy rates in the centers and markets to 94% , and the increase of revenues in our centers and markets by 16% compared to 2022. Additionally , Alaziziyah Fruits & Vegetable Market revenue has increased by 40% as a result of our efforts. ARDCO continuously seeks to improve through developing the infrastructure and urban landscape of our assets , reviewing asset price strategies periodically , and digitizing our operational and leasing processes , which allows for smooth integration with government systems and stakeholder follow-up.
• Better cooperation and alignment with MEWA by achieving agreement requirements and partnering across multiple initiatives • Developed an operational and leasing program across all centers and markets to facilitate connectivity with other government and financial systems , allowing access to data and information to support decision making. • Developed a digital platform allowing merchants and partners in AlAziziyah Central Market to view rentable units , prices , and contact the market management team. • Signed agreements with 4 partners across multiple channels , including Jahez (sponsorship and logistical cooperation in Oteiqah Dates Season) , Monshaat and Social Development Bank (Saudization initiatives) , Neoleap (implementation of electronic payment systems) , and Khairat (community initiatives)
Monsha’at and the Social Development Bank “Tawteen Initiatives”
NewLeap “Development of Financial and Digital Systems”
Khiyrat for Food Preservation “community initiatives”
Jahez Company “for care and cooperation in logistical services in the Atiqa season”
Occupancy rates for markets
Center
Occupancy rates 2023
100%
Office building
95%
Otaiqah Market
98%
AlTameer Wholesale Center
800 Visitors (Thousands )
14 tons of dates (thousands )
+70 Traders
92%
Riyadh market
Public Transport Center
78%
AlAziziyah Fruits & Vegetable Market Car Auction
98%
89%
94%
Total
20
04. Finance In an unprecedented manner in 2023 , ARDCO continued its approach in maintaining the financial strength and raising its recurring operating revenuesThe company also furtherdeveloped its business through • Revising financial procedures , allowing for better monitoring and improvement of performance (Via periodic financial reports for centers and markets , capital expenditure reports , occupancy rate reports , and pricing strategy for operational and leasing activities) • Addressing and consolidating legacy issues , which positively impacted decision-making through providing important context for previous cases. • Developing and automating models for the 2024 budget across all ARDCO departments and divisions • Complying with the Capital Market Authority’s laws , policies , and procedures without incurring any violations • Completion of all zakat procedures in a timely manner • Settling outstanding financial disputes for some of our assets , leading to a significant rise in our occupancy rates • Revising and consolidating our internal collection system and developing a clear mechanism , contributing to a significant increase in our operating rates and collecting over 117 Mn SAR during the previous period. • Consolidating and reviewing all legal cases in conjunction with the legal department and our centers and markets , leading to settling 21 cases in our favor and receiving approximately 950 thousand SAR in 2023 We were also able to secure final rulings for the company in 22 pending cases , with further work underway to collect 22 Mn SAR as a result • Building an institutional relationship with a wide segment of Saudi banks and financial advisors 05. Legal Affairs In 2023 , ARDCO’s legal department played a key role in protecting the rights and interests of the company against other parties , holding the responsibility of handling any disputes that may have arisen from any actions or decisions taken by the company In addition to this key role , the department also consulted and advised the top management in all trade and legal matters that the company had faced 06. Corporate Transformation and Digitization At ARDCO , we worked to attract a well-integrated workforce and develop their skills and capabilities in order to achieve our corporate objectives and priorities in 2023 Through digitization , we adopted cutting-edge technology across various workflows , gathering and analyzing data to monitor and follow up on improvement and expansion opportunities , digitizing most processes and correspondences , and developing applications to support our business This helped raise productivity and increase operating efficiency to allow us to reach our goals and aspirations
Employee & Corporate Culture At ARDCO , it was our utmost priority to make our work environment highly engaging and professional to attract and build an integrated working team We have set a plan to further develop our corporate culture during 2024 across four key pillars Talent Attraction¬ At ARDCO , we believe that , in order to achieve ambitious goals and aspirations , high-level competencies and skills are key by taking charge and driving the company towards our ambitions As such , we attracted 15 highly competent individuals for 2023 across various corporate functions , with expertise in the fields of real estate development , asset management , and financial investments Additionally , we developed a workforce plan as well as a roadmap to improve employee efficiency Saudization & Women Empowerment¬ During 2023, ARDCO diligently worked to advance its efforts to nationalize its workforce , increasing the percentage of Saudization from 52% to 75% , resulting in a raise from a medium green rating to platinum in the Nitaqat program We are committed to empowering our female workforce and fostering their growth within our organization For the first time in our company ’ s history, we have appointed female talent in a leadership position We have also increased the number of women participation in our business from 44% to 8%
• Increased our Saudi workforce from 52% in 2022 to 75% in 2023 , raising our rating from medium green to platinum in the Nitaqat program
2022 2023
52%
medium green platinum
75%
• Digitized and documented 93% of employee contracts on the Qiwa platform in 2023 , up from 35% last year
35%
93%
• Increased the percentage of females in the company from 44% in 2022 to 8% in 2023
4.4%
8%
15 Male and female employee Recruitment
Diversity and inclusion
Saudization
Platinum on Nitaqat
73% 8%
21
Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73Made with FlippingBook - Share PDF online