Confidential Information Memorandum - rt A...This Memorandum is furnished on a confidential basis...
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Union Oasis Transit Oriented Development Public-Private Partnership Project Confidential Information Memorandum February 2016 Roads and Transport Authority is advised by:
Transcript of Confidential Information Memorandum - rt A...This Memorandum is furnished on a confidential basis...
Union Oasis Transit Oriented Development
Public-Private Partnership Project
Confidential
Information Memorandum
February 2016
Roads and Transport Authority is advised by:
February 2016
Important Notice
This Information Memorandum (“Memorandum”) is provided as part of the evaluation materials to the
recipient solely for informational purposes in order to assist the recipient and its advisors in assessing
whether they wish to consider participating in the competitive tender for a Public-Private Partnership
(“PPP”) tender involving the design, financing, construction, operation and maintenance of a new mixed
use Transit Oriented Development (“TOD”), being the Union Oasis Project (the "Project").
The Memorandum is being issued by the Roads Transport Authority (“RTA”) solely for use by the
prospective developer (“Prospective Developer”) and their advisors in considering the Project.
The Memorandum has been prepared with the assistance of the RTA’s Transaction Advisor, Ernst & Young
(“EY” or “Transaction Advisor”), supported by Faithful+Gould (“F+G”) as Technical Consultant and
Trowers & Hamlins (“T&H”) as Legal Consultant. The Memorandum does not contain or purport to contain
all the information that a Prospective Developer may desire. In all cases, interested parties should conduct
their own investigation and analysis of the Project and of the data set forth in this Memorandum. Neither
the RTA, nor any of their advisors, other representatives or agents make any representation (expressed or
implied) or warranties as to the accuracy or completeness of this Memorandum and shall have no liability
for this Memorandum or for any other written or oral communication transmitted to the recipient in the
course of the recipient’s evaluation of the Project.
Neither the RTA nor any of their advisors will be liable to reimburse or compensate the recipient for any
costs or expenses incurred by the recipient in evaluating or acting upon this Memorandum or otherwise in
connection with competitive tender for the Project as contemplated herein. The Memorandum contains
certain interpretations, explanations and/or summaries of the Dubai PPP laws, and other governmental
authorizations which were prepared solely to acquaint the recipient with the matters described in a
general manner only and are not intended to constitute legal opinions, memoranda or interpretations or to
disclose or discuss any aspects of such laws or other governmental authorizations that may be important
to a recipient, and interested parties and their advisors (including legal counsels) must rely solely on their
own due diligence review and findings in connection with the same.
The RTA reserves the right: (i) to modify any of the rules or procedures set forth herein or any other rules
or procedures without giving prior notice or assigning any reason therefore and/or (ii) to take any action
which they deem necessary or prudent in their sole discretion in connection with the Project (including
cancelling the Project and/or the bidding process). The RTA may amend, supplement, or replace any
information contained in this Memorandum at any time, without giving prior notice or providing any
reason. The Memorandum does not constitute a solicitation to invest, or otherwise participate, in the
Project.
This Memorandum is furnished on a confidential basis for the purpose of evaluating an investment in the
Project. The information contained herein is intended solely for selected bidders having the necessary
expertise to determine whether to accept the risks inherent in such an investment. This Memorandum is
not to be reproduced or redistributed without the prior written consent of the RTA and the Transaction
Advisor.
This Memorandum is intended solely for use on a confidential basis by those persons to whom it is
transmitted by the RTA and the Transaction Advisor in connection with the contemplated tender for the
appointment of a Developer for the Project. Recipients of this Memorandum by their acceptance and
retention of this Memorandum, acknowledge and agree to preserve the confidentiality of the contents of
this Memorandum and all accompanying documents and to return this Memorandum and all such
February 2016
documents to the RTA or the Transaction Advisor if the recipient does not proceed with a bid for the
Project.
February 2016
Contents
Glossary ................................................................................................................................... 5
Figures ...................................................................................................................................... 7
Tables ....................................................................................................................................... 8
1. Introduction ...................................................................................................................... 9 1.1 Executive Summary ................................................................................................................................ 9 1.2 Project background .............................................................................................................................. 10 1.3 Project objectives ................................................................................................................................. 16 1.4 Objectives of the Information Memorandum ........................................................................................ 18
2. Industry background ...................................................................................................... 19 2.1 Overview of Dubai ................................................................................................................................ 19 2.2 Dubai and Deira real estate market ...................................................................................................... 21
3. Project description ........................................................................................................ 27 3.1 Site analysis ......................................................................................................................................... 27 3.2 Project parameters .............................................................................................................................. 35 3.3 Architectural vision .............................................................................................................................. 37
4. Commercial principles ................................................................................................... 42 4.1 Transaction structure and contracts .................................................................................................... 42 4.2 Minimum Revenue Guarantee .............................................................................................................. 44 4.3 Payment mechanism ............................................................................................................................ 45
5. Tender process and timetable ....................................................................................... 47 5.1 Tender process ..................................................................................................................................... 47 5.2 Indicative timetable .............................................................................................................................. 49
6. Contact Details ............................................................................................................... 50
Appendix A – Affection Plan for the Site ............................................................................. 51
Appendix B – Area of the Site intended for the Project ...................................................... 52
Appendix C – Transaction Term Sheet .................................................................................. 53
Glossary
February 2016
Glossary
Term Definition
AED United Arab Emirates Dirham
Architectural Vision Term relating to architectural visioning options for the development, also referred to as
concept or visioning in this Memorandum
BUA Built-up Area, which is the total constructed area of the building
CAGR Compound Annual Growth Rate
CMA Concession and Musataha Agreement
Company A special purpose company established for the purpose of implementing the Project, and
which will enter into the CMA with the RTA
Developer Entity which arranges financing (as required, inter alia, equity and/or debt) to the
Company alongside providing management expertise to engage a contractor to complete
the construction and operators to manage the various real estate assets
D&B Design & Build
DM Dubai Municipality
EOI Expression of Interest
EY Ernst & Young (Dubai Branch), Transaction and Financial Advisor
FAR Floor Area Ratio, which equals total building area including all usages and staircases
(excluding car parking) divided by the area of the plot
F+G Faithful + Gould, Technical Consultant
GDP Gross Domestic Product
KPI Key Performance Indicators
IRR Internal Rate of Return
LEED Leadership in Energy and Environmental Design
Legal Consultant Trowers & Hamlins LLP
M Million
MRG Minimum Revenue Guarantee
O&M Operations & Maintenance
PPP Public-Private Partnership
Glossary
February 2016
Term Definition
RFQ Request for Qualification
RFT Request for Tender
RTA Roads and Transport Authority
RTPI Real Time Passenger Information
Technical Consultant Faithful+Gould
TIA Traffic Impact Assessment
TOD Transit Oriented Development
Transaction Advisor Ernst & Young
T&H Trowers & Hamlins, Legal Consultant
UAE United Arab Emirates
Union Oasis Name of the TOD, which will be built on Union Square; the Project
Union Square Refers to the site above Union metro station in Deira, which is planned for TOD
development named Union Oasis
Union Station Also known as Al Ittihad station; it is a rapid transit station on the Green and Red Lines of
the Dubai Metro in Dubai, located in Deira below Union Square, for which it is named
VP Variable Payments
WTO World Travel Organization
Figures
February 2016
Figures
Figure 1: Dubai Metro Ridership (in millions of passengers) .............................................. 10
Figure 2: Metro ridership at Red Line stations (2014) ....................................................... 11
Figure 3: Metro ridership at Green Line stations (2014) .................................................... 12
Figure 4: Union Station ridership vs. overall Dubai Metro, 2010 – 2014 .......................... 13
Figure 5: Union Station monthly ridership ........................................................................... 14
Figure 6: Dubai Metro ............................................................................................................ 15
Figure 7: Union Oasis Architectural Vision Perspective 1 .................................................. 17
Figure 8: Historic Union Square and Union Square’s current neighbourhood ................... 18
Figure 9: Deira residential properties analysis .................................................................... 22
Figure 10: Deira office building analysis .............................................................................. 23
Figure 11: Deira retail analysis ............................................................................................. 24
Figure 12: Deira hotels analysis ........................................................................................... 25
Figure 13: Deira hotel apartments analysis ......................................................................... 26
Figure 14: Project site location map .................................................................................... 27
Figure 15: Union Square site in 1966 .................................................................................. 28
Figure 16: Historic condition of the site in 2006 ................................................................ 28
Figure 17: View of the Project site from Al Reem Tower .................................................... 29
Figure 18: View of the Project site from Radisson Hotel .................................................... 29
Figure 19: Omar Bin Al Khattab proposed bridge ............................................................... 30
Figure 20: Transport plan...................................................................................................... 31
Figure 21: Existing conditions around the Project site - key roads and junctions ............ 32
Figure 22: Union Square utility connections ....................................................................... 33
Figure 23: Height of buildings in areas surrounding Union Square .................................... 34
Figure 24: Union Oasis Architectural Vision Perspective 2 ................................................ 37
Figure 25: Characteristics of the Union Square development ........................................... 38
Figure 26: Environmental considerations for Union Oasis development ........................... 41
Figure 27: Union Oasis development plan ........................................................................... 41
Figure 28: Potential contractual structure for the Project ................................................ 42
Figure 29: Tender process for the Project ........................................................................... 47
Figure 30: Indicative tender timetable................................................................................. 49
Tables
February 2016
Tables
Table 1: Union Oasis Project objectives ............................................................................... 16
Table 2: Summary of Traffic Impact Assessment ................................................................ 32
Table 3: Key parameters of Union Oasis development ........................................................ 35
Table 4: Uses for consideration of the Developer ................................................................ 35
Introduction
9
1. Introduction
1.1 Executive Summary
The Investment in Dubai Metro has seen a success with the numbers of trips increasing consistently since
its inauguration in 2009, with annual ridership experiencing 300% growth in ridership from almost 39
million in 2010 to 164 million trips in 2014. Union Station, is the second largest station along the Red Line
in terms of ridership, having seen over 6 million trips during 2014, accounting for 6.5% of total ridership
along the Red Line.
