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Savills International Associate Office. Chartered Surveyors. Regulated by RICS. DMB International W.L.L. Registered in Bahrain CR No. 70236. Registered office: Suite 21, Seef Star Building, Al Seef District, Kingdom of Bahrain.
Eskan Bank 18th August 2016
Valuation Report
Segaya Plaza, Manama Kingdom of Bahrain
savills.bh
Offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East.
Savills International Associate Office. Chartered Surveyors. Regulated by RICS. DMB International W.L.L. Registered in Bahrain CR No. 70236. Registered office: Suite 21, Seef Star Building, Al Seef District, Kingdom of Bahrain.
18th August 2016
Ref: DMB
Eskan Bank
Seef District, Almoayyed Tower
PO Box 5370 Manama
Kingdom of Bahrain
For the attention of Mr Ahmad Tayara
Dear Sir,
RE: VALUATION REPORT – Segaya Plaza, Manama, Bahrain
We wish to thank you for your instruction to revalue this property following our report of the 15th October 2015.
We are pleased to provide our valuation as of 15th August 2016. If you require the valuation for October please let
us know and we can provide an updated certificate for your records.
We trust the attached report meet your requirements of your instructions and we remain yours faithfully.
Donald M. Bradley FRICS
RICS Registered Valuer CEO DMB International WLL
Donald Bradley FRICS
DL: +973 3961 0600
Suite 21, Seef Star Building
Bahrain
International Associate of Savills
DMB International W.L.L.
savills.bh
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016
Contents
2Executive Summary 1
1. Instructions and Terms of Reference 3
Instructions ................................................................................................................................................................. 4
2. The Property, Statutory & Legal Aspects 7
Location Overview ...................................................................................................................................................... 8
Situation ..................................................................................................................................................................... 8
Description.................................................................................................................................................................. 9
Accommodation ........................................................................................................................................................ 11
Condition .................................................................................................................................................................. 12
Highways and Access .............................................................................................................................................. 12
Access ...................................................................................................................................................................... 12
Services .................................................................................................................................................................... 12
Environmental Considerations .................................................................................................................................. 12
Planning and Approvals ............................................................................................................................................ 13
Town Planning .......................................................................................................................................................... 13
Tenure ...................................................................................................................................................................... 13
Occupational Leases ................................................................................................................................................ 13
Current Rental Income ............................................................................................................................................. 13
Operating Expenditure .............................................................................................................................................. 14
Building Management ............................................................................................................................................... 15
3. Market Commentary 16
Global Macro Economic Factors ............................................................................................................................... 17
Regional Macro Factors ............................................................................................................................................ 17
Bahrain General Factors ........................................................................................................................................... 17
Growth in Office Stock .............................................................................................................................................. 18
Current and Future Supply ....................................................................................................................................... 18
Demand and Supply Dynamics ................................................................................................................................ 19
Rental Growth Over Time ......................................................................................................................................... 20
Current Rental Rates ................................................................................................................................................ 21
Car Parking............................................................................................................................................................... 21
Introduction to Retail Sector ..................................................................................................................................... 22
Market Dynamics ...................................................................................................................................................... 22
Existing Supply ......................................................................................................................................................... 23
Neighbourhood and Community Retail Supply ......................................................................................................... 24
Supply Trends .......................................................................................................................................................... 24
Future Mall Supply .................................................................................................................................................... 25
Rents ........................................................................................................................................................................ 26
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016
4. Valuation Advice 28
Approach to Valuation .............................................................................................................................................. 29
Principal Valuation Consideration ............................................................................................................................. 29
Background to Market Value .................................................................................................................................... 30
Opinion of Market Value ........................................................................................................................................... 30
Market Volatility ........................................................................................................................................................ 30
Confidentiality and Disclosure .................................................................................................................................. 31
Signature .................................................................................................................................................................. 31
5. General Assumptions & Conditions to Valuations 32
General Assumptions and Conditions ...................................................................................................................... 33
Appendixes
Confirmation of instructions………………………………………………………………. .Appendix A
Title Deeds…………………………………………………… ..Appendix B
Service Charge Budgets….…………………………………………………………. Appendix C
Floor Plans.………………………………………………………………………... Appendix D
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016
Executive Summary
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 1
Executive Summary
Front Elevation
Location Plan
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 2
Executive Summary
Address Segaya Plaza, Manama, Kingdom of Bahrain
Use Modern 8-storey commercial and residential building, currently fully leased and considered as an income producing investment.
Location The property is situated close to the City Centre Manama, enjoying a prominent position overlooking a busy road junction.
Description A recently completed high grade mixed commercial and residential building. The property has 8 floors with ground floor retail, 2 floors of internal parking, 5 typical floors of apartments providing 105 fully furnished units and the top floor with gym, sauna and leading to the roof terrace swimming pool.
Site Details
Title No.
Current Use
Square foot
Square meters
57505 Mixed use development 59,160 5,496
Tenure Assumed as virtual Freehold without any undue encumbrances apart of the occupational leases.
Gross Rental Income
Total yearly rental retail BD 387,450 pa Service charge income BD 34,845 pa Residential apartment income BD 627,000 pa Antenna licence BD 9,600 pa Total gross revenue BD 1,085,895 pa.
Occupancy and Leases The building is fully leased with 14 individual tenants occupying 15 units on ground floor. The 105 furnished apartments (floor 3, 4, 5, 6 and 7) are fully leased to the Ministry of Education.
Floor area Retail lettable area amounts to 3,075 sqm The residential lettable area amounts to 12,818 sqm contained in 105 units.
Tenant Covenants Commercial tenants pay rental, service charge, municipality tax and electricity. For the apartments leased to the Ministry of Education the landlord is responsible to pay municipality tax, electricity providing and maintaining the furniture.
Outgoings Total landlord’s expenses have been budgeted for 2017 BD 217,533 to include management fees.
Net Rental Income The estimated net rental income amounts to BD 868,362 for the year 2016.
Market Value
Valuation Date 15th August 2016
Valuation Methodology The property is considered as an investment / building in owner occupation.
Market Value / yield BD 11,250,000 (ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND BAHRAINI DINARS) Yield of 7.71 %on the current rental income
Purpose of Valuation
The Valuation has been prepared for a Regulated Purpose as defined in the RICS Valuation – Professional Standards 2014 Edition (the “Red Book”). We understand that our valuation is to determine the portfolio value reported in a Prospectus (the “Prospectus”) which is to be published by The Securities and Investment Company (SICO) which has been mandated by Eskan Bank B.S.C.(c) to establish a Shari'ah compliant real estate investment trust ("REIT") under the Bahrain Financial Trust Law No. (23) of 2006 (the "Trust Law") and the Central Bank of Bahrain's ("CBB" ) Rulebook volume 7 - Collective Investment Undertaking ("CIU").
Strengths Prominent mixed commercial and residential building Located in a popular situation Well planned and finished
Maintained in excellent condition Fully leased Professionally managed
Weaknesses Bahrain market has consolidated Government deficit
Site fully developed
Valuations Assumptions All other valuation assumptions are as detailed.
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 3
1. Instructions and Terms of Reference
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 4
Instructions
1.1.1. Instructions and Basis of Valuation
You have instructed us to provide our opinions of value on the following bases:
The Valuation will be to Market Value and will be prepared in accordance with RICS (Royal Institution of Chartered
Surveyors) RICS Valuation –Professional Standards January 2014 (the Red Book).
1.1.2. General Assumptions and Conditions
All our valuations have been carried out on the basis of the General Assumptions and Conditions set out in the relevant section
towards the rear of this report.
1.1.3. Date of Valuation
Our opinions of value are as at the 15th August 2016. The importance of the date of valuation must be stressed as property
values can change over a relatively short period.
1.1.4. Definitions of Market Value and Market Rent
In undertaking our valuations, we have adopted the RICS definitions of Market Value and Market Rent, as detailed below:
Valuation Standard VS 4 1.2 of the Red Book defines Market Value (MV) as:
“The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a
willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably,
prudently and without compulsion.”
