PIF’s Saudi Downtown brings Sumou in to build its flagship’s homes

The first residential plots of PIF’s newly launched Downtown Al Khobar will be built with private money. Saudi Downtown Company, the PIF unit behind Downtown Al Khobar, signed three agreements handing the work to Sumou Real Estate, with Saudi Downtown contributing land in kind while Sumou funds the build through its own investment and off-plan sales, the companies said.

Downtown Al Khobar is Saudi Downtown’s flagship. The development spans more than 829k sqm along the waterfront and is slated to hold over 4k residential units, more than 500 hotel rooms, 40k+ sqm of office space, 139k+ sqm of retail, restaurants, and cafés, and 103k+ sqm of green space and parks, according to last week’s launch statement.

What Sumou is building: Through the three agreements, Sumou will build two mid-rise residential developments on near-identical plots of c. 28.3k sqm each, south and north of the Boulevard, and a high-rise residential tower on a 4.8k sqm plot, Sumou said in separate filings to Tadawul. In total, Sumou’s three plots come to c. 61.5k sqm, roughly 7% of the 829k sqm masterplan, based on our calculations. Each agreement runs for four years.

The financial arrangement in a nutshell: On every project, Sumou takes a development-management fee of 6.5% of total development costs and a sales-and-marketing fee of 2% of total sales, plus 32% of net income in return for its investment.

Why it matters: The structure — land in kind from PIF, capital and sales risk from the developer, construction funded off plan — lets PIF build out Downtown Al Khobar without fronting the cost, and draws more private money into the Eastern Province residential market.

REMEMBER- Saudi Downtown is already working in the Eastern Province with private partners. It tapped Cenomi to set up what it has billed as its largest mall there, with Cenomi picking Lynx Contracting for the design-and-build. Sumou, meanwhile, set up several real estate funds through its investment arm last year to finance projects including developments in Khobar.