In continuation with the success of Dubai Metro, the Roads and Transport Authority of Dubai (“RTA”) is
embarking on a development of the land available above Union Station into a Transit Oriented
Development (“TOD”) named Union Oasis (the “Project”).
The TOD concept has many success stories in Europe, Asia, and America, bringing benefits to the
communities, regenerating areas and creating positive commercial impact; Union Oasis will be the first
TOD in the region and a landmark destination for the people and visitors of Dubai. The aim of Union Oasis
is to foster transit use and support other key goals relating to people movement, such as increased
walking and cycling.
Furthermore, the RTA believes this Project is attractive to Developers due to the following:
- Attractiveness of the Site location in the busy commercial hub and historic centre of Dubai;
- No requirement for upfront land contribution by the Developer;
- Flexibility for the Developer to innovate and determine the development mix and detailed design of
the Project to maximize revenues; and
- RTA’s collaborative approach to working with the Developer to ensure best value for money is
achieved for all stakeholders of the Project.
For making the project further attractive, the RTA Management has recently approved the following
enhancements to the project structure:
- Payments to RTA will be a percentage of the profits achieved by the Company with no
requirement for fixed base payments;
- Extended concession period to 50yrs (including construction); and
- Provision for Minimum Revenue Guarantee (MRG) for the first 15 years of operations for
covering O&M and debt service costs. The MRG is a biddable parameter and the maximum
revenues to be guaranteed by RTA correspond to revenues at 45% occupancy (see section 4.2).
In order to ensure a fair and competitive tendering process, the RTA foresee the Project to be delivered as
a PPP between the RTA and the Selected Developer.
The principles associated with the PPP form of contracting, in addition to the attractiveness of the Project,
will allow the private sector to use their development and operational expertise, and commercial acumen
to determine the optimal development mix and design for the Project, which is expected to encourage
innovation and efficiencies that can be achieved, thus maximizing profitability and commercial returns.
Following the first round of market sounding, the RTA has received feedback from the Private Sector with
regards to the features of the transaction, which it took into consideration and is now reissuing this
Information Memorandum (“IM”).The tender process will start with the issuance of the Request for
Qualification, which will include an invitation to one-to-one meetings between interested developers and
the RTA, to further discuss any aspect of the Project.
Introduction
10
1.2 Project background
Dubai Metro Success
The Dubai Metro was ceremonially inaugurated at 09:09:09 PM on 9 September 2009, by H.H. Sheikh
Mohammed bin Rashid Al Maktoum, the Ruler of Dubai. The Red Line and Green Line are operational, with
three further lines planned. These first two lines run underground in the city centre and on elevated
viaducts elsewhere. The currently operating system includes 74 km of track and 47 stations.
The investment in Dubai Metro has already brought positive effect on the property prices in the Emirate as
the Metro system provides:
Easy and efficient mobility;
Multimodal transport options;
Lower transportation costs; and
Travelling comfort in excellent quality facilities.
Metro ridership
Dubai Metro ridership has seen the numbers of trips increase consistently since its inauguration in 2009,
with annual ridership growing from almost 39 million trips in 2010 to 164 million trips in 2014 (Figure 1),
Figure 1: Dubai Metro Ridership (in millions of passengers)
0
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38.90
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109.50
137.80
164.30
Introduction
11
Red Line ridership
Red Line ridership totalled 63% of total Metro ridership. The Deira City Center station registered the most trips in 2014 with 7.18 million, followed by Union (Red Line) with 6.77 million trips. Burj Khalifa/ Dubai Mall registered 6.69 million trips in 2014. The top 10 stations in terms of ridership constituted 56% of ridership at all Red Line stations in 2014. These figures are highlighted in Figure 2 below.
Figure 2: Metro ridership at Red Line stations (2014)
7.18 6.77 6.69 6.61 6.41 5.87 5.66
4.52 4.37 4.33 4.15 4.08 4.03 3.76 3.28 3.03 3.03 2.87 2.54 2.23 2.18 2.12 2.11
1.62 1.43 1.33 1.27 0.38 0.16
012345678
Red
Lin
e rid
ersh
ip ,
mill
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Ridership station by, 2014
Ridership station by, 2014
7%
7%
6%
6%
6%
6%
5% 4% 4% 4%
4%
4%
4%
4%
3%
3%
3%
3%
2%
2% 2%
2% 2% 2% 1% 1% 1% 0% 0%
Deira City Centre Union (Red Line)
Burj Khalifa / Dubai Mall Al Rigga
BurJuman (Red Line) Mall of the Emirates
ADCB Noor Bank
Rashidiya Dubai Internet City
Ibn Battuta Jumeirah Lakes Towers
Al Jafiliya Business Bay
DAMAC PROPERTIES World Trade Centre
Emirates Towers FGB
Financial Centre Sharaf DG
GGICO Airport Terminal 1
Emirates Nakheel
Jebel Ali Danube
Airport Terminal 3 Nakheel Harbour & Tower
Energy
Introduction
12
Green Line ridership Green Line ridership totalled 37% of total ridership. Al Fahidi station registered the most trips in 2014 with 6.92 million, followed by Baniyas Square station with 6.45 million trips. Ridership registered in 2014 at Union Station on the Green Line was over 2.5 million, which takes total Union Station ridership (both Red Line and Green Line) to 9.36 million. The top 10 stations in terms of ridership constituted 73% of ridership at all Green Line stations in 2014. These figures are highlighted in Figure 3.
Figure 3: Metro ridership at Green Line stations (2014)
6.92 6.45
4.87 4.20 4.20 4.01 3.93
3.41 3.33 2.77 2.73 2.60
2.16 2.16 1.97 1.66 1.43
1.04
0.27 0.17
0
1
2
3
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7
8
Al Fahidi BaniyasSquare
AlGhubaiba
Oud Metha Salah AlDin
Stadium Abu BakerAl Siddique
BurJuman(GreenLine)
DubaiAirport
Free Zone
Palm Deira Abu Hail Union(GreenLine)
Al Nahda Al Ras Al Qusais Al Qiyadah DubaiHealthcare
City
Etisalat Creek Al Jadaf
Gre
en li
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ider
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, mlli
on
Ridership by station, 2014
Ridership by station, 2014
11%
11%
8%
7%
7% 7% 7%
6%
6%
5%
5%
4%
4%
4% 3%
3% 2% 2% 0% 0%
Al Fahidi Baniyas Square Al GhubaibaOud Metha Salah Al Din StadiumAbu Baker Al Siddique BurJuman (Green Line) Dubai Airport Free ZonePalm Deira Abu Hail Union (Green Line)Al Nahda Al Ras Al Qusais
Introduction
13
Union Station Ridership
The growth in the number of passengers using the Union Station showed an upward trend over the years
2010-2014, growing by a Compound Annual Growth Rate (“CAGR”) of 16.4%, rising from 4.9 million
passengers in 2010 to 9.3 million passengers in 2014. Over the same period, the number of passengers
of Dubai Metro grew by CAGR of 52.4%.
The percentage of Union Station ridership in the overall Dubai Metro ridership dropped from 13% in 2010
to 6% in 2014. This is largely explained by the continuous addition of new metro stations, which increased
from 26 in 2010 to 47 in 2014. Figure 4 highlights the above mentioned statistics.
