Gulf Related Plans to Assume Debt for $1 Billion Sowwah

Related Cos., the New York developer founded by billionaire Stephen Ross, and its partner Gulf Capital plan to build a $1 billion shopping mall focusing on department stores in Abu Dhabi.

Gulf Related, the joint venture undertaking the project, is also aiming construct two towers connected to the mall that will include a 300-room hotel as well as 120 serviced apartments, Kenneth Himmel, president and chief executive officer of Related Urban, told reporters in Abu Dhabi today. Related Urban is a unit of Related Cos.

Sowwah Central, as the project is named, is the venture’s second development on Sowwah island, which will be the location for a financial district and Abu Dhabi’s stock exchange.

The mall, due to be completed in 2017, will be financed by a combination of equity and debt, Himmel said. Gulf Related bought the land last year from Abu Dhabi’s sovereign investment fund Mubadala Development Co. PJSC, which hasn’t yet decided whether it will invest in this project, Himmel said.

Gulf Related may assume debt to fund as much as 60 percent of the development, designed to include cinemas, health clubs and restaurants, Himmel said. He declined to specify the amount of equity Gulf Related plans to invest in the project or the price of the land.

Wealth Funds

“Gulf Capital and Related are anchoring this project,” said Karim El Solh, Chief Executive Officer of United Arab Emirates’ private equity firm Gulf Capital. “We are approaching investors such as sovereign wealth funds, pension funds, insurance companies, financial institutions and family owned companies who are looking for a long-term cash yield.”

The response has been positive, helped by the company’s ability to get commitments for seven- to 10-year leases from retailers it’s in discussions with, El Solh said. Investors should expect an annual yield of 12 percent to 13 percent once the mall is fully occupied, he said.

Gulf Related is also looking at funding through bonds and will announce the details of the financing in about three months, Himmel said. The company is in talks to bring two department stores to the mall, with each to occupy 20,000 square meters, he said. He declined to name the potential tenants. Sowwah Central will have a gross area of 288,000 square meters (3.1 million square feet).

“We don’t want to over leverage, so we are looking for debt of 50 percent to 60 percent,” Himmel said. Debt will mostly be raised locally and regionally, he said, without identifying the banks.

The Galleria, a high-end retail and dining district at Sowwah Square, will open in August and will include shops from Gucci and Louis Vuitton to restaurants such as Zuma.

(Corrects Himmel’s job title in second paragraph of story published on Jan. 27.)
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