A consortium led by First Avenue for Real Estate Development Company has signed a framework agreement to establish a fund for the development of the East Hindawiyah informal settlement area in Makkah, the company said in a stock exchange statement.

The agreement was signed with the Royal Commission for Makkah City and Holy Sites (RCMC) and Jadwa Investment.

First Avenue owns 45 percent stake in the project, with Dar Al Majed owning 35 percent and Rekaz owning 20 percent.

The statement didn’t disclose the fund value, but Jadwa Investment announced on Thursday that it has launched two real estate development funds worth up to 10 billion Saudi riyals ($2.67 billion) for projects under the Makkah Informal Settlements Development Programme. It said the funds are being established in partnership with First Avenue, Al Majdiah, and Rikaz Real Estate, and with Zood Real Estate for Eastern Hindawiyah and Al Hijla redevelopment projects respectively.

First Avenue had previously disclosed that the estimated cost of Eastern Hindawiyah, inclusive of land acquisition and infrastructure development costs but excluding future superstructure development, is SAR 2 billion ($532.37 million). Zood had pegged the total cost of the Al Hijla redevelopment project at SAR 8 billion ($2.13 billion).

According to First Avenue’s Thursday statement, the development fee payable to the consortium would be 15 percent of the actual project costs, which in turn, will be determined and finalised in the Development Agreement to be executed with Jadwa Investment following the completion of the required studies and approval of the project's design plans.

Additionally, the consortium shall be entitled to a performance incentive equivalent to 14 percent of any return exceeding the Fund's target Internal Rate of Return (IRR) of 8 percent, and a sales commission fee of 2.5 percent of the project's sales value.

Saudi-listed Ladun Investment Company had announced on Thursday that its consortium with Al-Ayuni Investment and Contracting Company signed a framework agreement with RCMC to establish a $1.07 billion real estate investment fund for the Khalidiyah Informal Settlement Redevelopment Project in Makkah. The name of the fund manager wasn’t disclosed.

(Writing by Majda Muhsen; Editing by Anoop Menon)  (anoop.menon@lseg.com)

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