Valuation Standard VS 4 1.3 of the Red Book defines Market Rent (MR) as:
“The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and
a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had
each acted knowledgeably, prudently and without compulsion.”
1.1.5. Purpose of Valuations
The Valuation has been prepared for a Regulated Purpose as defined in the RICS Valuation – Professional Standards 2014
Edition (the “Red Book”). We understand that our valuation is to determine the portfolio value reported in a Prospectus (the
“Prospectus”) which is to be published by The Securities and Investment Company (SICO) which has been mandated by Eskan
Bank B.S.c.(c) to establish a Shari'ahcompliant real estate investment trust ("REIT") under the Bahrain Financial Trust Law No.
(23) of 2006 (the "Trust Law") and the Central Bank of Bahrain's ("CBB" ) Rulebook volume 7 - Collective Investment
Undertaking ("CIU")
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 5
1.1.6. Conflicts of Interest
We are not aware of any conflict of interest preventing us from providing you with an independent valuation of the property in
accordance with the RICS Red Book. We are acting as External Valuers, as defined in the Red Book.
1.1.7. Valuer Details and Inspection
The due diligence enquiries referred to below were undertaken by Mr Donald Bradley FRICS. The valuations have also been
reviewed by Michael Lowes MRICS. Both valuers represent DMB International WLL – Savills International Associate.
The property was inspected on the 17th August 2016 by Mr Donald Bradley FRICS. We were able to inspect most areas of the
property and wish to thank the management team for their support. The weather on the date of our inspection was dry and
sunny.
Furthermore, in accordance with PS 3.7, we confirm that the aforementioned individuals have sufficient current local, national
and international knowledge of the particular market and the skills and understanding to undertake the valuation competently.
1.1.8. Extent of Due Diligence Enquiries and Information Sources
The extent of the due diligence enquiries we have undertaken and the sources of the information we have relied upon for the
purpose of our valuation are stated in the relevant sections of our report below.
This valuation has been carried out at the client’s request, based on information supplied to us.
1. Segaya Plaza Tenancy Schedule as provided by Cluttons (undated)
2. Budget breakdowns 2016
3. Copy of July Property Management Report
4. Abstract of Title Deed with site plan
Where reports and other information have been provided, we summarise the relevant details in this report. We do not accept
responsibility for any errors or omissions in the information and documentation provided to us, nor for any consequences that
may flow from such errors and omissions.
1.1.9. Liability Cap
Our confirmation of instructions at Appendix 1 includes details of our liability cap which is set at Bahraini Dinars 100,000.
1.1.10. RICS Compliance
This report has been prepared in accordance with Royal Institution of Chartered Surveyors’ (“RICS”) Valuation – Professional
Standards January 2014 (the “RICS Red Book”) published in November 2013 and effective from 1 January 2014, in particular in
accordance with the requirements of VPS 3 entitled Valuation reports and VPGA 2 Valuations secured lending, as appropriate.
Our report in accordance with those requirements is set out below.
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 6
1.1.11. Verification
This report contains many assumptions, some of a general and some of a specific nature. Our valuation is based upon certain
information supplied to us by others. Some information we consider material may not have been provided to us. All of these
matters are referred to in the relevant sections of this report.
We recommend that you satisfy yourself on all these points, either by verification of individual points or by judgement of the
relevance of each particular point in the context of the purpose of our valuation. Our valuation should not be relied upon
pending this verification process.
1.1.12. Confidentiality and Responsibility
Finally, in accordance with the recommendations of the RICS, we would state that this report is provided solely for the purpose
stated above. It is confidential to and for the use only of the party to whom it is addressed only, and no responsibility is
accepted to any third party for the whole or any part of its contents. Any such parties rely upon this report at their own risk.
Neither the whole nor any part of this report or any reference to it may be included now, or at any time in the future, in any
published document, circular or statement, nor published, referred to or used in any way without our written approval of the form
and context in which it may appear.
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 7
2. The Property, Statutory & Legal Aspects
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 8
Location Overview
Segaya Plaza is prominently positioned fronting Oman Avenue at its junction with King Abdulaziz Street and on the outskirts of
Manama. This is an extremely busy location with a high volume of passing traffic and convenient for most central areas of the
city.
The property lies closed to the Salmaniya Medical Complex with a wide range of shops, restaurants and cafes close by.
Situation
The property comprises a mixed use building situated on an island site at the junction of Oman Avenue and Abdulrahman Jasim
Kanoo Avenue. There is strip retail along a number of the main highway frontages and the Al Hayat shopping mall and a small
retail park are located opposite. To the rear of the property there is mid-rise development of apartment and office buildings and
the Royal Bahrain and Salmaniya Hospitals lie close by to the north west.
2.2.1. Site Area
The site occupies an area of 5,496 m 2. We attach a copy of the title plan in full within Appendix B of this report showing the
property boundaries and its immediate vicinity and the plan is extracted below.
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 9
Description
The property comprises a modern mixed use development completed in about 2013, with 15 self-contained retail units at ground
floor level, two podium parking levels and 105 residential apartments located on five floors above. On the roof there is an open
swimming pool and a fully fitted gym and sauna with male and female changing rooms.
It occupies an island site with a prominent frontage to Oman Avenue and there is a secondary frontage to a side road which is
accessed from the adjoining service road.
There is a spacious entrance lobby with security desk, accessed from the rear of the property, which gives access to the upper
residential floors via two Schindler 13 person passenger lifts.
Photographs of the property taken on the date of our inspection are provided below.
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 10
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 11
Accommodation
The building has a standard floor plan rising from the ground floor to the eight floor with a uniform shape following the main road
frontage. The principle access is from the rear to an attractive entrance hall and flit lobby. The ground floor shops have
independent entrance doors.
The first and second floors are used as internal carparking with an entrance ramp on the west side. The building management
office is also located on the second floor.
There are access controls to the lifts and apartments spread over five floors (floors 3 to 7) . The eighth floor provides a gym and
a small health club and leads to the external terrace where there is an open air swimming pool .
We inspected flat 303 which was vacant at the time which was extremely well planned and had a good standard of internal
fittings. We understand that all the apartments are finished to the same standard and include hard furnishings.
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 12
Condition
As instructed, we have not carried out a site survey. The property is of recent construction and generally well maintained. Some
issues were noted on the roof with slabs broken and lifting and upstands cracked and broken, with some repair being required.
However these items are not considered to be serious.
We noted that the tiling around the eighth floor swimming pool is currently defective and is due to be repaired by the original
contractor.
Highways and Access
The property enjoys access from the adjoining highways, but there is no direct access from Oman Avenue. The main access is
via the service road to Abdulrahman Jasim Kanoo Avenue travelling in a northerly direction, which leads to the service road in
front of the property which provides on- street parking. There is an exit from the service road to Oman Avenue, travelling
eastbound.
The road to the rear of the building is also accessed from the same service road and provides further on-street parking and
access to the podium parking floors via a spiral ramp at the eastern end of the site.
Access
In reporting our opinion of value, we have assumed that there are no third party interests between the boundary of the subject
Property and the adopted highways and that accordingly the site has unfettered vehicular and pedestrian access to and from
the public highways.
Services
As stated in our terms of business, we have not tested the services at the property. We have assumed that adequate mains
services are provide and all are in working order and sufficient for the subject property.
Environmental Considerations
2.9.1. Informal Enquiries
As instructed, we have not carried out a soil test or an environmental audit. We are unaware of the previous development
history of the site, but it would appear unlikely that land contamination exists. This comment is made without liability.
2.9.2. Assumption
As our informal enquiries have suggested that land contamination is unlikely, we have valued the property on the basis that it
has not suffered any land contamination in the past, nor is it likely to become so contaminated in the foreseeable future.
However, should it subsequently be established that contamination exists at the property, or on any neighbouring land, then we
may wish to review our valuation advice.
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 13
2.9.3. Flooding
Much of Bahrain is constructed on land reclaimed from the sea which is low lying. It may therefore be susceptible to flooding,
although we are unaware of any specific risk in respect of the subject property
Planning and Approvals
We understand that the property was constructed with the full approval of the master developer and that all consents were
obtained. We have not been informed of any breaches.
