Dubai seeks investors for public-private metro project

12 December 2013

RTA looking for firms to develop land above Union station in Deira

Dubai’s Roads & Transport Authority (RTA) is looking for private sector investors to develop the land above the Union metro station in Deira.

The project is intended to be developed as a public-private partnership (PPP) between the RTA and a private developer. A procurement process to select a suitable developer is due to start next year.

Referred to as the Union Oasis, the scheme is modelled as a Transit Oriented Development (TOD), a concept that aims to maximise the area surrounding transport hubs, with an aim of increasing usage of the nearby trains, metros and buses.

Union station is one of the busiest stations on the Dubai Metro network as it is where the Red and Green rail lines cross. It is also close to Dubai Creek and has connections with water taxis and local buses. The development of the area surrounding the station is expected to encourage more people to use public transport, as well as regenerate the Deira area, which lies at the heart of old Dubai.

UK-headquartered EY (formerly known as Ernst & Young) is the financial adviser on the project and has conducted a feasibility study into the development, while UK firm Atkins has acted as technical adviser and has drawn up the initial architectural designs.

The early plans for the scheme were presented to potential investors and developers on 11 December. The feasibility plan outlines how the site could be potentially developed, with a mixture of residential properties, offices and restaurants.  

“The development mix is open to interpretation,” says Umer Ahmad, project director at EY, before adding that developers would still have to make sure the project encourages public transport usage.

“The TOD concept is very important to the RTA,” he says.

Under the terms of the PPP structure, the chosen developer will be given a 30-year concession to develop the land, after which point the land will be returned to the RTA.

As is typical in PPP deals, a special purpose project company will be established by the chosen investor to keep the project off-balance sheet. The investor will be responsible for the design, construction, financing, operation and maintenance of the scheme.

The RTA will provide the developer with the land in return for payment stream.

“The idea is that the developer will be able to make a commercial return from sub-leasing different elements of the property,” says Ahmad.

In terms of the specifics of how the project is financed, Ahmad says there is a degree of flexibility.

“We are looking for the developer partner to innovate here,” he says. “So, there is an openness here whether a project finance structure is utilised, whether a real estate finance structure is used or corporate financing.“  

The RTA is expected to issue an invitation to prequalify for the contract in January. The market will be given five weeks to respond.  Within a further three weeks, a short-list of potential developers will be drawn up and a tender will be issued in March.

The RTA then intends to announce a preferred bidder by August and conclude negotiations by the end of 2014.

The Dubai Metro was opened in 2009, and is the first metro system to be built in the GCC. Since its launch, ridership has increased every year from 39 million trips in 2010 to an anticipated 137 million trips by the end of 2013.

Union station is one of the biggest stations on the network, with an estimated 16 million passengers passing through the station this year.

The development of the area surrounding the station forms part of the RTA’s long-term strategy to increase the use of public transport from 6 per cent in 2009 to 30 per cent in 2030. It currently stands at 12 per cent.

Plans to develop Union station began back in 2009, when the RTA invited consultants to express interest in developing the project masterplan.

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