Figure 4: Union Station ridership vs. overall Dubai Metro, 2010 – 2014
Ridership detail 2010 2011 2012 2013 2014
All stations ridership (in million) 38.9 69 109.5 137.8 164.3
Union Station ridership (in million) 4.9 6.4 6.4 7.7 9.3
Union Station ridership % in all stations ridership 13% 9% 6% 6% 6%
The monthly ridership of Union Station depicts an increasing trend. The monthly data shows that Union
Station ridership picks up during the months of April and May, as well as the period from October to
January. In contrast, the data shows consistent drop in the number of passengers in the summer months,
particular from July to September, which is explained by the increasing temperatures, which in turn is
affecting the number of tourists in Dubai. This time of the year also often coincided with the Holy Month of
Ramadan, and the fact that many expatriate workers leave the city for their annual vacations.
Figure 5 shows the monthly ridership trend at Union Station, highlighting the summer months when traffic
at Union Station drops.
38.9
69
109.5
137.8
164.3
4.9 6.4 6.4 7.7 9.3
0
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2010 2011 2012 2013 2014
Rid
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ip, m
illio
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All stations ridership Union Station ridership
Introduction
14
Mar
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June
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Sep
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Dec
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2014
Figure 5: Union Station monthly ridership
Transit-Oriented Development and a Place for People
In continuation with the success of Dubai Metro, the RTA is embarking on a development of the land
available above Union Station into a TOD named Union Oasis. It will be the first TOD in the region and a
landmark destination for the people and visitors of Dubai. The intention is for a Developer to develop a
mixed-use complex including residential and commercial properties, designed to maximize access to the
public transport and incorporating features to encourage transit ridership. In addition to creating a
multimodal transport hub, the Project will be a catalyst for the regeneration of the Deira neighbourhood.
Implementation of the TOD concept echoes one of the key objectives included in the RTA Strategic Plan,
focusing on increasing the use of public transit means from 6% in 2009 to 30% in 2030, currently standing
at approximately 12%.The TOD concept has many success stories in Europe, Asia and America, bringing
benefits to the communities, regenerating areas and creating positive commercial impact. The RTA’s
aspiration is that the Union Oasis will take into consideration international best practices with regards to
design of transit-oriented communities and will enhance them in consideration of local and regional
context and requirements.
The vision for Union Oasis is to provide a place for people. This will be achieved through a strong focus on
good quality pedestrian-oriented streetscape, landscaping and buildings. The vibrant civic and community
facilities, retail and other amenities of this compact mixed-use development will not only support transit
ridership, but will also provide a comfortable and enjoyable place for local residents and visitors alike.
Transit-oriented communities lend themselves to cost-effective transportation networks and services,
which will allow Dubai to move people and goods more efficiently and to produce more value for each
transportation investment implemented by the Government.
The objective of Union Oasis is to uncover and deploy the best solutions for integrating community
development with transit investment, resulting in an improved quality of life for all who live and work in
the city of Dubai and the neighbourhood of Deira. In this context, the development around the Union
Square station will regenerate the area, create more affordable lifestyles and disposable income, provide
better job access and catalyse private investment.
Planning and designing communities has a profound impact on travel behaviour. The aim of Union Oasis is
to foster transit use and support other key goals relating to people movement, such as increased walking
and cycling.
0
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Introduction
15
The RTA has performed a detailed feasibility study for the Union Oasis development, which indicates
healthy returns for the private sector in consideration of realistic revenue expectations from the RTA.
Figure 6: Dubai Metro
Procurement of Developer
The RTA wishes to invite Prospective Developers to undertake the Project on the basis of PPP concession
and musataha principles. The successful Developer will be selected via tender process, currently
envisaged to start with the issuance of pre-qualification documents to the market no later than February
2016 and to conclude with commercial and financial close in the fourth quarter of 2016.
Introduction
16
1.3 Project objectives
The RTA has set out the following objectives for the Union Oasis development:
Landmark development;
Public transport orientated;
Mixed use development;
Providing high quality services; and
Commercially feasible.
A detailed explanation of each objective for the Project is provided in Table 1 below.
Table 1: Union Oasis Project objectives
Objective Details
Mixed use development
Including a mix of various uses;
Attractive for local residents and visitors;
Contribute to the overall economic and environmental sustainability of the Deira community;
Allow for the aggregation of open space and amenity space to benefit the whole community;
Create opportunities to help retain and grow viable local small businesses;
Employ Deira’s existing strengths – ethnic diversity, eclectic small businesses and
“crossroads” location;
Provide public realm and green spaces for residents and visitors;
Landmark development
Maintain the character of neighbourhoods in Deira;
Capturing traditional architecture and heritage, and highlighting site importance;
Landmark and prominent building defined by its qualities relating to architecture, landscape
and transport connectivity;
High-quality project that significantly improves the physical realm of Union Square and Deira;
Public transport orientated
Create a TOD, a walkable, mixed-use community which enhances/promotes the use of public
mass transit services;
Provide high-pedestrian traffic and bicycle connectivity and emphasize street level activity
that is safe, secure and appealing;
Promote complimentary development that enhances connectivity and greater integration;
between Deira and Dubai;
Providing high quality
services
High quality of services to the residents and visitors and enhanced customer care will be
provided in the development;
Appropriate long-term asset management, operation and maintenance programme will be
implemented to incorporate whole life cycle considerations and preserve the assets in good
condition throughout the concession period and beyond;
Commercially feasible
Financially feasible and sustainable project through leveraging expertise of private sector
Developer and RTA contribution, harnessing the PPP concept;
Utilize a mixed-use development to achieve a better balance of residential and commercial
uses;
Revitalize economic drivers, including entertainment, a variety of boutique retail
establishments and restaurants;
Innovation brought by private sector; and
Balanced commercial terms to be achieved between the Developer and the RTA to achieve
best value for money.
Introduction
17
Architectural Vision
The Project will be a mixed use TOD, developed preferably with the Architectural Vision shown in figure 7
below. In order to provide Prospective Developers with more flexibility in the development of this iconic
Project, the RTA is allowing Prospective Developers to propose, alternative conceptual designs which must
contain a mix of modern buildings fused with a traditional architecture.
Figure 7: Union Oasis Architectural Vision Perspective 1
Project Attractiveness for Developers
The following factors contribute to the attractiveness of the Project for the Developer:
No requirement for upfront land contribution by the Developer;
Phasing of the Development is allowed, with the Operational Terms of the Musataha Agreement fixed
at 50 years inclusive of the period of construction;
No requirement for fixed base payments to RTA;
Provision for Minimum Revenue Guarantee (MRG) for the first 15 years of operations for covering
O&M and debt service costs. The MRG is a biddable parameter and the maximum revenues to be
guaranteed by RTA correspond to revenues at 45% occupancy (see section 4.2);
Attractive site location in the busy commercial hub and the historic centre of Dubai;
Benefit of 16 million footfall from the Union metro station;
Convenient access from the Union Oasis development to various public transport modes, including the
metro, buses, water transport and taxis; and
Flexibility for the Developer to innovate and determine the development mix and detailed design of the
Project to maximize revenues.
Introduction
18
1.4 Objectives of the Information Memorandum
The objective of this Memorandum is to provide basic information about the Project to Prospective
Developers to generate interest in the Union Oasis Project. By issuing this Memorandum, the RTA is
progressing toward the stage of qualification.
In addition, the RTA expects to organize one-on-one meetings with interested parties as part of the
Request for Qualifications (“RFQ”) process.
Figure 8: Historic Union Square and Union Square’s current neighbourhood
Industry background
19
2. Industry background
2.1 Overview of Dubai
Dubai is one of seven emirates in the United Arab Emirates federation. The main city of the Emirate is also
called Dubai. The current ruler, His Highness Sheikh Mohammed bin Rashid Al Maktoum, is also the Vice
President and Prime Minister of the United Arab Emirates and member of the Supreme Council of the
Union.
The Dubai Emirate is located on the southeast coast of the Arabian Gulf and it has the largest population in
the UAE at 2.17 million (2013, Dubai Statistics Centre) and the second-largest territory (4,114 sq. km)
after the capital Abu Dhabi.
Since the establishment of the UAE in 1971, Dubai has grown towards developing a distinct identity as a
modern and dynamic city. Today, the city enjoys a global reputation as a regional economic, financial and
tourism hub. The Emirate of Dubai, through the development of tourism, media, shipping, trading and
commercial services facilities, aims to accelerate the diversification process to compensate for its less
significant oil industry and build a prominent position for itself as a finance, trade and services centre
within the Gulf region.