Town Planning
We have been provided with an approval BP/51/198049/BA/SB/062013 dated 27 June 2015 for the present building, however
we have not been provided with the accompanying plans. We understand that there are no onerous conditions attached, to this
approval.
Tenure
We have valued the unrestricted freehold interest in the property as outlined in red on the title plan in Appendix B. We have
been advised that the land was initially gifted by the Government on 26 March 1990 to Eskan Bank. From our inspection of the
title deeds it appears that there are no onerous or restrictive covenants affecting the site.
Occupational Leases
In accordance with the schedule provided the property is fully leased. Retail units 1 to 13 are all let to individual tenants and
units 14 and 15 are leased jointly to Avis rental car. Apart for one retail unit the standard rental for the shop units is between
BD 200 to BD 240 per month per bay, which seems reasonable at the current times
All the 105 flats are leased under a single agreement to the Ministry of Education at the current rental of BD 52,250 per month
or BD 627,000 per annum of the year 2016.
There is a licence with Zain Bahrain for the roof antennas at the monthly payment of BD 800 or BD 9,600 per annum.
Current Rental Income
Based on the schedule provided during our visit to the management office the following applies
Retail rents BD 387,450 pa
Service charge income on retail rents BD 34,845 pa
Residential apartment income BD 627,000 pa
Antenna licence BD 9,600 pa
Total gross revenue BD 1,085,895 pa
Landlord’s expenditure BD 217,533 pa
Net rental income BD 868,362 pa
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 14
Schedule of current rental income.
Operating Expenditure
Segaya Plaza - Budget Breakdown 2016 - as per property management agreement Amount
Cluttons Property Management annual cost 30000
Site Management & Resources - Staff Costs 240
Municipality Tax - 7.5% of rent 47,025
Office Running Costs - stationary 150
Telephone & Internet - Office Bill (Internet, Fax & Landline) BD 25 per month 300
Electricity - charges for the electricity and water for flats & common areas 50,000
Sewerage Charges - approx. twice a year 500
Security Guarding BASMA - BD 1400 per month as per the yearly agreement 16,800
Security Systems - CCTV/ CP barriers/ Access Readers maintenance 400
Internal Cleaning/Laundry - SMS - BD 1156.500 per a month as per the yearly agreement 13,878
Pest Control - Verminex BD140 per month as per the yearly agreement 1,680
MEP Maintenance Contract - Almoayyed Air condition annually as per the agreement 7,850
MEP Parts - Almoayed Air Conditioning (includes lights, switches etc.) 6,000
Fire Extinguishers - Refilling and servicing cylinders by Khyber 1,000
Life Safety System Repairs 300
Fire Alarm Maintenance - Khyber fire system as per the yearly agreement BD 46 per month 550
Swimming Pool Maintenance - Bader pools BD 90 per month as per the yearly agreement + Pumps/Gratings/Valves etc.
1,480
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 15
Air Conditioning Maintenance/Parts 6,500
BTA annually as per the yearly agreement 5,500
Satellite TV 200
Lift Maintenance Contract - Jalal Schindler - BD 233.350 per month as per the yearly agreement 2,800
Lift Repairs 500
Lift Parts 300
Lift Inspections 900
Suspended Access Maintenance - Contract (Cradles/BMU's) 300
Suspended Access - Repairs 300
Suspended Access Inspection - TUV BD 120 twice a year 240
Internal Maintenance - estimated carpentry work costs 400
Internal Maintenance - 1st & 2nd car park floor filling, BD 800 for each floor 1,600
Internal Maintenance - recovering sofa sets in reception 140
External Repairs & Maintenance - refilling cracks & painting 2,000
External Repairs & Maintenance - cleaning of carpark walls outside 800
Decorations 400
Furnishings 3,500
Buildings Insurance 8,000
Project Works - Estimate for changing damaged swimming pools tiles 5,000
Total 217,533
Building Management
We have been provided with a copy of a property management agreement dated 31st December 2014 between the owner and
Cluttons LLP for the management of the property.
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 16
3. Market Commentary
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 17
Global Macro Economic Factors
While the major economies of the US and UK remain positive in the long term, currently international capital markets are in a
state of some uncertainty as a consequence of Brexit, the decline in the price of oil and commodities and general uncertainties
in the global financial markets. This uncertainty is beginning to reflect the challenges facing other major economies as output
begins to show a downward trend. This uncertainty has caused knock on effects across the globe.
Regional Macro Factors
Until the oil price decline in 2014, regional GCC Governments had been committed to high levels of spending,
particularly on major infrastructure projects. This was particularly true of Saudi Arabia, Kuwait and Abu Dhabi. In
addition, Dubai was commencing a number of expansionary projects to support the 2020 Dubai World Expo and in Qatar
there was continuing spending to meet obligations to host the 2022 FIFA World Cup Qatar.
Since 2014 and the oil price decline, GCC Governments are having to make rapid adjustments to re-align budgets with
the significant drop in available revenues and limit the exposure from drawing from their long held capital reserves,
even where these are significant.
Bahrain General Factors
Even with the Governments expansion of oil production to finance a budget deficit there will now be seen to be a significant
and much greater imbalance. The policies for a diverse market economy with a combination of oil, service industries and
tourism serving the Eastern Province of Saudi had produced an upbeat tone – but not to the point where fundamentals
would not increasingly be exposed.
Nevertheless the provision of a GCC support fund of $10 billion provided over ten years is seen as both an economic and
strategic demonstration of solidarity. Part of this fund will be allocated to recommencing some of the “failed” real estate
projects, which overhang the skyline, such as Villamaar and Marina West. Savills Bahrain office has been appointed by the
judicial authorities on a strategy to deal with these projects and reactivate the market. The necessary tightening of Central
Bank regulations to lending to the real estate development sector are a major constraint on new projects, although domestic
demand has kept reasonable levels of activity for medium and small scale projects, particularly those close to existing urban
areas.
The Government’s long-term strategies outlined in both its 2030 Vision and the 2030 National Land use strategy still
perceive that major real estate projects could be entertained. While the land mass of Bahrain has expanded by over 15%
since 1985 with ambitious large scale reclamation, the prevailing reality is that most of these projects have only attracted
limited international or local investors; apart from parties connected with the Government.
The potential overhang of these projects on the market has increased supply across every sector. The result being that real
estate prices remain close to nominal 20 year norms. Additionally, both institutional and private investment has been
directed to the main global markets where returns are more secure and liquidity higher.
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 18
Growth in Office Stock
3.4.1. The commercial office market in Bahrain has been suffering from an oversupply of stock since 2009
and the gap between demand and supply has continued to widen up to 2016.
3.4.2. Current supply of Grade A and Grade B office stock is 1.1 million square metres showing a growth of
almost 270% over the last 10 years.
3.4.3. Supply levels of office space in Bahrain began to increase at a much faster rate following the
introduction of much larger scale projects such as Almoayyed Tower in Al Seef District which was
completed in 2004.
3.4.4. This project was then surpassed by the Financial Towers at Bahrain Financial Harbour in 2007 along
with World Trade Centre on Government Avenue in 2008 and more recently Diplomat Tower in the
Diplomatic Area which was completed in 2012.
3.4.5. Each of these buildings is over 40-storeys in height offering over 35,000 square metres of space in
each property when previously most commercial developments in Bahrain were less than 10 levels in
height and typically offered 10,000 square metres at most.
Figure 1
Growth in Total Office Stock Over Time
Source: Savills Research
3.4.6. The 35% year on year growth between 2006 and 2007 when most of the larger projects entered the
market has not since been matched, with more typical annual increases of between 5% and 15%
experienced.
Current and Future Supply
3.5.1. There is currently 1.1 million square metres of Grade A and B stock in the Bahrain market.
3.5.2. Of this, approximately 330,000 square metres is currently vacant at a rate of circa 30% in 2013.
3.5.3. Pipeline supply that is currently under construction totals 84,000 square metres.
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 ¹ 2013 ¹ 2014 ¹ 2015 ¹
GLA (m²)
-5
0
5
10
15
20
25
30
35
YoY Growth (%)
Total GLA (m²) Year on Year Growth (%)
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Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 19
3.5.4. Potential pipeline supply within master planned projects that is documented but not yet under
construction is circa 285,000 square metres including that on Bahrain Financial Harbour and Bahrain
Bay.
