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Legal Considerations of a Mixed Use Project

Tara Marlow Jeremy ScottPartner Head of Real Estate - DubaiHead of Real Estate & Hospitality

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merald Palace Group

Emerald Palace Group

Emerald Palace / Pozniakizhilstroy isthe largest developer of residentialprojects in the Ukraine, and a keydeveloper of residential andcommercial projects in both Russiaand Dubai.

Founded in 1996, the companyworks with world-class architectsand engineers to realise prestigious,high-end developments in some ofthe world's most desirable locations.

Partnering with international luxuryhotel operators such as Kempinski,the company has successfullydelivered 25 master-plannedproperty comprising more than10,000 residential units andspanning over one million squaremetres. Today, we have five newdevelopments under construction,with a further ten at project stage.

MIXED USE DEVELOPMENT SCHEME

Mixed Use Development Scheme

Mixed Use Development Scheme

Mixed Use Development Scheme

Mixed Use Development Scheme

Mixed Use Development Scheme

o Components & Interested Parties

• Hotel (Owner/Operator)

• Serviced Apartments (Owner/Operator/Unit owners)

• Residential Units (Owner/tenants)

• Office Units (Owner/tenants)

• Retail Units (Owner/tenants/Operator)

• Common areas (Owner/Operator/FM Manager)

• Common facilities and infrastructure

(Owner/Operator/FM Manager)

o Title Structuring

• Funding/security considerations

• Ring-fencing liability with use of SPVs

• Off-plans sales in advance (strata titling)

• Owner retained components

• Occupational leases

• Future exit strategy

o Master Planning & Design

• Cohesion of scheme – look & feel

• Development phasing & construction

• Hotel Operator Brand Standards (Hotel/Serviced Apartments v Overall Scheme)

• Timing for handover and occupation / Hotel and Serviced Apartment opening

o Operational independence between components

• Shared areas & facilities

• Facilities management of project

• Access & Control (Developer/FM Service Provider/Hotel Operator)

• Utility charges and metering

• Service charge allocation and recovery

• Future renovation & repairs (Owner Capex v Hotel Operating Expenses v Unit Owner cost)

• Operational disruption and impact on Hotel & Serviced Apartments

Mandatory & Optional Serviced Apartment Rental Pool Scheme

Legal Structure – Serviced Apartment Rental Pool Scheme

Owner Co.

OpCo

Hotel & Serviced Apartment Operator

Serviced Apartment Rental Pool Scheme

Stakeholders and their respective interests

• Who are the Stakeholders and what are their respective interests?

o Project Owner/Developer

o Hotel/Serviced Apartment Operator

o Unit Owners

o Owners Association

o Regulators

What are the Stakeholders respective interests?

• Developer:

o maximise sales price

o enhance own brand value

o streamline asset management of the project

o control FM and service charge costs

o enhance return on investment and future investment value

o owner of retained components

o obligations owed to Operator to retain brand v rights in respect ofserviced apartments within rental pool scheme

o minimise risk and exposure vis a vis breach of obligations by serviced apartment owners

• Operator:

o freedom and control to operate the hotel & serviced apartments in accordance with operating and brand standards

o consistency of other Project components with brand standards

o operational non-interference from Developer and serviced apartment owners

o deal only with Developer and not multiple serviced apartment owners

o ability to implement operational requirements under Management Agreement ie. future refurbishment, signage, brand protection, no competition (no airbnb or short term letting)

• Serviced Apartment owners:

o as investors, want a return

o no involvement in management issues

o obligations as owner and member of Owners Association

o periods for personal use of serviced apartment

o transparency on fees, costs, service charges and allocation among other components of the Project

• Serviced Apartment Building Owners Association

o rights and obligations of OA vis a vis Developer and Operator

o grant of serviced apartment owner proxies to the Developer (as tenant) under the rental pool lease back scheme

o quality of service and facilities management of the Project

o transparency on fees, costs, service charges and allocation among other components of the Project

o insurance protection

• Regulator

o vibrant development and investment market

o fair balance between the rights of the stakeholders balance with consumer protection

o good quality management of completed developments

o transparency on fees, costs and service charges

Balancing the Stakeholder interests

• SPAs and disclosure

o clearly identifying expectations, rights and obligations

• Strata Constitutional Documents

o setting out clear obligations in order to support Operator’s rights and brand standards to prevent loss of brand in the future

• Lease-back arrangements

o ensuring a clear operational arrangement as between the serviced apartment owners (as investors), Developer and Operator

• Planning

o ensuring operational independence so long as Operator brand standards are supported

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Jeremy ScottHead of Real Estate - DubaiJ.Scott@tamimi.com

Tara MarlowPartnerHead of Real Estate & HospitalityT.Marlow@tamimi.com

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