Union Properties has signed a memorandum of understanding (MoU) with China State Construction Engineering Corporation (CSCEC) to expedite the build-out of its revived Motor City project.
The companies signed an agreement at Dubai Cityscape Global real estate exhibition to build out the whole of the project. This will cost 8 billion dirhams $2.2 billion) and will be completed within four years of ground breaking for the first element of the project, which will be a recommencement of the 1.1 billion UAE dirham, five-tower Vertx project first announced at Cityscape Global in 2014.
The new masterplan also includes a redevelopment of the site’s main mall, which has now been rebranded The Central and will be built around a sports theme and will contain indoor running tracks, cycle tracks and swimming facilities.
In total, the new masterplan covers 44 new high- and low-rise buildings expected to contain 11,500 apartments, 3,000 serviced apartments, 3,500 hotel rooms, 46,000 square metres of retail space and more than 300,000 square metres of offices. It will also house 150 villas.
Union Properties’ chairman, Nasser Butti Omair Bin Yousef, said that it would look at several different sources of funding for the 2 billion UAE dirhams needed per year to fund the project, including sukuk and conventional bonds.
Speaking to Zawya on the sidelines of the event, Yousef also said that the company plans to retain 80-90 percent of the project for rental income, and argued that Union Properties’ balance sheet was strong enough to fund the entire development itself.
“When I came into the company, I found that the company didn’t have any return from rentals, only from sales,” he said. “Motor City was left to us. So we decided to build Motor City and make rental income from the portfolio. Then you can expand.
“Over 80 percent to 90 percent will not be for sale. The mall, the hotel, Vertx – we plan to build it as a rental portfolio.
“Our balance sheet is strong enough,” he added, saying that the region’s financial sector is likely to support its plans.
China State partnership
However, CSCEC is also likely to participate in helping to fund at least some elements of the project’s funding.
Speaking at a press conference following the signing of the agreement, CSCEC Middle East’s chief executive, Yu Tao, said that signing the MoU provided “an opportunity for China State to participate – to make use of our experience in the Middle East”.
“For the past few years, we have participated in quite a few syndication loan arrangements for our own developments as well as other clients,” he said.
“As the number one contractor in the world, China State has one of the highest ratings by Moody’s – A2,” Tao added. “I think the financial market response to most of our deals are extremely positive.”
He told journalists at the conference that its role was more like that of a guarantor, sourcing funding and insurance from Chinese banks and credit agencies, as well as local and international banks.
“We hope… we can invite as much as possible our partners.”
However, CSCEC Middle East has also directly invested in some projects, including a pair of hotel projects undertaken with Kabir Mulchandani’s Five Holdings, something Tao said it would repeat if required.
“We are flexible at this moment – it depends on the requirement for our partner,” he told Zawya in an interview at Cityscape.
He added that he was confident of the firm’s ability to be able to deliver the entire scheme within four years, once the financing has been agreed.
“I think it’s a matter of resources,” he said. “We can sub-divide into a number of packages. Four years is a challenge but it is still manageable.”