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Kingdom City (Jeddah)
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Crown of the Kingdom
by Ben Roberts on Aug 13, 2011
The announcement from Kingdom Holding of the next world’s highest tower came as a thunderbolt of business news to a Gulf region about to enter the quieter summer period.
As one of the few mega projects in Saudi Arabia not directed by the high-spending government, it could only have come from HRH Prince Alwaleed bin Talal bin Abdulaziz Alsaud, chairman of the group and the Arab world’s most dynamic private investor. Money, indeed, never sleeps, and there is always a sense that the prince is only just beginning.
The surface financials say much about the scale of the project: SAR 4.6 billion to build the tower that will outreach Dubai’s Burj Khalifa by more than 200 metres, sitting within a new 530-hectare urban development to the north of Jeddah – Kingdom City – which will require a total of SAR 75 billion.
Funding Kingdom City is a new joint venture, Jeddah Economic Company, led by Kingdom Holding and Abrar International Holding Company, which will both hold a 33.35% stake, Saudi Binladen Group, which two weeks ago was awarded the main construction contract, will hold a 16.67% stake, as will Saudi businessman Abdulrahman Hassan Sharbatly. Samaual Bakhsh, director of the Traco group of companies in Egypt and a former director of Egyptian Gulf Bank, is also closely involved.
SAR 1.5 billion of equity capital from the partners will be invested, along with cash loans from banks, which will be repaid from the revenues that will be generated from the tower, according to Kingdom Holding.
JEC’s capital also includes SAR 8.8 billion in land value and assets worth 7.3 billion.
The tower will contain a Four Seasons Hotel as well as serviced apartments from the hospitality chain, office space, ‘luxurious condominiums’ and what will be the world’s highest observatory deck.
Perhaps the most surprising element to the tower and Kingdom City is its location, far north of the main city away from other hotels and offices. Essentially, Kingdom City will need to create an entire new centre of commerce to fill the tower and related buildings with residents.
The first two phases of construction are the building of the tower – over 50 hectares – and the construction of the infrastructure for the entire development. The third phase, according to Kingdom Holding, is yet to be finalised; one of many tantalising bits of mystery around the project.
The prince last week acknowledged that the project was a “big risk”, and the context of the commercial and hospitality sectors in the Jeddah region certainly supports this admittance.
CB Richard Ellis, the property firm, wrote in a recent report that the city traditionally had a “sustainable” approach, where office space mixed with retail outlets across the urban sprawl in the absence of a true commercial centre.
“The commercial sector is very practical and price-sensitive, often offices share buildings with shopping malls to be able to share certain facilities, such as car parks,” Mike Williams, senior director for Middle East research and consultancy at the firm, told CW last week.
“It is split over about five areas as there is no centre for commerce in Jeddah.”
He explained that any new commercial development was largely moving north up to the Corniche and beyond the Creek and the Al Kira region. The planned space for the tower and Kingdom City is essentially a few steps ahead of this progress.
But the present remoteness of the site, and the difficulties witnessed in other regional city projects, leave a number of questions as to the project’s viability.
“I don’t know if there have been feasibility studies for the project, I would be interested to see what they are, as there are a number of city developments that have struggled to attract sufficient interest,” Williams added. “If you head further north of [what will be] Kingdom City there is King Abdullah Economic City, which has failed to generate a lot of demand.
“Also, the hotel sector in Jeddah is dominated by businessmen. The location of the tower wouldn’t suit this, as at the moment there is no business there; they would rather be in the city centre. The project requires the demand for commercial business that at the moment I don’t think is there.”
But he added that the success of the Kingdom Centre in Riyadh showed that the prince has faced this challenge before. In this instance, a ground-breaking tower project was launched in urban areas of the capital that were surrounded by few commercial developments; over the years it has been the presence of this iconic building that helped generate development around it, in the business district of Olaya.
Other property commentators are more confident. John Harris, country head of Saudi Arabia at Jones Lang LaSalle, pointed out that the project is unique in the city as it will be one of the few spaces dedicated to commercial development.
“The location has its advantage as there are few big tracts of land being developed in Jeddah. Kingdom Tower and the City has gone considerably further north, and will be near the airport,” he said last week.
“The project might seem situated on the outside at the moment but Jeddah is growing up into that part of the world.”
ConstructionWeekOnline
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