3.5.5. We set out below a summary of current supply figures.
Figure 2
Supply (Grade A and B)
No. Location Current GLA
(m²) GLA Under
Construction (m²) Projected GLA by
2015 (m²) Growth Rate
(%)
1 Diplomatic Area and Government Avenue 485,000 10,000 495,000 2%
2 Bahrain Financial Harbour and Bahrain Bay 170,000 39,000 209,000 19%
3 Al Seef District and Sanabis 450,000 35,000 485,000 7%
Totals/Averages 1,105,000 84,000 1,189,000 7%
Source: Savills Research
Demand and Supply Dynamics
3.6.1. Between 2002 and 2006 demand for office space in Bahrain outweighed supply, creating upward
pressure on rents and fuelling the supply side response with an increase in construction and planned
units.
Figure 3
Office Demand and Supply Dynamics Over Time
Source: Savills Research
Notes: (1) Savills Estimates
3.6.2. The chart above shows how total leasable area in Bahrain begins to increase significantly from 2006 as
the country begins to experience a construction boom.
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 ¹ 2011 ¹ 2012 ¹ 2013 ¹ 2014 ¹ 2015 ¹
GLA m²
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Vacancy (%)
Supply Demand Vacancy rate
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3.6.3. Throughout 2007 and 2008 the growth in demand is greater than the growth in supply, and vacancy
rates are negative by circa 10%.
3.6.4. These circumstances were not maintained, and as demand levelled off throughout the latter part of the
2000’s, the delivery of new office space increased with over three times the amount of gross leasable
area available in 2012 compared to 2002.
3.6.5. Vacancy rates have thus increased as the oversupply of space and lack of tenant demand leaves
landlords with around 30% vacancy in 2013.
Rental Growth Over Time
3.7.1. There was little variance in prime office rents in Bahrain leading up to 2000, with only a small increase
seen around 1990/1991, before restabilising, but nonetheless, monthly rents did not exceed BD6.000
per square metre.
Figure 4
Bahrain Office Rents Over Time
Source: Savills Research
3.7.2. Throughout the first five years of the last decade (2000 to 2005), prices began to increase as more
quality stock was supplied into the market and by 2005 monthly rents had reached BD8.000 per square
metre.
3.7.3. Growth over the period 2000 to 2005 was circa 5% and this was soon eclipsed by the growth
experienced in 2007 and 2008 with prestigious schemes such as Bahrain Financial Harbour being
released onto the market.
3.7.4. Prime monthly rents escalated almost over night to a peak of BD15.000 per square metre in 2008 prior
to the global economic downturn.
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Current Rental Rates
3.8.1. The number of transactions has reduced over the course of 2015, partly as a result of the ongoing
political unrest which began in February 2011 and also because of the continued economic downturn in
Bahrain.
Figure 5
Monthly Office Rents (Grade A and B)
No. Location Shell and Core (BD/m²) Fitted Out (BD/m²)
1 Al Seef District 4.000 7.000
2 Diplomatic Area 4.500 4.500
3 Government Avenue 5.000 5.500
4 Bahrain Financial Harbour 7.000 9.500
Totals/Averages 5.125 6.625
Source: Savills Research
3.8.2. This has induced a prolonged “wait and see” policy as tenants hold off making any decisions as to
future expansion until they become sure what the longer lasting effects of the unrest will be. As a result
many recent leases have been for small amounts of space and are often companies re-locating for
better rental terms rather than new companies entering the Bahrain market.
3.8.3. Shell and core space in Sanabis, has been offered at as low as BD2.000 per square metre. This
highlights the current trend of tenants wishing to avoid costly fit out works while landlords display
continuing willingness to provide incentives such as fitted out units.
3.8.4. We believe that this current market dynamic of over supply coupled with falling rents will continue in the
short to medium term as the market attempts to absorb stock.
Car Parking
3.9.1. Historically the provision of car parking, particularly in the main commercial areas of Bahrain, has been
poor.
3.9.2. Building owners and developers have sought to maximise what they see as the income generating
elements of a development, to the detriment of car parking.
3.9.3. In part, this was exacerbated by the Ministry of Municipalities, Affairs and Agriculture which stipulated
low ratios between built up area (BUA) and car parking provision within its development regulations.
Current car parking ratios for commercial site is a minimum of one space per 100 square metres,
compared to one space per 150 square metres in the 1998 regulations. Even at the current ratio, the
demand for car parking in a fully occupied office tower exceeds the regulations for provision.
3.9.4. There were a number of sites in key commercial areas which were un-developed and as a result
occupiers of properties which were underprovided in terms of car parking would park on these adjacent
vacant lots.
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3.9.5. As these lots were developed, the pressure on car parking increased. A number of land owners
developed both grade, surfaced and multi storey car parking and charged licensees to park. Those
unwilling to pay these charges, particularly in the Diplomatic Area, began double parking, on already
narrow roads, leading to the current congestion problems.
3.9.6. Increasing demand for car parking, particularly from banking institutions head quartered in the
Diplomatic Area, led to an increase in the monthly rental rates for car parking spaces.
3.9.7. We are aware of a number of car parks in the Diplomatic Area charging between BD75.000 and
BD100.000, per month while land adjacent to the Diplomat Tower is achieving between BD75.000 and
BD80.000 per space, per month.
3.9.8. We understand that the City Plaza development by Venture Capital Bank is currently achieving
BD80.000 per space, down from BD120.000 per month in the previous years.
3.9.9. As the popularity of the Diplomatic Area as an office location wanes, with occupiers seeking more
recently constructed, better quality stock, with improved car parking ratios and less congestion, in areas
such as Al Seef District and Bahrain Financial Harbour, demand for car parking in the Diplomatic Area
is likely to reduce.
Introduction to Retail Sector
3.10.1. To a large extent the retail market in Bahrain is supported by the spending of foreign nationals, primarily
from the GCC. In particular the retail market in Bahrain relies on the considerable spending power of
Saudi Arabian tourists who visit the Kingdom via the King Fahad Causeway.
3.10.2. Completed retail mall space has increased five fold from approximately 100,000 square metres to
500,000 square metres since 2000.
3.10.3. Of this retail space approximately 80% is located in Al Seef District and Central Manama which has led
to congestion and some developers looking to alternative locations for future schemes.
3.10.4. With approximately 75,000 square metres of additional retail space planned to come on line.Tthe
Bahrain retail market looks set to suffer from a continued supply / demand imbalance.
3.10.5. The above future supply figures do not take account of the large amount of potential pipeline supply
that will be situated in master planned developments such as Amwaj Islands, Reef Island and Bahrain
Bay.
3.10.6. There are also a number of smaller, stand alone schemes in areas such as Riffa, Saar and Budaiya
which have led to a two tiered market comprising neighbourhood retail centres serving their immediate
locality and those retail malls that act as destinations, such as City Centre, which attract clientele from
outside of Bahrain.
Market Dynamics
3.11.1. The retail market in Bahrain is dominated by a small number of large retail malls situated in the Al Seef
District and Northern Manama area which offer destination shopping and provide a wide range of
brands, entertainment and food and beverage outlets.
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3.11.2. As mentioned above, supply of retail space has increased dramatically in the past 10 years with Majid
Al Futtaim’s City Centre being the largest single offering.
3.11.3. With the opening of City Centre the supply of retail mall space doubled and overtook Seef Mall as
Bahrain’s premier mall.
3.11.4. Due to the size and extensive range of the retail offering, City Centre changed the dynamics of the retail
market in Bahrain in much the same way that Mall of the Emirates altered the retail sector in Dubai.
3.11.5. For a number of years, the largest and most successful malls have been located in Al Seef District, a
prominent commercial area with high visibility to passing traffic on the Khalifa bin Salman Highway.
