ICD, Brookfield ‘scrapped plans for distress fund’ to build DIFC project

Canadian asset manager claims scarcity of opportunity at the time as construction begins on ICD Brookfield Place

A partnership between Dubai’s sovereign wealth fund and Brookfield Property Partners opted not to pursue 2012 plans to create a $500 million-plus fund to invest in distressed real estate assets because there were no viable opportunities, according to one of its chairmen.

Investment Corporation of Dubai (ICD) entered into a partnership with Brookfield Property Partners, the real estate subsidiary of Canadian asset manager Brookfield Asset Management, in 2011.

They intended to create a fund to help recapitalise stalled or incomplete projects in Dubai by the end of 2013.

However, this fund never materialised and instead the two organisations announced plans to build the first new development in Dubai International Financial Centre (DIFC) since the start of the financial crisis, to be named ICD Brookfield Place.

At a ceremony to mark the start of construction of the $1 billion scheme on Wednesday, Ric Clark, chairman of Brookfield Property Partners, told reporters that the JV had been forced to abandon plans for the distressed real estate fund some years ago.

“Coming out of the global financial crisis, what we did is to form a venture with ICD to help recapitalise ‘broken’ projects,” he explained.

“What we learned along the way was that there was a big opportunity for new developments. We never raised capital around the partnership; instead we decided to study the opportunities.

“We spent a lot of time looking at things but didn’t see anything that we thought we could put our platform behind in order to turn around. We discovered that the opportunity for us was different – it lay in new development.

“So this project [ICD Brookfield Place] resulted from those conversations. The venture morphed into this particular project and hopefully we will do more [with ICD] in future.”

ICD Brookfield Place is a 1.5 million square foot office and retail development behind the Ritz Carlton hotel in DIFC. Designed by architects at Foster & Partners, the scheme comprises a 53-storey tower containing 900,000 sq ft of office space.

An adjacent five-storey tower contains 150,000 sq ft of retail, restaurants and bars, fitness and private members facilities. The two towers will be connected by pedestrian pathways and seven levels of underground car parking.

The scheme also features a food court or ‘emporium’, where a range of chefs will serve high quality food customers can eat in a large dining hall.

An 18,000 sq ft landscaped square will be built to showcase arts and cultural events to the public.

ICD and Brookfield formed a 50:50 joint venture, ICD Brookfield, to develop the scheme. It is understood to have bought the land from the DIFC in September 2014.

Clark declined to reveal the total cost of construction but said that the scheme would be valued at “well over” $1 billion when completed in 2018.

He said the JV aims to finance around 65 percent through conventional construction financing from a consortium of banks and the rest through equity.

It is in talks with several banks but “we’re probably two or three months away from wrapping that up”, he said.

Clark also declined to name potential tenants because deals are yet to be finalised. Interested parties include existing DIFC tenants looking to expand but lacking space because the free zone is nearing capacity, tenants from outside the DIFC, and international occupiers with whom Brookfield has relationships, he said.

Douglas Kirkman, CEO of ICD Brookfield, added: “The DIFC is effectively full. Notwithstanding the fact there’s been a downturn, there are a lot of companies that have been growing rapidly and continue to expand within the DIFC. This is a big opportunity for us.

“What’s more, historically Dubai has not been a pre-leased market and the fact that people are willing to discuss a lease three years before we deliver shows the demand for this space.”

Clark added: “The other thing we’ve learned from our international relationships is that they would like to rent space in and make a commitment to a single landlord-owned and managed property.

“The fact that ICD Brookfield offers this inspires confidence in the project. ”Many of the other office buildings in DIFC have multiple landlords and property management firms.

Mohammed Al Shaibani, executive director and CEO of ICD, said: “We first started talking with Brookfield somewhere between 2010 and 2011. It has taken us a while to get here, and we look forward to working together on this exceptional project and hopefully more in future.”

Clark told reporters that Brookfield would consider more projects across the Gulf in the coming years but is focusing on Dubai, Brazil, Europe and the US at present.

JLL and CBRE are acting joint leasing agents.

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