(For more retail coverage, click GlobeSt.com/RETAIL and to read more on the multifamily market, click here.)
MUSCAT, OMAN-Alfa International Holdings of New York has gained the equity partner it needs to move forward with a mixed-use development on 245 acres of beachfront here being provided by the Omani government. Dubbed "Omagine," the project is an integration of cultural, heritage, educational, entertainment and residential components.
Alfa, through its Journey of Light subsidiary, has been working toward a development agreement with the Government of Oman since early 2005. Frank Drohan, president of both Alfa and JOL, tells GlobeSt.com that a formal development agreement with the government should be signed before the end of the first quarter, clearing the way for development to begin now that it has found an equity partner in Joannou & Paraskevaides Ltd., an active general contractor in the Middle East.
J&P, which has 17,000 employees and generates $1 billion in annual revenue, has agreed to put up the equity necessary to get the development off the ground--between $15 million and $30 million--in exchange for construction contracts and a minority position in the project company. Drohan says that if J&P provides all of the necessary equity it will receive all of the construction contracts related to the development.
The development calls for a "high culture" theme park containing seven pearl shaped buildings and associated exhibition buildings; a five-star resort hotel; a four-star hotel; a boardwalk; an open air amphitheater and stage; a canal and enclosed harbor area; boat slips; commercial office buildings; shopping and retail establishments; restaurants and open space green areas; and 3,900 for-sale residential units including villas, townhomes and apartments.
According to the draft disposition and development agreement, the government is leasing the land to the project company. However, the lease allows for the project company to sell the land, at which point the buyer would own the land. Moreover, because the land is in a designated tourist zone, the project company will be allowed to sell the land to a foreigner.
Alfa's lease agreement calls for no payments for the first five years. Beginning in year six, it must pay the Omani government annually $0.70 per sm of land on which a structure has been built. Drohan does not expect to pay any rent, however, because he expects to develop the land and sell the properties in the first five years.
Originally, the cultural and heritage portion of the project--the seven Epcot-like structures showcasing different aspects of the Omani's heritage and culture--was to be built by JOL but maintained by the Omani government because it wasn't expected to be a profitable venture. Now, Drohan says the deal calls for JOL to not only develop but also maintain all aspects of the development, including the seven "pearls." To make it work, Drohan is integrating the cultural component with some of the commercial components in a development called the Landmark, which will be designed to be a stand-alone, income-producing development.
Due to the project company's ability to sell the land on a freehold basis, the collateral for the construction loans will be the land, which has risen in value significantly since negotiations began. Eighteen months ago, the gross sell-out value of the developed land was estimated at $1.6 billion. Today, Drohan says it is valued at $2.2 billion, which equates to a net present value gain of $300 million.
Alfa International acquired Journey of Light in October 2005. The acquisition was contingent upon the memorandum of understanding with the Omani government, which was inked in August 2005. The formal development agreement is expected to be signed once the Omani government is confident--by way of third party analysis--that the Landmark portion of the development can stand on its own.
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