►Dubai’s success can be primarily attributed to the bold visionary leadership and a flexible human capital
structure. In addition, the city’s mega projects and free trade zones have assisted in attracting the excess
liquidity in the region brought about by the high oil prices in the form of Foreign Direct Investment. Dubai is
allocating resources efficiently in providing infrastructure suitable for positioning itself as a regional
business hub.
►Over the last few years, economic growth in the Emirate has also been fuelled by private sector
participation in developing sectors where the Government has developed a platform by establishing a
conductive business environment, coupled in many instances with initial investments to boost private
sector confidence.
►Although the financial crisis has hampered this growth trend, market intelligence data reveals that the
economy has started rebounding in the middle of 2010 with overall business sentiment in positive territory
at present. In November 2013, it was announced that Dubai will host the World Expo 2020. As a result, a
significant amount of capital and resources are currently deployed in Dubai, which in turn is expected to
contribute to a considerable increase in GDP growth through to 2020 and beyond.
As part of the Government's strategy of diversifying Dubai's economy from its historic dependence on
labour intensive and oil–related industries, tourism has become a major focal sector for the Emirate.
Tourism is seen by the Government of Dubai as a major growth industry, and has been the focus of a series
of major infrastructure based investments aimed at establishing Dubai as a leading international
destination and consequently raising the profile and positioning of the Emirate around the world.
Dubai welcomed more than 10 million international visitors during 2012, according to the estimates from
Dubai Statistics Centre, representing an increase of over 9 percent compared to the year before. Not only
this, but Dubai’s hotels reaped a bumper AED18.82bn ($5.12bn) in revenues, a 17.9 percent year-on-year
hike. The CAGR in tourist arrivals to Dubai over the period 2007 to 2012 has been approximately 6.5%.
The World Travel Organization (“WTO”) estimates that the number of tourist arrivals worldwide grew by
4.6% in 2011. This indicates that despite the global slowdown, Dubai continues to enjoy higher than
average tourism trends.
The high season in Dubai for tourism occurs during the first and last quarters of the year when
temperatures are cooler. Additionally, European tourists visit Dubai during the same period in order to
Industry background
20
avoid the winter season in their home countries. Following the Emirate’s property market crash of 2008-
2009, which saw prices fall by up to 60 percent, Dubai’s real estate market has rallied in 2013 on the back
of strong economic fundamentals and a rising population.
Industry background
21
2.2 Dubai and Deira real estate market
Scope of initial market assessment
An initial market assessment for the site was performed during the Feasibility Study undertaken by the RTA
and it is summarized below. The Developer will have to perform their own analysis and due diligence to
determine the most appropriate property mix on the site, and for the decision-making purposes, in
consideration of market dynamics and commercial acumen.
Union Square is located in Deira, where a number of Government agencies and trading businesses are
based. The Deira area is becoming popular among families looking for affordable accommodation when
compared to other areas as newer parts of Dubai (e.g. Dubai Marina) have become increasingly expensive.
The following sectors were investigated during the market analysis:
Residential;
Offices;
Retail;
Hotels/convention space; and
Hotel apartments.
Properties comparable to potential uses within Union Oasis were used as competitive market area.
Industry background
22
Residential
The outlined yellow area on Figure 9 has been defined as the competitive market area for residential
use and is home to some of the oldest, but high quality residential buildings in Dubai. This is widely
considered to be the ‘original downtown’ of Dubai; and
The buildings in the selected competitive set are some of the best quality buildings in Deira and range
from 8 to 22 stories in height and 2 to 20 years in age. These buildings were primarily chosen for the
analysis based on the desirability from the tenant’s perspective which has been analysed through
discussions with property managers and real estate brokers. The catchment area of the considered
buildings included buildings as close as 200 m and as far as 3.3 km of driving distance from Union
Square.
Figure 9: Deira residential properties analysis
Zeenah Residence
Twin Tower
Falcon tower
Creekside Residence
Easa Saleh Al Gurg 3
Easa Saleh Al Gurg 2
Dar Al Buteen 2
Creek Tower
Legend Plaza
Al Ghurair Center apartments
Al Aman house
Union Square
Industry background
23
Offices
The competitive market area for office space was defined as two distinct office districts in Deira, as
identified in Figure 9. These buildings are expected to compete with the Project in terms of quality
office space;
On Figure 10, the area shaded and named in yellow is defined as Downtown Deira, while the area
shaded and named in blue is defined as Airport Area; and
The catchment area of the considered buildings included buildings as close as 200 m and as far as
3.2 km of driving distance from Union Square.
Figure 10: Deira office building analysis
► The Downtown area is occupied by manysingle tenanted buildings includinggovernment departments and large localinsurance companies and banks.
► Most other buildings in this area areoccupied by small trading firms.
► The Airport area is predominantly occupied bylarge private firms, many of which occupymultiple floors.
► Other tenants include small sized professionalservices firms and some small tradingcompanies.
Easa Saleh Al Gurg3
Easa Saleh Al Gurg1
Al GhurairOffices
Damas Tower
Al Reem Tower
Twin Towers
Creek Tower
Business Point
Business Avenue
ACICO Business Park
Al Masaood Tower 2
City Avenue
Al Fattan Plaza
NGI House
New Century City Tower
Union Square
Airport Area
Downtown Deira
Industry background
24
Retail
Retail space within the analysed area consists of ground floor retail within residential or commercial
buildings, community malls spread over 2 or 3 levels within larger buildings and fully fledged shopping
malls. The competitive market area for retail space includes ground floor retail within quality
buildings, as well as community and fully fledged shopping malls in Deira, all of which are expected to
compete with the Project. The catchment area includes buildings as close as 200 m and as far as
3.2 km of driving distance from Union Square;
The community malls within the competitive set include Galleria, Galadari Plaza and Twin Towers.
Galadari Plaza and Galleria are connected to hotels and therefore their primary business comes from
hotel guests. Twin towers is a residential and commercial complex with 2 storeys of retail area and a
food court on the third level which is frequented by people working in the locality; and
There are three major malls in Deira including:
Al Ghurair Centre, which was extended by approximately 75% and opened in 2013;
Deira City Centre which was once the most successful mall in Dubai and is still the most successful
mall in Deira with the highest lease and occupancy rates; and
Reef Mall which caters to mid-market clients.
Figure 11: Deira retail analysis
Union SquareGalleria (Hyatt) Reef Mall Deira City Center
Al Ghurair CenterTwin towers Galadari Plaza
Industry background
25
Hotels
The hotel market in Deira consists primarily of two and three star, unbranded properties; and
The competitive market area for hotels was defined as all 4 and 5 star branded properties which would
be expected to compete with a new branded hotel of similar rating. These have been highlighted in the
map in Figure 12 with a catchment area that is as close as 750 m and as far as 3.4 km of driving
distance from the Project;
Figure 12: Deira hotels analysis
Traders Hotel (4star)
Taj Palace Hotel (5star)
Metropolitan Palace Hotel Deira (5star)
Radisson BluDubai Creek (5star)
Hilton Dubai Creek (5star)
Sheraton Dubai Creek (5star)
MovenpickHotel (5star)
Holiday Inn Downtown (4star)
Hyatt RegencyHotel (5star)
Union Square
Industry background
26
Hotel apartments
The hotel apartment market in Deira bears similar characteristics to the hotels in this market, as
described above;
The competitive market area in Figure 13 is defined as all branded hotel apartment properties in
Deira, which would be expected to directly compete with a new branded hotel apartment building.
Areas as close as 1.2 km and as far as 3.2 km of driving distance from Union Square were found to be
within this catchment;
The branded properties are however relatively old and were established when Deira was the most
important commercial hub in Dubai;
In this asset class too, there are very few branded properties and most properties fall in the unbranded
‘standard’ segment as opposed to the ‘deluxe’ hotel apartment segment as defined by the Dubai
Tourism and Commerce Marketing Department; and
Most hotel guests in the Deira market are traders or budget travellers and therefore have a preference
for low to mid segment hotel apartments.
Figure 13: Deira hotel apartments analysis
Hyatt Regency Serviced Residences (Deluxe)
Rimal RotanaSuites (Standard)
Taj Palace Hotel Apartments (Deluxe)
Al SondosLe Meridien (Deluxe)
Marriott Executive Residences (Deluxe)
Clover Creek Hotel Apartments (Deluxe)
Union Square
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3. Project description
3.1 Site analysis
Size and Physical Layout
Union Square, formerly Al Nasr Square, is a large open space set in the busy commercial centre of Dubai,
on the boundary between the historic district of Deira to the west and the newer Al Rigga to the east.
The land above Union Station, intended for developing the Project, has an area of 37,855 m2.