Existing Supply
3.12.1. Below we attach a table setting out the total current supply of retail mall space in Bahrain.
3.12.2. We have categorised each retail outlet by total lettable area and type and these categories are
neighbourhood retail, community retail, regional mall and super regional mall.
Figure 6
Regional and Super Regional Shopping Centres, Bahrain – 2014
No. Complex Name Type GFA (m²) GLA (m²) Efficiency
(%) Units Parking
Opening Date
1 Bahrain Commercial Complex R 28,000 18,000 64% 170 1,700 1983
2 Al A’Ali Complex R 40,000 25,000 63% 165 600 1996
3 Seef Mall S 100,000 50,000 50% 225 2,500 1997
4 Bahrain Mall R 50,000 40,000 80% 160 1,600 2001
5 Marina Mall R 17,000 10,000 59% - - 2001
6 Dana Mall R 65,030 32,512 50% - 2,000 2002
7 Harbour Mall R 20,000 14,000 70% 75 - 2007
8 Bahrain City Centre S 230,000 150,000 65% 330 5,500 2008
9 Moda Mall R 25,000 16,500 66% 160 1,700 2008
10 Al Enma Mall R 35,000 27,000 - - - 2012
Totals/Averages - 610,030 383,012 - - - -
Source: Savills Research and Middle East Council of Shopping Centres Notes: (N) Neighbourhood retail; (C) Community retail; (R) Regional mall; (S) Super regional mall.
3.12.3. The above table represents a macro view of the current supply of retail mall space within Bahrain. It
can be seen that the average size of mall is 38,000 square metres. This figure is grossly weighted on
the upside by Seef Mall and City Centre Mall which are by far the largest malls in the country and on the
downside by Isa Town and GOSI malls which are very small.
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3.12.4. Adopting the inter quartile range rather than the straight average, the average size of mall falls to
26,000 square metres. This equates to the size of a community mall which clearly shows how Bahrain
is predominantly served by smaller malls when compared to centres such as Dubai.
Neighbourhood and Community Retail Supply
Figure 7
Neighbourhood and Community Retail Centre Supply, Bahrain
No. Complex Name Type Location GFA (m²) GLA (m²) Units Parking Opening
Date
1 Yateem Centre C Manama 20,000 6,000 90 54 1981
2 Al Alawi Complex C Sanad 14,000 9,000 - - 1984
3 Jawad Dome N Budaiya 6,500 5,500 15 230 1988
4 Isa Town Mall C Isa Town 11,710 5,556 114 550 1992
5 GOSI Shopping Complex C Manama 30,000 7,433 160 400 1995
6 Najibi Centre N Budaiya 5,000 3,500 24 100 1995
7 Sitra Mall C Sitra 35,000 24,000 70+ 600+ 2007
8 Country Mall C Budaiya 10,000 7,700 73 370 2007
9 The Lagoon C Muharraq 55,000 34,986 139 1,800 2009
10 Oasis Mall C Muharraq 16,000 12,000 - 250 2009
11 Riffa Lulu C Riffa 25,000 15,000 - - 2009
12 Oasis Centre C Riffa 16,000 12,000 - 250 2009
13 Ramli Mall C A’Ali 72,000 42,000 115 1,400 2011
14 Muharraq Lulu C Muharraq 28,000 20,000 - - 2011
15 Uptown Village N Budaiya 4,500 4,000 16 50 2011
16 Palm Square N Budaiya 3,250 3,000 12 55 2011
17 Al Reem Centre N Riffa 1,800 1,600 20 65 2011
18 St. Christopher’s Centre N Saar 2,100 1,950 30 85 2012
19 The Walk N Riffa 3,600 3,040 17 230 2012
20 Al Hayat Shopping Centre C Segaya 12,000 5,000 24 210 2012
21 Talal Plaza N Segaya TBC TBC - - 2013
22 Saar Mall C Saar 5,600 3,360 52 144 2013
Totals/Averages - - - - -
Source: Savills Research and Middle East Council of Shopping Centres Notes: (N) Neighbourhood retail; (C) Community retail; (R) Regional mall; (S) Super regional mall.
Supply Trends
3.14.1. We have tracked the increase in the supply of retail stock coming to the market for over two decades
and the resultant chart is attached below.
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3.14.2. This graph clearly shows the exponential growth in supply of retail space within the major malls in
Bahrain.
3.14.3. It must be borne in mind that retail stock has increased from a relatively low base.
3.14.4. In 1995 total stock levels stood at 50,000 square metres and increased to 124,000 square metres by
2000 which equates to an increase of 148%.
3.14.5. From 2000 to 2005 a further 83,000 square metres of stock were added to the market which equated to
a further 66% rise.
3.14.6. Then in the period from 2005 to 2010 the market witnessed a further increase of 125%.
3.14.7. These headline figures clearly show the explosion in development that the retail sector underwent post
2000 in part following the development of Majid Al Futtaim’s City Centre Mall. This project currently
accounts for 30% of the total supply in the market and is double the size of Seef Mall which used to be
the premier mall in Bahrain in terms of size and retail offering.
Figure 8
Growth in Retail Centre Supply Over Time
Source: Savills Research
Future Mall Supply
3.15.1. The future supply of retail stock in Bahrain appears has slowed with two main projects under
construction at present including Muharraq Seef Mall and Wadi Al Sail Mall.
3.15.2. We attach details of these malls in the table below setting out their gross floor areas, gross lettable
areas and their estimated opening dates. These opening dates are subject to review depending on the
progress of each development.
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Figure 9
New / Future Supply of Shopping Centres, Bahrain
No. Complex Name Type Location GFA (m²) GLA (m²) Opening Date
1 Muharraq Seef Mall R Arad 70,000 29,000 2015
2 Wadi Al Sail Mall R Riffa (BDF) 36,200 16,500 2016
3 The Avenues R Manama 50,000 38,000 2017
4 Villamar @ The Harbour R Manama 14,300 9,990 2018
Totals/Averages
Source: Savills Research and Middle East Council of Shopping Centres Notes: (N) Neighbourhood retail; (C) Community retail; (R) Regional mall; (S) Super regional mall.
3.15.3. The latest retail development to be announced was in September 2014 and is the BD35 million
waterfront mall named “The Avenues Bahrain” being built by the King Faisal Corniche Development
Company (KFCDC) off King Faisal Highway overlooking Bahrain Bay in Manama. The project will offer
public access to a 1.5 kilometre stretch of coast including children's outdoor play areas, a running track
and outdoor gym sets, as well as waterfront restaurants and cafes, retail outlets, a suq, an indoor
market and entertainment options such as movie theatres, children's arcades and a public park
covering 85% of the 265,000 square metre site. KFCDC is a venture by Bahraini private investors
acting in partnership with Kuwait-based M. H. Alshaya and Mabanee Corporation.
3.15.4. Expected to be completed in early 2017, the mall will have a total leasable area of approximately
38,000 square metres, occupying only 15% of the overall site, it will be a ground plus one level building,
and provide parking space for over 1,400 vehicles. A unique feature will be a water taxi service
allowing shoppers to visit the mall by boat from jetties around the country including one planned near
the National Theatre.
Rents
3.16.1. Rents have been falling in Bahrain since 2009, mainly as a result of the increase in supply and the
unfavourable trading conditions as mentioned above.
3.16.2. At their peak in 2008/09 rents of BD40.000 per square metre per calendar month were being achieved
at City Centre for prime units. These rental levels have not been achieved for some time and are now
currently nearer BD25.000 to BD28.000 per square metre calendar month for prime, in line units.
Figure 10
Prime Monthly Rents by Centre Type, Bahrain – 2014
No. Centre Type Location Anchor Tenant
(BD/m²) In-line Unit
(BD/m²) F&B Unit
(BD/m²) Entertainment
(BD/m²)
1 Super Regional Manama 5.000 28.000 20.000 4.500
2 Regional Muharraq 4.000 20.000 18.000 4.000
3 Community/Neighbourhood Saar 5.500 12.000 16.000 3.500
4 Community/Neighbourhood Budaiya - 6.000 6.000 -
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5 Community/Neighbourhood Manama 5.000 20.000 25.000 3.500
6 Community/Neighbourhood Muharraq - 12.000 18.000 -
Totals/Averages 4.875 16.300 17.200 3.875
Source: Savills Research Notes: (N) Neighbourhood retail; (C) Community retail; (R) Regional mall; (S) Super regional mall.
