Appreciation: projected growth in the market value of the asset

For example, consider a unit that is acquired at a price of SAR 1,000. Assuming the unit is sold upon exit of the fund at a price of SAR 1,500, the appreciation is SAR 500 or 50% (i.e. SAR 500 / SAR 1,000).

Development fund: A development real estate fund is an investment vehicle that pools capital to finance the construction or renovation of properties. Unlike income-generating real estate funds, development funds focus on creating new real estate assets or improving existing ones and do not generate income during the development phase. Profits are received from the eventual sale or increased value of the developed properties.

For example, a development real estate fund might invest in building a new residential complex, with returns realized once the units are sold.

Dividends: A dividend or distribution from a real estate fund is a payment made to investors from the income generated by the fund's real estate assets. These payments typically come from rental income.

Extension period: The additional time that a fund manager can extend the duration of a real estate fund beyond its original term. Typically ranging from 1 to 2 years, the specifics of the extension period are outlined in the fund's terms.

For example, if a real estate fund has a 3-year term with a 6-12 month extension period, the fund manager can extend the investment duration to 4 years if needed.

Fund duration: The total length of time a real estate fund is intended to operate before it is dissolved or liquidated. This period is predetermined and specified in the fund's terms.

For example, a real estate fund with a 3-year duration will aim to achieve its investment objectives and return capital to investors within that 3-year timeframe.

Fund manager: The firm responsible for making investment decisions and managing the assets of a real estate fund. They oversee the fund's operations, including property acquisitions, sales, and overall strategy, aiming to achieve the fund's investment objectives.

Income fund: An income-generating real estate fund is an investment fund that focuses on acquiring and managing properties to produce regular income, typically through rental payments. These funds aim to provide investors with steady income streams along with potential capital appreciation.

For example, a fund that invests in office buildings or apartment complexes would generate rental income for its investors.

Net yield: Net yield in an income fund represents the annual income generated by the fund as a percentage of its net asset value, after deducting expenses such as management fees and operating costs.

For example, if an income fund generates SAR 500,000 in annual income and has a net asset value of SAR 10 million, the net yield would be 5%.

Subscription form: A subscription form is a document received by investors after purchasing units in a fund. It serves as the equivalent of an ownership document, confirming the investor's purchase and detailing their unit allocation and personal information.

Total projected return: The total projected return for a fund is an estimate of the overall gain or profit expected from the fund over its investment horizon. This projection includes anticipated income and capital appreciation, expressed as a percentage of the initial investment.

For example, if a real estate fund estimates a 50% total projected return over three years, it expects investors to gain 50% on their initial investment through a combination of rental income and property value increases.

Unit: A real estate fund unit is a share in a real estate investment fund, giving investors a proportional stake in the fund's real estate assets and income.

For example, purchasing a unit in a fund allows an investor to benefit from the income generated by commercial properties owned by the fund.

Unit Price: the cost to purchase a single unit of a real estate fund.

For example, if the unit price of a fund is SAR 1,000, an investor would pay SAR 5,000 to buy 5 units.

Withholding taxes: Withholding taxes are taxes deducted at source from income, such as dividends, paid to non-resident investors. For non-Saudi residents, withholding taxes on dividends are typically set at 5%.

For example, if a non-resident investor receives SAR 1,000 in dividends from a fund, SAR 50 would be withheld as tax, and the investor would receive SAR 950.

Yearly investment return: the annualized rate of return on an investment, calculated based on the total projected return over the fund’s duration. It represents the average annual gain or profit expected from the investment.

For example, if a fund has a total projected return of 50% over two years, the yearly investment return would be an annualized rate that reflects an average annual return of 25%.