The site is bounded to the south and east by heavily used main roads, both dual carriageways. To the north
the site is bounded by a small bus station and the Tabreed district cooling system which serves the Metro
stations on the site and in the surrounding districts. To the west is the memorial monument Jamal Abdul
Nasser (recently refurbished).
Set along the northern boundary, but extending well into the site, is the underground Union Station for the
Dubai Metro system. This is a major station on the system, serving both the Red and Green lines which
come together and run through Union Station along parallel axes but at different levels. At ground level all
that can be seen of the Metro are the two entrance pods at each end of the boundary, and six light tunnels
which extend some 3m above the surface. However, below ground the installation is extensive, and building
above it is not possible (although reasonable landscaping works certainly are).
Figure 14: Project site location map
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Historical and current condition of the site
The below Figure 15 illustrates the historic context of the site, dating to the middle of 1960’s.
Figure 15: Union Square site in 1966
The below Figure 16 shows the historic condition of the site, illustrating the Union Square before the Metro
station was added under the Oum al Reoul monument.
Figure 16: Historic condition of the site in 2006
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The current condition of the site is illustrated in the below Figure 17. This figure illustrates the iconic
Dubai Metro access pods, with the highest buildings on the site being the Tabreed water cooling facilities
of approximately six stories.
Figure 17: View of the Project site from Al Reem Tower
Figure 18 illustrates the current state of the plot from a vantage point of approximately 12 stories above
the site. In comparison to the site condition from year 2006 (Figure 13 above), there are porta cabins in
the south of the site and lack of recreational grounds on top of the metro box.
Figure 18: View of the Project site from Radisson Hotel
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Oum Al Reoul
Oum Al Reoul is the name given to the small defensives structure which used to stand at the heart of what
is now Union Square. It was a two-storey building, with a small room and adjacent walled terrace supported
on another small room and freestanding columns below. Access to the upper level was by ladder. It
provided a defensible lookout point overlooking the approaches to Deira in a double quadrant extending
from the creek in the south through the eastern approaches to Sharjah in the north. The tower was
demolished many years ago. A replica was constructed, but this has also been lost during the Metro
construction works. A new replica of Oum Al Reoul is required by the Dubai Municipality, however the RTA
will be responsible for reinstating the structure.
Access
Pedestrian access is eminently possible from anywhere along the south or east boundaries, and to a
slightly more limited extent from the west. A primary source of access to the site is of course the
underground station, and the abra stations, also providing a source of pedestrian traffic. A desire line
exists through the site from south west to north east, connecting both creek side and Deira commercial
districts to the Al Ghurair centre. Road access will be along the south and east boundaries, avoiding the
junction for obvious safety reasons.
Figure 19 illustrates the linkages of the site to other public transport modes with taxi and ferry stations.
Figure 19: Omar Bin Al Khattab proposed bridge
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The Transport plan in Figure 20 shows that the site is directly above the confluence of the two Metro lines
(Red and Green), and is surrounded by a network of major urban roads linking it directly to wider Dubai.
The commercial developments in Al Rigga, and the hotels on the creek side, the adjacent abra station and
Dubai Municipality headquarters attract significant pedestrian populations.
Figure 20: Transport plan
Traffic Impact Assessment
The Developer will have to perform a Traffic Impact Assessment (”TIA”) during the tendering stage. An
initial TIA was performed during the Feasibility Study for the Project to evaluate possible effects of the
Project’s traffic on the transportation network of the community. This TIA concluded that TOD is an
appropriate concept for the site in order to minimize additional traffic volumes on the neighbouring roads
and to increase public transport use by visitors and residents. The TIA recognised the unique nature of the
site in terms of its public transport provision, particularly as an interchange for the Metro red and green
lines. Therefore, enhancement of public transport integration, as well as improvements to signage and
pedestrian connectivity were identified as very important to the success of the development from a
transport perspective. Such improvements are envisaged to be provided by the RTA unless they form
integral part of the Project or are required by relevant authorities, in which case they will be delivered by
the Developer.
Figure 21 illustrates that the key routes on the site perimeter attract high traffic flows. Furthermore, the
traffic observations around the site show significant traffic volumes during the peak periods, particularly at
the Al Maktoum/Omar Bin Al Khattab Junction. The wider road network around the Project site is generally
congested, with key land uses such as Al Maktoum Hospital and Al Ghurair Mall generating significant trips.
Project description
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Figure 21: Existing conditions around the Project site - key roads and junctions
Source: Atkins understanding of traffic flows – traffic data from 2011 and 2012.
The TIA recognized a number of traffic-related issues around the Project site, which are summarized in
Table 2. As mentioned previously, the Developer will have to perform its own assessment to validate and
expand findings, and to draw relevant conclusions for the Project and its success as TOD.
Table 2: Summary of Traffic Impact Assessment
Subject TIA findings
Road traffic The road network and junctions surrounding the site experience high traffic volumes;
There is limited scope to adjust existing road junction layouts or access points to the development;
Careful consideration is required when planning and providing access and egress to/from the site;
The final impact of the proposed 777 Crossing of Dubai Creek is still unknown in terms of phasing and
final design, however initial analysis of the Dubai traffic model flows indicates that this crossing could
reduce at grade traffic flows around the site at most junctions;
Bus infrastructure Maintenance of the existing bus infrastructure requires additional attention, in particular bus stop air
conditioning and Real Time Passenger Information (“RTPI”);
Additional bus-related signage may be required around the development;
Pedestrian
connectivity
A number of pedestrian crossings require improvement to support pedestrian desire lines;
Pedestrian conflict with vehicular traffic was identified, notably in the bus interchange;
There is a need to improve pedestrian connectivity to key surrounding land uses, notably the Al Ghurair
Mall;
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Subject TIA findings
Cyclist access Cycle routes would be required to connect the site to wider Deira neighbourhood;
Ideally cycle routes should be segregated from the main traffic flows;
Parking Limited control and management of surrounding parking supply;
50% reduction in all trips and parking has been proposed and approved for the Project; and
Policies such as shared parking should be promoted in the development to improve peak parking demand
management.
*Based on analysis undertaken during the Feasibility Study by F+G. Prospective Developers will be responsible for performing their
own due diligence and gather information to be used for their decision-making purposes.
Utilities
Utilities as identified in Figure 22 are readily available in the immediate area as the site is ringed with a full
range of the basic services. It is for the Prospective Developers to ascertain during the tendering stage the
adequacy of capacity to support their proposed development. A large Tabreed Chilled Water Facility is
along the Northern Boundary of the site (to supply cooling to the Metro facility). The Tabreed facility has
spare capacity and Developer should discuss with Tabreed an option for the provision of cooling services
from this facility.
Figure 22: Union Square utility connections
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Adjacent land uses
The areas surrounding the site were assessed to provide an indication of the scale of adjacent
developments. As illustrated in Figure 23 the Union Oasis site has a cemetery directly adjacent to the west
with a high proportion of low rise buildings to the north and west of the site. The majority of buildings to
the east and south of the site are mid-rise buildings with a few high rise buildings close to the Creek.
The nature of the surrounding buildings is generally mid-rise (10 to 25 storeys) mixed-use
commercial/residential/office buildings, together with one or two hotels. These structures are generally
reasonably contemporary designs, in good condition, although the low-rise commercial buildings to the
north of the site are now tired and in need of maintenance. They are generally hidden from view by the
Tabreed buildings and bus station, so do not have a direct effect on the views or character of the site.
Union Station serves both Government and commercial districts, including the Dubai Municipality's Health
Centre, the Dubai Economic Department, the Dubai Chamber of Commerce and Industry and the Dubai
Land Department. It is also a convenient access point for commuters from the Northern Emirates and a
transfer point between the Red and Green Metro lines.
Figure 23: Height of buildings in areas surrounding Union Square
Union Square Site
Mid Rise buildings:7 to 12 storeys
High Rise buildings:15 to 25 storeys
Low Rise buildings:3 to 5 storeys
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3.2 Project parameters
Key parameters
The Developer will develop the Project within the site parameters, which are set out in the affection plan,
summarized in Table 3 below. A copy of affection plan is included in Appendix A.
Table 3: Key parameters of Union Oasis development
Detail Description
Setback Not mandatory
Max Height 4 basements + G + Mezzanine + 20 story
Usage Residential, commercial, offices
Parking Not mandatory
Plot Size 37,855 m2*
Allowable Footprint 30%
FAR 2.5
Additional requirements Provide a prayer room and green areas
The entire plot size is 37,855m2, however the area of the site planned for the development is 14,662 m2.
Appendix B highlights the site area intended for the Project.
