The Kingdom of Bahrain has followed through with a $550 million social housing public-private partnership (PPP) to develop 4,100 new homes across the region over the next three years. Local developer Naseej led the consortium that was awarded the Gulf Cooperation Council’s maiden housing PPP.
The landmark transaction, expected to reach financial close in April, represents the largest deal of its kind in the kingdom’s housing sector, housing minister Basim bin Yacoub Al Hamer said in a press release. Trowers & Hamlins, legal adviser to the winning consortium, added that it “believed this is the first PPP of its kind in the Middle East region”.
Naseej said it would finance the project with 70 percent of debt and 30 percent of equity. Mohammed Khalil Al Sayyed, who is a member of both the Naseej board of directors and the firm’s PPP Steering Committee, commented: “There are banks, shareholders and investors ready [to fund the project].” Any debt offerings would likely be available to retail investors.
He added that the consortium would earn a return on its investment through government payments for social housing and the sale of affordable units. Most of the new homes being built across Northern City, Al Buhair and Al Lawzi will support the government’s social housing programme.
Homebuyers in the strongest financial position will be given precedence for the residences, including those who obtain mortgages from the Bahraini Housing Ministry. The remaining inventory will be sold in the open market.
PPPs are commonly used to procure several types of social infrastructure, such as hospitals and universities. Social housing PPPs are not the most popular sub-sector, but are nonetheless used in some countries, like the UK.
In addition to Naseej, the winning consortium includes Ithmaar Development Company as the development manager, AECOM as the master planners, URS/Scott Wilson and Ansari Engineering Services as infrastructure designers, AECOM/Ansari Engineering Services as the architects, Davis Landon as cost consultants, Chase Manara BSC as the main contractor and Olive VFM as the facility manager.
PriceWaterhouseCoopers provided the Naseej consortium with financial advice. Ernst & Young and Freshfields Bruckhaus Deringer served as legal advisers to the Bahraini authorities.