3.16.3. City Centre, Seef Mall, Al Aali Mall and Moda Mall command the highest rents and also benefit from
being located in Bahrain’s main commercial centres. In contrast those malls that are distant from the
main commercial centres of Seef and the Diplomatic Area such as Sitra Mall command lower rents.
3.16.4. Those retail malls which have continued to report relatively strong occupancy, given that the current
macro economic climate has not been favourable to retailers, have often done so at the expense of
effective rents. In an attempt to keep occupancy high, some landlords have renegotiated rents and in
some cases given tenants rent free periods in order to ease retailers’ cash flow problems.
3.16.5. This practice of offering incentives has taken a relatively long time to gain traction in Bahrain when
compared to more mature markets where landlords are keen to avoid costly vacancies and maintain a
good tenant mix particular to the mall’s target demographic.
3.16.6. In Bahrain many of the malls have low average rental values compared to current rental values. This is
partly a factor of the number of historic leases that are running and the current opacity of the Bahraini
legal system regarding the mechanisms of rent renewals. As a result, a number of malls have been
unable to increase the rent to full market values. Therefore, in many instances current rents are higher
than average recorded rents when analysed across the whole mall in terms of current leases.
3.16.7. In addition three of the major malls in Bahrain (Marina Mall, Riffa Mall and Oasis Mall) are operated
under head leases. All three of these malls are operated by the Al Rashid Group which is a subsidiary
of Landmark Retail, Dubai.
3.16.8. Al Rashid Group is a large retail group with a large number of franchises which enables them to
populate the majority of these smaller malls with their own brands and concepts. The excess space is
thereafter sublet on the open market to other brands and concepts.
3.16.9. Many of Al Rashid Group’s brands are large anchor stores including Centrepoint and Home Centre.
These types of brands can almost guarantee footfall and a large customer base.
3.16.10. The retail sector continues to evolve and consolidate with shifts in retail spending locations dependent
on the project being developed.
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4. Valuation Advice
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Approach to Valuation
Since our 2015 valuation and commentary a number of new influences are coming to place which would affect the market’s
opinion of this high standard office building.
These factors include:-
The undoubted slowdown in the Bahrain economy caused by a reduction in global oil prices which is resulting in the
Government having a substantial budget deficit;
Similar macro-economic issues are also affecting Saudi Arabia and most of the GCC countries with budget deficits in
almost every country financed by drawing on previous current account surpluses or the bond / sukkuk markets;
Additionally, in Bahrain political issues remain and have an influence on foreign investment into the country;
In recent days global financial markets have been thrown into further turmoil with the UK Brexit decision, extremist
attacks in mainland Europe, the attempted coup in Turkey and the impending US election.
Global investors have focused on liquid assets in the prime core markets and several real estate investment trusts
have been put under pressure to liquidate holdings.
While the US Dollar and GCC currencies have remained firm, they have escalated in comparative terms.
Principal Valuation Consideration
Several property transactions have taken place in the property market over the last few years, which indicates that prime yields
are between 7 to 8%. There has been a compression of real estate yields in the international markets over the last 18 months
with significant activity in the main core capital cities, particularly the UK, Europe and USA.
There are a few actual investment property transaction which taken places in the recent times in Bahrain and indicate a level
of demand, pricing and yield. These include:-
The 2014 sale Addax Bank Head Office in Seef to BMMI reported at BD 8.6 million
The sale of Taib Bank Head office building in the Diplomatic Quarter to ABC Banks reported at US $ 10 million in
2014
The sale / retail investment units between a UAE Investment house and a Bahrain Based Investment Bank, August
2015.
The most recent transaction, which occurred in August 2015, was based on a yield of 8% for leased assets and 9% for
unleased assets. It should be noted that the largest of these transactions was significantly smaller than the subject property
and devaluation led to capital value ranging from only BD 400 to BD 800 per m2 of GLA.
In Bahrain there are four companies listed on the Bahrain bourse which give a dividend yield of between 5 to 6% with long-
term listings and trading patterns. The level of hotel development activity indicates that investors still see strong potential in
the market and are prepared to commit significant capital sums to individual projects. While the general economy has
softened in the last six months, the hospitality sector is being actively promoted as a means of reinvigorating the broader
services sector.
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Date Name Dividend Yield
Bahrain
14 01 2016 National Hotels Company 3.57%
14 01 2016 Gulf Hotel Group BSC 5.13%
14 01 2016 Bahrain Tourism Company 5.36%
14 01 2016 Bahrain CarPark Company 5.56%
14 01 2016 Seef Properties 5.39%
Average 5.00%
Background to Market Value
Segaya Plaza is considered an attractive investment proposition for the following reasons: -
The property is well designed, constructed and located
The demand from occupational tenants for properties of this standard in this location remains strong
The property is to be well managed and is presented in a good condition
The property combines both retail and residential income flows
The property is a mid-scale investment which could appeal to a private family group, an investment company or
institution
The rental income seems secure and could potentially be increased if the leas to the Ministry of Education be
terminated
There is a possibility to sell off the flats individually as an alternative disinvestment strategy
There are few properties offering the same advantages in this location and the building would appeal to a number of
investment groups
Opinion of Market Value
Taking all the above factors into account we place the market value of the freehold interest in the Segaya Plaza as described
herein as income producing investment building at the sum of BD 11,250,000 (ELEVEN MILLION TWO HUNDRED FIFTY
THOUSAND BAHRAINI DINARS) as at the 15th August 2016.
This value reflects a yield of 7.71% based on the current net rental income and includes the land and buildings, fixture,
equipment and furniture.
Market Volatility
The current political unrest and recent fall in world oil prices have introduced instability in the Bahraini property market. VPGA 9
of the RICS Valuation - Professional Standards January 2014 relates to market uncertainty and it is considered helpful for
valuers to draw attention to factors likely to create significant instability and uncertainty.
The recent fall in oil prices will have a significant effect of the Bahraini budget and income and is likely to directly affect the
property market.
The political instability has resulted in many companies relocating to other Gulf countries and this has resulted in an oversupply
in most property sectors.
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As Bahrain is heavily financially dependent on its oil exports the price instability is likely to have a significant impact on the
property market and certainty is unlikely to return until there is stability in oil prices and the longer term impacts are more fully
known and reflected by buyers and sellers.
Confidentiality and Disclosure
Our valuation is confidential to the addressees for the specific purpose to which our instruction refers and no responsibility is
accepted to any third party for the whole or any part of its contents.
If our opinion of value is disclosed to persons other than the addressees of this report, the basis of valuation should be stated.
Before the report or any part of it is reproduced, or referred to in any document, circular or statement, and before its contents or
contents of any part of it are disclosed verbally to a third party, our written approval as to the form and context of such
publication or disclosure must first be obtained.
Signature
For and on behalf of DMB International WLL
Savills International Associate
Donald Bradley FRICS
RICS Registered Valuer CEO DMB International W.L.L.
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5. General Assumptions & Conditions to Valuations
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DMB International W.L.L. – Savills International Associate 18th August 2016 33
General Assumptions and Conditions
5.1.1. General Assumptions
1. Unless otherwise stated in this report, our valuation has been carried out on the basis of the following General
Assumptions. If any of them are subsequently found not to be valid, we may wish to review our valuation, as there may
be an impact on it.
2. That the property is not subject to any unusual or especially onerous restrictions, encumbrances or outgoings
contained in the Freehold Title. Should there be any mortgages or charges, we have assumed that the property would
be sold free of them. We have not inspected the Title Deeds.
3. That we have been supplied with all information likely to have an effect on the value of the property, and that the
information supplied to us and summarised in this report is both complete and correct.