Development mix
By definition, the TOD community should include a mix of various uses. Encouraging a vibrant mix of land
uses should help to create a complete, walkable and diverse neighbourhood around Union Station and to
support community growth. Major traffic reduction benefits of the TOD occur not only because of
increased transit ridership, but because of increased walking for the majority of household travel that is
not commute-related. In a community where most of the basic needs of daily life are available within
walking distance, owning and using a car can become an optional rather than a daily requirement.
The Developer will have the flexibility to select the development mix in accordance with its market
knowledge and commercial acumen, in consideration of the Project objectives and maximum trip
generation and parking numbers allowable for the site. A balanced approach will be required from the
Developer to combine achieving TOD objectives and maximizing revenues on the Project site.
The below Table 4 summarizes examples of uses (non-exhaustive), which can be included on the site.
Table 4: Uses for consideration of the Developer
# Use type Example
1 Residential Apartments for rental
2 Commercial Offices
3 Hospitality Hotel, hotel apartments, convention centre
4 Retail Convenient stores, grocery stores
5 Community facilities Nursery, fitness centre, medical centre (e.g. dentist, walk-in clinic), park
6 Personal services Bank, post office
7 Entertainment Amphitheatre, cinema
At the neighbourhood scale, a mix of land uses such as homes, offices, hospitality retail, parks and
entertainment in close proximity creates an environment where many needs of daily life can be met within
Project description
36
a short walk from home, work or transit. The development should feel safe and lively because different
types of uses are active at different times of day. A built form that supports a mix of land uses can also
allow a community to be more resilient over time, adapting to changing economy and demographics.
Areas within 200 meters of transit facilities are particularly valuable to encourage a mix of attractive land
uses. People often like to combine tasks in one trip – such as picking up coffee on the way to work or
getting groceries on the way home – and, therefore, convenient access to goods and services makes
transit much more attractive. Providing retail and community services near transit can also promote local
business opportunities and can help to create lively street life, a pleasant pedestrian environment and safe
and secure public realm.
The following should be taken into consideration by the Developer when selecting the development mix:
Encourage retail and service uses in order to put the most common needs of daily life in convenient
locations for transit riders;
Promote the most active uses such as retail, cafes and restaurants in the way to promote safe and
lively pedestrian environment;
Encourage a diverse mix of land uses that are attractive at different times of the day to encourage a
vibrant pedestrian environment;
Promote the location of grocery shops (both large and small) to support combined transit-shopping
trips and walkability;
Discourage low-density and auto-oriented uses, such as gas station or drive-through facilities; and
Locating the following land uses near to stations tends to contribute positively to transit-oriented
communities:
Convenience stores and pharmacies;
Grocery stores;
Child-care facilities;
Fitness clubs;
Restaurants and fast food outlets;
Medical services; and
Personal services.
Project description
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3.3 Architectural vision
Having analysed the constraints, objectives and priorities for the Project site, an Architectural Vision for
Union Oasis was prepared during the feasibility study stage of the Project. This Architectural Vision has
been endorsed by His Highness Sheikh Mohammad bin Rashid Al Maktoum, the Ruler of Dubai.
Figure 24 below present the Union Oasis Architectural Vision.
Figure 24: Union Oasis Architectural Vision Perspective 2
The private sector are expected to use their development and operational expertise to determine the
detailed design and development brief, which will be constructed. The Prospective Developers will be
allowed to propose improvements and modifications to the vision in their tenders.
The Developer will provide the following to adhere to the Architectural Vision:
Green roof, which represent previously existing green park on the square;
Podium at the ground level of the development;
Water feature incorporated in the development;
Community space;
Connectivity to the Metro and other modes of transport; and
Appropriate quality materials to deliver the vision.
Considerations during development of Architectural Vision
The Architectural Vision developed for the Project addresses factors, which have been identified in
consideration of the Project objectives. These are captured in Figure 25 and description below.
Project description
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Figure 25: Characteristics of the Union Square development
Landmark development
Union Square has grown out of what was once the site of a watchtower, a defensive position to the east of
the old port of Deira and Bur Dubai. As the city has expanded and grown around it, the space has been
retained, and it now holds a pivotal position in the modern business district of Deira. This open area
between old and new is a physical expression of the change that has embraced the city. It requires a
landmark development to reflect this, with a suitable development to highlight the change.
Integration of transport modes
The site benefits from superior transport links, particularly for a city centre location, with Metro
connections in every direction below ground, and road connections likewise at surface level. It also forms
an important component on the pedestrian route connecting the abras of Dubai’s Creek to the newer
commercial ventures of Al Rigga and eastern Deira, and the site is directly adjacent to the Dubai
Municipality headquarters building, the administrative heart of the city.
The Project development will encourage intermodal passenger transport, involving a combination of
various public transportation options in one journey, namely metro, buses, taxis and water transport. The
major goal of the intermodal passenger transport will be to reduce dependence on cars as the major mode
of ground transportation and increase use of public transport.
Based on international benchmarks, a half-mile-radius circle is envisaged to be the catchment area for the
Project. This will include the areas of Riggat Al Bateen, Muraqabbat, Naif and Rigga. A half mile (800
meter) corresponds to the distance someone can walk in 10 minutes at 3 mph (4.8 km/h) and is a common
estimate for the distance people would walk to a transit station.
When deciding whether to use transit, one of the most important factors for people to consider is the
distance between their origin and a transit passenger facility, and again to their destination. What matters
for the traveller is not the straight line distance, but rather the actual walking distance using available
streets and paths. While cyclists are not as sensitive to distance as pedestrians because they move more
quickly, they are more sensitive than vehicle drivers, and therefore well connected cycling routes promote
cycling as means of access to the Metro.
The Project will be designed in a way to promote cycling and walking, including provision of long-term and
short-term bicycle parking, if possible.
Project description
39
Transit and walkability are mutually supported by many of the same land use and built environment
factors, such as well-designed public realm, higher density homes located near commercial uses, a
diversity of land uses and well-connected streets that reduce walking distances.
Walkability is among the best predictors of demand for transit, while transit use is predictive of physical
activity levels – transit users are more than three times more likely than non-users to achieve
recommended levels of daily physical activity. This relationship between transit, walkability and active and
healthy lifestyles suggests that combining the benefits of walkable neighbourhood design and broader
focus on transit connection in Dubai will realize the most benefits for community and environment.
Regeneration of market space
Union Square has been dedicated to the construction of the Dubai Metro for the last seven years. While
undeniably worthwhile, the temporary loss of the square has left the surrounding districts somewhat
heartless, unconnected and unsupported. The new development will bring life back to the square by
providing a balanced mix of uses and re-establishing pedestrian and transport links, and in so doing,
providing a catalyst for the regeneration of the area and in tandem, act as a driver for economic growth.
Deira has the potential to be known as the original downtown or the old souk of Dubai with ongoing efforts
to promote the area and to attract increased tourism to the neighborhood, with the Union Metro Station
already inviting to the key surrounding attractions. Union Square is a landmark space and it requires an
exceptional development to highlight the heritage, the history and the significant changes contributing to
the importance of this location.
The vibrant and community-focused Union Oasis will enhance the significant position of the location at the
heart of the transition between the old and the new city, offering some striking views over the Dubai
Creek.
Heritage
Union Oasis should capture conceptually traditional architectural approach as well as history and heritage
of the site, with the aim of maximizing the public realm where the old green park is represented by a green
roof of the podium.
Community and green space
While Dubai’s soaring buildings and network of roads form a dynamic three-dimensional composition that
emphasises the thrust and vigour of a modern city, such a structure only has resonance when set in
counterpoint to the calm of parks and gardens, natural colours and shapes, serene lines and peaceful
acoustics. The proposed development uses the space above Union Station, at the heart of the site, as the
basis of a new park, sheltered by the buildings arranged around it. It provides the communities of Deira and
Al Rigga with a new space in which to relax, in safety and peace.
To support the transit-oriented community, the public realm will be both functional and attractive, and it
will be inviting for those walking, cycling or enjoying leisure time. High-quality public spaces are expected
to take on many different forms from small, intimate spaces between buildings, through niches or steps
that allow pedestrians to pause along a busy commercial corridor, to large open plazas that can
accommodate public gatherings and events and have convenient access to public transit.
Market dynamics
Current market dynamics are developing in new directions, away from towering skyscrapers and massive
monolithic structures. The move now is toward compact developments, sympathetic to their physical
context, and with a calmer, more supportive approach to their occupants and neighbours. This proposal is
Project description
40
designed to reflect Dubai’s new more considered approach to development, while still creating an
outstanding work of contemporary architecture.
