Construction on a long-awaited shopping mall on Dubai’s Palm Jumeirah is set to start soon after the master developer Nakheel awarded a Dh1.2 billion contract under a private finance initiative.
The Dragon Mart builder United Engineering Construction (Unec) and Actco General Contracting will build the 418,000 square metre mall in the centre of the Palm, Nakheel said yesterday.
Nakheel said that the mall would be developed through a "build, operate, transfer" contract with a consortium of investors called New Mall, which will take on the development risk of the construction in return for operating the shopping centre until it had made its money back.
Under the agreement Nakheel has leased the land to New Mall which in turn has awarded the construction contracts for the 200-store shopping centre. The mall is expected to be completed in 2016.
"The investor will then develop the mall and operate it until it has recouped its investment," a Nakheel spokesman told The National. "After that time the investment will transfer back to Nakheel."
The developer declined to say which investors had put their money into New Mall or to give further details of the value of the contract.
Nakheel has previously used the financing model on the 177,000 sq metre extension to its Dragon Mart outlet mall at International City, where New Mall is also providing the finance in return for operating it for a number of years.
The Palm Mall project will include a nine-screen cinema, medical centre and fitness complex as well as a restaurant roof plaza and three basement parking levels with 4,000 car spaces.
Nakheel said that about half of the 100,000 sq metres of shopping space spread over five storeys had already been reserved by retailers hoping to lease stores.
It added that it was also on the verge of issuing a separate construction contract to build its proposed 50-storey Palm Tower housing and hotel complex, which will be located next to the mall.
News of Nakheel’s innovative funding model for the Palm Mall came just a day after Dubai’s largest listed developer Emaar Properties announced that it had secured approval from the Securities and Commodities Authority to float 25 per cent of its shopping malls subsidiary Emaar Malls Group on the Dubai Financial Market.
“This announcement from Nakheel shows that there is a great appetite for retail property in Dubai, even for speculative shopping space,” said Craig Plumb, the head of research at JLL’s Dubai office. “This is an unusual way of funding retail development and I would wonder why Nakheel has adopted this approach. But it goes to show that developers are looking at innovative funding structures.”
lbarnard@thenational.ae
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