4. That the building has been constructed and is used in accordance with all statutory and municipal requirements, and
that there are no breaches of planning control. Likewise, that any future construction or use will be lawful (other than
those points referred to above).
5. That the property is connected, or capable of being connected without undue expense, to the public services of,
electricity, water, telephones and sewerage.
6. That in the construction or alteration of the building no use was made of any deleterious or hazardous materials or
techniques, such as high alumina cement, calcium chloride additives, woodwool slabs used as permanent shuttering
and the like (other than those points referred to above). We have also assumed that any building cladding is
incombustible and fully compliant with UK and US building codes. We have not carried out any investigations into
these matters.
7. That the property does not suffer from any risk of flooding. We have not carried out any investigation into this matter.
8. That the property either complies with all regulations relating to occupation, or if there is any such non-compliance, it is
not of a substantive nature.
9. That the property does not suffer from any ill effects of Radon Gas, high voltage electrical supply apparatus and other
environmental detriment.
10. That there are no adverse site or soil conditions, that the property is not adversely affected by environmental or other
regulations, that the ground does not contain any archaeological remains, nor that there is any other matter that would
cause us to make any allowance for exceptional delay or site or construction costs in our valuation.
5.1.2. General Conditions
Our valuation has been carried out on the basis of the following general conditions:
1. We have made no allowance for any taxation liability that might arise upon a sale of the property.
2. No allowance has been made for any expenses of realisation.
3. Excluded from our valuation is any additional value attributable to goodwill, or to fixtures and fittings which are only of
value in situ to the present occupier.
Additional assumptions and conditions are contained in our Terms of Business attached hereto.
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These General Terms of Business comprise a part of our Terms of Engagement. The following General Terms of Business apply to all professional assignments, valuations and appraisals undertaken by DMB International WLL. unless specifically agreed otherwise in confirming instructions and so stated within the main body of the valuation report.
1. DMB International – Savills International Associate
DMB International WLL. is a Limited Liability Company registered in the Kingdom of Bahrain and the commercial registration no. 70236, ‘(DMB International)’.
2. Jurisdiction
Commercial law shall apply in every respect in relation to our appointment and the agreement with the client which shall be deemed to have been made in the Kingdom of Bahrain. In the event of a dispute arising, unless expressly agreed otherwise in writing by DMB International, the client, and any third party using any of our reports or correspondence of any kind, will submit to the jurisdiction of the Kingdom of Bahrain only. This will apply wherever the property or the client is located or the advice is provided.
3. Limitations on Liability
3.1 Our valuation is confidential to the party to whom it is addressed for the stated purpose and no liability is accepted to any third party for the whole or any part of its contents. Liability will not subsequently be extended to any other party save on the basis of written and agreed instructions; this may incur an additional fee. Maximum liability shall in no event exceed the fee for the professional assignment subject to end absolute maximum of BD100,000.
3.2 The client agrees not to bring any claim arising out of or in connection with this agreement against any Director, employee, ‘partner’ or consultant of DMB International (each called a ‘DMB International Person’). Those individuals will not have a personal duty of care to the client and any such claim for losses must be brought against DMB International...
3. Nothing in these Terms of Business (or in our letter of engagement) shall exclude or limit our liability in respect of fraud or for death or personal injury caused by our negligence or for any other liability to the extent that such liability may not be excluded or limited as a matter of law .
4. Disclosure and Publication
Neither the whole or any part of our reports or correspondence nor any reference thereto may be included in any published document, circular or statement nor published in any way without our prior written approval of the form and context in which it may appear. Our report in entirely confidential to you.
5. Complaints Procedure
If you have any concerns about our service, please raise them in the first instance with the valuer concerned. If this does not result in a satisfactory resolution, please contact the relevant Head of Department. As required by RICS, we will send you a copy of our Complaints Procedure on request.
6. Our Fees
6.1 All fees and expenses are payable to DMB International W.L.L. payments are to be made by the Client within 14 days of fee account submission and failure to remit fees may result in DMB International suspending or terminating the agreement. In such case the payments set out in this agreement above will be payable in full without deduction.
Interest may be charged on unpaid fees 14 days after the date of the invoice, at a rate of 3% per annum above the base rate of Standard Chartered Bank Bahrain from the invoice date of until payment is made.
6.2 If you end this instruction at any stage, we will charge abortive fees on the
basis of reasonable time and expenses incurred.
6.3 Where a valuation is for loan security purposes, and we agree to accept
payment of our fee from the borrower, the fee remains due from yourselves until payment is received by us. Additionally, payment of our fee is not conditional upon the loan being drawn down or any conditions of the loan being met.
7. Assignment
You may not assign this agreement or any of your rights under it without our consent. The Services will be provided solely for the benefit of the Client and not for the benefit of and may not be relied on by any other party or person. Any arrangement for the benefit of any of our services to be passed on to any third party must be agreed with us at the time.
8. Disclosable Interests
We may offer the following services to prospective purchasers and similarly the services may be offered to them by another organisation in circumstances where we may benefit financially: financial services, property letting and management services, building construction, refurbishment and maintenance services and the sale of the prospective purchaser’s property.
9. RICS Valuation Standards - "The Red Book"
Valuations and appraisals will be carried out in accordance with the RICS Valuation – Professional Standards January 2014 ("The Red Book"), by valuers who conform to its requirements and with regard to relevant statutes or regulations. Compliance with The Red Book is mandatory for Chartered Surveyors in the interests of maintaining high standards of service and for the protection of clients.
10. Monitoring
The valuation may be subject to monitoring under the RICS conduct and disciplinary regulations.
11. Valuation Basis
Valuations and appraisals are carried out on a basis appropriate to the purpose for which they are intended and in accordance with the relevant definitions, commentary and assumptions contained in The Red Book. The basis of valuation will be agreed with you in the letter covering the specific terms for the instruction.
12. Portfolios
Where requested to value a portfolio, unless specifically agreed with you otherwise, we will value the individual properties separately, upon the assumption that the properties have been marketed in an orderly manner.
13. Title and Burdens
We do not read documents of title although, where provided, we consider and take account of matters referred to in solicitor’s reports or certificates of title. We would normally assume, unless specifically informed and stated otherwise, that each property has good and marketable title and that all documentation is satisfactorily drawn and that there are no unusual outgoings, planning proposals, onerous restrictions or local authority intentions which affect the property, nor any material litigation pending.
14. Disposal Costs and Liabilities
No allowance is made in our valuation for expenses of realisation or for taxation which may arise in the event of a disposal and our valuation is expressed as exclusive of any VAT that may become chargeable. Properties are valued disregarding any mortgages or other charges.
15. Sources of Information
We rely upon the information provided to us, by the sources listed, as to details of tenure and tenancies (subject to 'Leases' below), planning consents and other relevant matters, as summarised in our report. We assume that this information is complete and correct.
16. Boundaries
Plans accompanying reports are for identification purposes only and should not be relied upon to define boundaries, title or easements. The extent of the site is outlined in accordance with information given to us and/or our understanding of the boundaries.
17. Planning, Highway and Other Statutory Regulations
Written enquiries can take several weeks for response and incur charges. Where reassurance is required on planning matters, we recommend that formal written enquiries should be undertaken by the client’s solicitors who should also confirm the position with regard to any legal matters referred to in our report. We assume that properties have been constructed, or are being constructed, and are occupied or used in accordance with the appropriate consents and that there are no outstanding statutory notices.
We assume that the premises comply with all relevant statutory requirements including fire and building regulations.
18. Property Insurance
Our valuation assumes that the property would, in all respects, be insurable against all usual risks including terrorism, flooding and rising water table at normal, commercially acceptable premiums.
Terms of Business - North Africa and Middle East Valuations
assignments
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 35
19. Building Areas and Age
Where so instructed, areas provided from a quoted source will be relied upon. Otherwise, dimensions and areas measured on location or from plan are usually calculated in accordance with the local norm or fee current RICS Code of Measuring Practice and are quoted to a reasonable approximation, with reference to their source. Where the age of the building is estimated, this is for guidance only.