Sustainability considerations
Figure 26 below illustrates matters of sustainability which the Developer will have to consider to eventually
achieve LEED Silver Certificate, which will be required as a minimum. The Developer will have flexibility to
propose the relevant design aspects and ongoing operations and maintenance considerations in order to
achieve such certification. The difficulties of dealing with the underground station, occupying a diagonal
axis of the site, should be turned to advantage by using it as a major component in the underground part of
the development, which has significant functional and environmental advantages and leaves the ground
level free for the establishment of attractive, peaceful landscaped parks and gardens.
Project description
41
Figure 26: Environmental considerations for Union Oasis development
Development plan
Figure 27 below presents the plan of Union Oasis development.
Figure 27: Union Oasis development plan
Commercial principles
42
4. Commercial principles
4.1 Transaction structure and contracts
Transaction structure
The Project will be delivered as a PPP between the RTA and a Developer selected in a competitive
tendering process. The principles associated with the PPP form of contracting will allow the private sector
to use their development and operational expertise, and commercial acumen to determine the exact
development brief and detailed design, which will be constructed. This is expected to encourage
innovation and efficiencies that can be achieved by the Developer, thus maximizing commercial returns.
It is envisaged that the Developer will establish a Special Purpose Company (“Company”) to deliver the
Project. The Company will enter into a Concession and Musataha Agreement (“CMA”) with the RTA, the
owner of the Project site. Under the CMA, the Company will be granted a long-term musataha interest in
the Project site. The Company will be responsible for the design, construction, financing, management and
operation & maintenance of the mixed-use development on the Project site. The Company will take
advantage of the revenue streams from commercial operations of the various components of the Project,
and in return will offer the RTA a percent of the project profits (see section 4.3). The RTA will mitigate the
market demand risk of the Company by providing a minimum revenue guarantee to the Developer for the
first 15 years of operations for covering O&M and debt service costs (see section 4.2).
It is currently envisaged that the musataha interest will be granted for 50 years (including the
construction period), following which the development will be handed back to the RTA. As part of the
RTA’s commitment to support Developers achieve the objectives of this Project while maintaining an
acceptable return on investment, the RTA has approved an extension of the term of the Musataha
agreement to 50 years.
A potential contractual structure for the Project is presented in Figure 28 below.
Figure 28: Potential contractual structure for the Project
Roads and Transport Authority
Project Company
Concession
Musataha
Agreement
(CMA)
Finance
providers
(Equity and/or
Debt)
Subleases
and/or
Management
Contracts
D&B
Contractor
Design & Build
Contract
Debt and/or
Equity
Potential
Sub-lessors
O&M
Contractor
Operations &
Maintenance
Contract
Commercial principles
43
The Developer will have the flexibility to select the financing type (corporate, project/property finance and
or hybrid) provided that any financing documentation will be subject to RTA's approval and must contain,
among other things, RTA step-in rights (envisaged through a Direct Agreement) and further, ensure that
the Project debt is ring-fenced through the Company mechanism with a definable boundary from other
corporate funding.
The Company is likely to have multiple sub-leases and management contracts beneath it providing
operational experience of the real estate assets, e.g. providing a brand for the hotel, retail management or
residences management.
Key contracts
A summary of the key commercial relationships illustrated in Figure 28, which are anticipated to
document the Project arrangements, is set out below.
The CMA will be the key contract between RTA and the Company setting out the rights granted by RTA to
the Company for the development and operation of the Project and the Company's payment obligations to
the RTA. Amongst other things, the CMA will address the following:
Contract duration;
Grant of musataha rights over the project site;
Development of the Project in accordance with the agreed design and output specification;
Operation and management of the Project including grant of sub-leases;
Assignment and sub-contracting;
Procedure for agreeing changes to the Project;
Payment by the Company to the RTA;
Minimum Revenue Guarantee Mechanism;
Treatment of Refinancing Gains;
Insurance requirements;
Force majeure and political risk;
Early termination and the effects of early termination;
Step-in rights;
Expiry of the CMA term;
Hand-back obligations to return the site and the Project to the RTA;
Disputes settlement mechanism; and
Governing laws.
As a Government entity, RTA must comply with certain procedures and processes for the award of the
Project in accordance with applicable laws. The CMA will be drafted in a manner, which will comply with all
such applicable laws, as well as the latest PPP law.
The CMA has been structured as a concession and musataha agreement under which the RTA will grant the
Company a musataha interest in the land on the terms set out in the CMA. This will allow the Company to
register the CMA with the Department of Lands, thereby taking a real right in the Project site for the term
of the CMA. As musataha interests may be mortgaged, pledged or leased under the Civil Code, this should
Commercial principles
44
facilitate funding for the development of the Project. The RTA has obtained an exception from the
Department of Land to allow for foreign developers to participate in the Project, enter into the CMA and be
granted Musataha rights over the land for the Project.
Appendix C includes a high-level Transaction Term Sheet, which is intended to present the key commercial
aspects of the Project and the contractual relationship between RTA and the Company. The terms and
conditions will be detailed in the CMA, which will be issued with the RFT document.
A Construction Contract will be entered into between the Company and its selected construction
contractor. Under the Construction Contract the Company will subcontract its development obligations
under the CMA to the contractor. Construction will be completed in accordance with an agreed design
(based on the Architectural Vision) and within an agreed schedule. RTA will be responsible for site
clearance. All requisite approvals for the development of the Project in accordance with the CMA are to be
secured by the Company.
The Company is expected to enter into Operating Agreements/Facilities Management Contracts,
subcontracting its facilities management and operating obligations in respect of the Project. The extent to
which such obligations are subcontracted/fully delegated to a manager may vary between different aspects
of the Project and the Company’s approach. The Company will have a flexibility to select operations
specialists.
Lease Agreements in relation to any office, residential and retail units, the Company will need to grant
leases to end-users / tenants through which revenue will be generated.
Developer Guarantee: the RTA will require a guarantee or support undertaking from the Developer in
respect of certain of the Company's obligations under the CMA, especially to the extent the Project is
equity-financed and therefore reliant on the contribution of equity funding from the Developer. The
Developer would also need to undertake to maintain its shareholding in the Company (or to sell down its
equity stake in the Company only within agreed levels).
The CMA will make provision for Security to be provided in respect of the Company’s performance during
all of the design, construction, operational and hand-back phases of the CMA term.
4.2 Minimum Revenue Guarantee
The Minimum Revenue Guarantee (MRG) concept is a mechanism for mitigating the risk of demand in
infrastructure assets. According to the Minimum Revenue Guarantee concept, approved by RTA
Management, the RTA will guarantee the Developer a minimum level of revenues during the first 15 years
of operations for covering O&M and debt service costs. The annual revenues to be guaranteed by RTA is a
biddable parameter and the Developer will propose the “annual revenues guaranteed” in its response to the
RFT. In principle, the “annual revenues guaranteed” proposed by bidders cannot exceed the revenues (in
the baseline financial model) corresponding to 45% occupancy of the development mix. If in a given year
actual revenues fall below the “annual revenues guaranteed” set for that year, the RTA will pay the
Company the shortfall in revenues. Any amount paid to the Developer by RTA will be treated as a loan. The
repayment terms of the loan will be defined by the Company in its response to the RFT (further details will
be provided in the RFT).
Commercial principles
45
4.3 Payment mechanism
Definition and key principles
One of the main components of the CMA is the Payment Mechanism, which is a contractual
procedure/mechanism for calculating and executing the payment from the Company to the RTA.
The Developer will be able to select one of the following combinations of payment method and security for
the Project:
Bank transfer or direct debit, accompanied by Bank Guarantee; or
Annual renewable irrevocable Letter of Credit.
The following payment components are envisaged in the CMA:
Variable Payments (payments to RTA for granting of the Musataha agreement);
Repayment of liabilities under the MRG concept (if applicable); and
Penalties.
Payment components
Variable payments (payments to RTA for granting of the Musataha agreement)
Payments to RTA will be a percentage of the profits achieved by the Company (the percentage of
profits to be paid to RTA is a biddable parameter);
The payments will be calculated and paid in advance on a quarterly basis, based on annual cash flow
estimates; and
Amounts will be adjusted at year end, based on Company’s audited accounts and other relevant
financial information.
Repayment of liabilities under the MRG Concept
If, at any point in time, RTA make cash payments to the Company under the provisions of the MRG,
these amounts will be treated as liabilities of the Company to RTA. The repayment of these liabilities
will be defined by the Company in its response to the RFT (further details will be provided in the RFT).
Penalties
Penalties will be applicable in the event of reaching contractually agreed thresholds of penalty points
accrued by the Company in relation to non-compliance with contractually agreed Key Performance
Indicators (“KPIs”);
Quarterly caps on penalty points and penalty amounts applicable will be established, and penalty
points accrued in each quarter will be cancelled at the end of such quarter;
Key considerations in determining KPIs by the RTA include:
Meeting RTA’s project objectives;
Attractiveness of the Project to market; and
Value for money.
