Simah Rating Agency (Tassnief) assigns “A-” solicited national scale entity ratings to Arabian Centres Company

Tassnief has assigned long-term national scale entity rating of “(A-)’’ (Single A Minus) and short-term entity rating of “T-3” to Arabian Centres Company (‘Cenomi’ or ‘the Company’). The assigned ratings reflect high creditworthiness, thus low credit risk. Risk profile may exhibit variation due to changes in economic and sector conditions.

Rating Rationale: The assigned ratings incorporate Cenomi’s leading market position, satisfactory business diversity, strong operating performance supported by high occupancies and footfall growth as well as sound tenant mix comprising renowned local, regional and international brands. Ratings also reflect a favorable operating environment which is expected to support operating performance over the rating horizon. Ratings are constrained by aggressive financial and development policies and weak credit metrics, although improvement in the same is expected when Jawharat Riyadh and Jawharat Jeddah are at full stabilization, generating incremental EBITDA of over SAR 650m.

Cenomi has a leading market share of approximately 18% in Gross Leasable Area (GLA), three times that of its nearest competitor, underscoring its scale advantage and operational depth in a fragmented market. Cenomi’s market leadership offers strong pricing power, high tenant retention, and resilience to competitive pressures. The Company’s competitive advantage and strong operational performance emanates from its high-quality malls’ portfolio, having strategic composition and broad geographical footprint, although some revenue concentration is present in tier-A malls. The key business risk factors include i) half of the malls built on leasehold land which expose the Company to lease non-renewal risk, and ii) sizeable lease expiries due in 2025. Tassnief expects revenue loss due to lease expiry risk to remain manageable over the rating horizon, while ongoing expansion will further strengthen its market position and enhance revenue diversity. Moreover, comfort is drawn from strong track-record of client lease renewals and historically high tenant retention.

Assessment of financial risk profile reflects aggressive financial and development policies which have resulted in weakening in credit metrics and deterioration in working capital cycle, as evident from cashflow from operations (CFO) having remained consistently lower than Funds Flow from Operations (FFO) over the last 3 years. Full recovery in credit metrics is expected to materialize by 2028 where we expect the full EBITDA impact of Jawahrat Jeddah and Jawahrat Riyadh to be reflected in financials. Tassnief is incorporating improved credit metrics while assigning the current ratings. Both malls are expected to contribute SAR 650m in new cash flows at stabilization.

Rating Triggers

Negative rating triggers include

Any further weakening in FFO-based interest coverages from around current level.

Further increase in Net Debt to EBITDAR from the current level of 7.51x.

Non-materialization of improvement in FFO-based interest coverages and Net Debt to EBITDAR post-stabilization of Jawahrat Jeddah and Jawahrat Riyadh.

Continued deterioration in working capital, resulting in lower CFO generation as compared to FFO.

Significant weakening in operating performance through decline in occupancies levels below 90%.

Deterioration in operating environment, which Tassnief does not anticipate in its base case scenario.

Positive rating triggers include

A sustained shift towards a balanced financial policy, resulting in notable improvement in debt and interest coverages.

Improvement in occupancies levels above 95% following the stabilization of Jawahrat Jeddah and Jawahrat Riyadh.

Improvement in FFO based interest coverages to around 2.75x and Net Debt to EBITDAR to below 5x on a sustainable basis.

About the Company: Arabian Centres Company, referred to as “Cenomi” or “the Company”, is a Saudi Joint Stock Company registered in the Kingdom of Saudi Arabia under the commercial registration number 1010209177. Cenomi is the largest owner, operator and developer of contemporary lifestyle malls in Saudi Arabia.