20. Structural Condition
Building, structural and ground condition surveys are detailed investigations of the building, the structure, technical services and ground and soil conditions undertaken by specialist building surveyors or engineers and fall outside the normal remit of a valuation. Since we will not have carried out any of these investigations, we are unable to report that the property is free of any structural fault, rot, infestation or defects of any other nature, including inherent weaknesses due to the use in construction of deleterious materials. We do reflect the contents of any building survey report referred to us or any defects or items of disrepair of which we are advised or which we note during the course of our valuation inspections but otherwise assume properties to be free from defect.
21. Ground Conditions / Reclamation
We assume there to be no unidentified adverse reclamation or ground or soil conditions and that the load bearing qualities of the sites of each property are sufficient to support the building constructed or to be constructed thereon.
22. Environmental Issues
Investigations into environmental matters would usually be commissioned of suitably qualified environmental specialists by most responsible purchasers of higher value properties or where there was any reason to suspect contamination or a potential future liability. Furthermore, such investigation would be pursued to the point at which any inherent risk was identified and quantified before a purchase proceeded. Anyone averse to risk is strongly recommended to have a proper environmental investigation undertaken.
We are not, however, environmental specialists and therefore we do not carry out any scientific investigations of sites or buildings to establish the existence or otherwise of any environmental contamination, nor do we undertake searches of public archives to seek evidence of past activities which might identify potential for contamination. In the absence of
appropriate investigations and where there is no apparent reason to suspect potential for contamination, our valuation will be on the assumption that the property is unaffected. Where contamination is suspected or confirmed, but adequate investigation has not been carried out and made available to us, then the valuation will be qualified by reference to appropriate sections of The Red Book.
23. Leases
The client should confirm to us in writing if they require us to read leases. Where we do read leases reliance must not be placed on our interpretation of these documents without reference to solicitors particularly where purchase or lending against the security of a property is involved.
24. Covenant
We reflect our general appreciation of potential purchasers' likely perceptions of the financial status of tenants. We do not, however, carry out detailed investigations as to the financial standing of the tenants, except where specifically instructed, and assume, unless informed otherwise, that in all cases there are no significant arrears of payment and that they are capable of meeting their obligations under the terms of leases and agreements.
25. Loan Security
Where instructed to comment on the suitability of property as a loan security we are only able to comment on any inherent property risk. Determination of the degree and adequacy of capital and income cover for loans is the responsibility of the lender having regard to the terms of the loan.
26. Reinstatement Assessments
A reinstatement assessment for insurance purposes is a specialist service and we recommend that separate instructions are issued for this specific purpose. If advice is required as a check against the adequacy of existing cover this should be specified as part of the initial instruction and then any such indication given is only for guidance and should not be relied upon as the basis for insurance cover.
27. Comparable Evidence
Where comparable evidence information is included in our report, this information is often based upon our oral enquiries and its accuracy cannot always be assured, or may be subject to undertakings as to confidentiality. However, such information would only be referred to where we had reason to believe its general accuracy or where it was in accordance with expectation. In addition, we have not inspected comparable properties.
Valuation Bases
1. Market Value (MV):
Valuations based on Market Value shall adopt the definition, and the conceptual framework, settled by the International Valuation Standards Committee.
Market Value is defined as:
The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction, after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion.
2. Existing Use Value (EUV)
Existing Use Value is the basis suitable for financial reporting purposes under UK accounting standards only and is defined as:
The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion, assuming that the buyer is granted vacant possession of all parts of the asset required by the business, and disregarding potential alternative uses and any other characteristics of the asset that would cause its market value to differ from that needed to replace the remaining service potential at least cost.
3. Market Rent (MR):
Market Rent is defined as: The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
4. Projected Market Value (PMV) of Residential Property only
Projected Market Value is designed to provide residential mortgage lenders with as simple numeric indication of the valuer’s opinion of short-term market trends and is defined as:
The estimated amount for which an asset is expected to exchange at a date, after the valuation date and specified by the valuer, between a willing buyer and a willing seller, in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
Regulated Purpose Valuations (RPV)
RICS has established particular requirements in circumstances where a valuation although provided for a client may also be of use to third parties, for instance, the shareholders in a company, defined by the RICS as “Regulated Purpose Valuations”. Where a valuation is for a Regulated Purpose, in accordance with RICS requirements, DMB International shall state the following in its report:
(a) The length of time the valuer has continuously been the signatory to valuations provided to the client for the same purpose as the Report, together with the length of time DMB International has continuously been carrying out the valuation instruction for the client.
(b) The extent and duration of the relationship of DMB International with the client.
(c) In relation to DMB International ’s preceding financial year the proportion
of the total fees, if any, payable by the client to the total fee income of DMB International expressed as one of the following:
Less than 5%; or: If more than 5%, an indication of the proportion within a range of 5 percentage points.
(d) Where, since the end of the last financial year, it is anticipated that there will be a material increase in the proportion of the fees payable, or likely to be payable, then we shall include a further statement to that effect in addition to (c) above.
When instructed in a continuing role as a Valuer it is DMB International’s policy to rotate persons responsible for valuations and the signatory to the report, on a seven yearly basis, unless specifically agreed otherwise.
Report and Valuation
Segaya Plaza, Manama, Kingdom of Bahrain
DMB International W.L.L. – Savills International Associate 18th August 2016 36
Appendices A
Confirmation of Instructions
DMB International – Savills International Associate
Segaya Plaza - Budget Breakdown 2016 - as per property management agreement Amount
Cluttons Property Management annual cost 30000
Site Management & Resources - Staff Costs 240
Municipality Tax - 7.5% of rent 47,025
Office Running Costs - stationary 150
Telephone & Internet - Office Bill (Internet, Fax & Landline) BD 25 per month 300
Electricity - charges for the electricity and water for flats & common areas 50,000
Sewerage Charges - approx. twice a year 500
Security Guarding BASMA - BD 1400 per month as per the yearly agreement 16,800
Security Systems - CCTV/ CP barriers/ Access Readers maintenance 400
Internal Cleaning/Laundry - SMS - BD 1156.500 per a month as per the yearly agreement 13,878
Pest Control - Verminex BD140 per month as per the yearly agreement 1,680
MEP Maintenance Contract - Almoayyed Air condition annually as per the agreement 7,850
MEP Parts - Almoayed Air Conditioning (includes lights, switches etc.) 6,000
Fire Extinguishers - Refilling and servicing cylinders by Khyber 1,000
Life Safety System Repairs 300
Fire Alarm Maintenance - Khyber fire system as per the yearly agreement BD 46 per month 550
Swimming Pool Maintenance - Bader pools BD 90 per month as per the yearly agreement + Pumps/Gratings/Valves etc.
1,480
Air Conditioning Maintenance/Parts 6,500
BTA annually as per the yearly agreement 5,500
Satellite TV 200
Lift Maintenance Contract - Jalal Schindler - BD 233.350 per month as per the yearly agreement 2,800
Lift Repairs 500
Lift Parts 300
Lift Inspections 900
Suspended Access Maintenance - Contract (Cradles/BMU's) 300
Suspended Access - Repairs 300
Suspended Access Inspection - TUV BD 120 twice a year 240
Internal Maintenance - estimated carpentry work costs 400
Internal Maintenance - 1st & 2nd car park floor filling, BD 800 for each floor 1,600
Internal Maintenance - recovering sofa sets in reception 140
External Repairs & Maintenance - refilling cracks & painting 2,000
External Repairs & Maintenance - cleaning of carpark walls outside 800
Decorations 400
Furnishings 3,500
Buildings Insurance 8,000
Project Works - Estimate for changing damaged swimming pools tiles 5,000
Total 217,533
Offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East.
Savills International Associate Office. Chartered Surveyors. Regulated by RICS. DMB International W.L.L. Registered in Bahrain CR No. 70236. Registered office: Suite 21, Seef Star Building, Al Seef District, Kingdom of Bahrain.
DMB International W.L.L. Savills International Associate Suite 21, Seef Star Building
Al Seef District
Kingdom of Bahrain
savills.bh
+973 1700 5208