Four categories of KPIs will be included in the CMA, focusing on the key areas of importance for the
RTA. These include:
Adherence to TOD principles;
Commercial principles
46
Protection of asset condition;
High quality of services; and
Compliance with Health, Safety and Security requirements.
The CMA will be flexible on the general operations and maintenance plan, which will be prepared and
followed by the Company in accordance with good industry practices.
Tender process and timetable
47
5. Tender process and timetable
5.1 Tender process
The procurement process will commence with the issuance of the RFQ and it will follow the below
presented four main phases (Figure 29).
Figure 29: Tender process for the Project
Pre-qualification
The objective of this phase is to short-list the Prospective Developers and invite them to submit a tender
for the Project. Bidders having expressed interest as response to this Memorandum will be automatically
invited to submit a Pre-qualification document within the framework of the Request for Qualification
(“RFQ”) document, which will be issued by the RTA. During the Pre-qualification stage, Prospective
Developers will be invited to one-to-one meetings with the RTA to further discuss any aspect of the
Transaction. The RFQ responses will be evaluated on a pass/fail basis. The key considerations in short-
listing Developers will relate to the strength of the applying organization (or consortium, if applicable) with
regards to financial capacity, resources and previous experience in delivering similar schemes. Pre-
qualified bidders will be announced.
Tender
The purpose of this phase is to select the preferred bidder for the Project. The pre-qualified parties will be
invited to submit a response to the Request for Tender (“RFT”), which will be issued by the RTA. The RFT
document will include instructions to bidders, technical specifications and the draft CMA. During the RFT
response time, the bidders will have an opportunity to ask clarification questions in relation to the RFT
contents. Furthermore they will have to perform their own due diligence and submit a Technical Proposal
and Financial Proposal to the RTA. The Technical Proposals will be evaluated and scored against detailed
criteria. The bidder will have to meet certain minimum score threshold for the Technical Proposal in order
to have the Financial Proposal evaluated.
Following the evaluation and clarifications of bidder’s responses to the RFT, the RTA will announce the
preferred bidder for the Project.
Pre-qualification
Tender
Negotiations
Close
Short-list of
developers/investors and
invitation to tender
Preferred
developer/investor
selection
Final project
agreements and
funding packageFine-tuning of best
value for money and
alignment with
objectives
Tender process and timetable
48
Negotiations
The purpose of this phase is to refine the detailed conditions of the CMA (technical, commercial and legal)
included in the preferred bidder’s tenders. It should be noted that the purpose of this stage is not to
re-open the discussions about Project terms, but to finalize the CMA to progress to the close. The
negotiations will be performed in consideration of fine-tuning the best value for money for the private and
public sectors and ensuring that the RTA’s project objectives are appropriately reflected in the Project
contractual documentation. During this phase, the preferred bidder will also have to negotiate/agree the
relevant funding arrangements, subcontracts and/or other agreements for the Project.
Close
The purpose of this phase is to achieve commercial and financial close for the Project, which relate to
signing all the relevant agreements. Commercial close is coinciding with the date when the RTA and the
preferred bidder have reached agreement on all the contractual documents and the CMA is signed. The
financial close is the date on which all the Project contracts and financing documentation are signed and
condition precedent for initial drawing of the debt has been fulfilled.
Tender process and timetable
49
5.2 Indicative timetable
An indicative timetable for the Project is provided in below Figure 30. It should be noted that this
timetable is only provided as a reference and is subject to change, based on the progress of the
transaction.
Figure 30: Indicative tender timetable
Union Square Project - Procurement Programme
Jan Feb Mar Apr May Jun July Aug Sep
1 2 3 4 5 6 7 8 9
1. Issue Request for Qualification (RFQ) document -
2. RFQ response 4
3. One-to-One Meetings 1
4. RFQ responses evaluation 2
5. Announcement of Pre-Qualified Bidders -
6. Issue of the Request for Tender (RFT) document -
7. RFT response 12
8. RFT responses evaluation 6
9. Successful Bidder announcement -
10. Negotiations 4
11. Commercial Close -
Activity
Envisaged
duration
(weeks)
2016
Contact Details
50
6. Contact Details
For further information in relation to the Project and submission of feedback and formal Expression of
Interest in participating in the Project tendering, please contact:
Jawad Kamal Sajwani
Project Manager – Rail Agency
Roads & Transport Authority
Phone: +9714 2902233
Mobile: +971 55 965 6565
E-mail: [email protected]
Appendix A – Affection Plan for the Site
51
Appendix A – Affection Plan for the Site
Appendix B – Area of the Site intended for the Project
52
Appendix B – Area of the Site intended for the Project
Appendix C – Transaction Term Sheet
53
Appendix C – Transaction Term Sheet
This Transaction Term Sheet is intended to present the key commercial aspects of the Project and the
contractual relationship between RTA and the Company. The terms and conditions will be detailed in the
CMA, which will be issued with the RFT document.
Parties and purpose The parties to the CMA shall be RTA and the Company. The Company will be
responsible for the design, construction, financing, management and operation &
maintenance of the Project.
Ownership The RTA will retain ownership of the site and it will grant musataha interest for
the site to the Company for the duration of the CMA term. The Company will own
the Project facilities for the CMA term, following which the ownership of the
Project facilities will be transferred to the RTA.
Term The envisaged term of the CMA is 50 years including construction period.
Shared risks The CMA will allocate the risks between the parties involved and will define their
respective responsibilities in connection with the Project. Table A, which appears
at the end of this Transaction Term Sheet, provides an overview of the proposed
allocation of main risks and responsibilities.
Under the CMA, the Company will be responsible for designing, building and
financing all the works of the Project, including possible delays and cost overruns.
The Company shall thus be required to obtain the permits and certificates of
authorization required for carrying out the Project, to meet all the requirements
(including environmental or regulatory requirements), as well as the obligations
of result with regard to the Project. Once construction is complete, the Company
will be responsible for the Project’s management and operations, as well as the
facilities maintenance. The demand risk, will be mitigated by the provision of a
Minimum Revenue Guarantee (MRG) from RTA to the Company for the first 15
years of operations. The maximum level of revenue guarantee is defined at 45%
occupancy and is intended to cover O&M and debt service costs.
The Company will bear all risks related to inflation and financing of the Project
during construction and operation periods.
To the extent indicated in the CMA, the RTA will support the Company in
obtaining authorizations and permits necessary to carry out the Project .
Payments In exchange for granting the musataha rights RTA will receive a share of the
annual profits of the Company. The percent of profit sharing will be proposed in
the bids, submitted in response to the RFT.
Compliance with
service performance
standards
During the operation period of the CMA term, the Company shall comply with the
agreed service performance standards and relevant Key Performance Indicators.
In the event of non-compliance, the Company will be responsible for the cost of
Appendix C – Transaction Term Sheet
54
non-compliance rectification and it will accrue agreed level of penalty points in
relation to each non-compliance event. If the penalty points exceed a certain
agreed threshold in a fixed period of time (e.g. a quarter) and the Company does
not improve its performance to the agreed service levels, this may progressively
lead to (i) a request for performance recovery plan by the RTA (ii) serving
warning notices by the RTA, and (iii) the CMA termination by the RTA.
In addition to the above remedies, penalties will be applicable in the event of
reaching contractually agreed thresholds of penalty points accrued by the
Company. Quarterly caps on penalty points and penalty amounts applicable will be
established, and penalty points accrued in each quarter will be cancelled at the
end of such quarter.
Compensation on
termination
The CMA will include a compensation on termination (“comp on term”) regime
that will set out compensation payable by the RTA to the Company, if the CMA
terminates early. The following three scenarios will be contemplated in the CMA,
if the Project is financed using limited recourse project finance debt:
Company default
RTA default or RTA voluntary termination
Prolonged force majeure
Insurance and
guarantees
The CMA shall stipulate that appropriate insurance coverage guarantees, letters
of credit and bonds be obtained and maintained in force by the Company.
Appendix C – Transaction Term Sheet
55
Table A: Key risks and responsibilities allocation between the Company and RTA
Risk / Responsibility Responsible
Design and construction Developer RTA
Authorization and permits
Design
Construction
Legal liability and property insurance
Construction schedule and schedule overruns
Cost overruns
Operations phase
Management and operations
Facilities management
Legal liability and property insurance
Demand on Project facilities (MRG is provided for the first 15 years of
operations – MRG is capped at a level of 45% occupancy)
Inflation and financing
Risk of inflation fluctuations during the construction and operation phases
Financing terms and conditions
Legend
Bears full responsibility partial responsibility
Appendix C – Transaction Term Sheet
56
