Maintenance deal is cut short

Mace loses contract at The Old Town island development.

Dubai - November 19, 2009 - The Burj Dubai rises above The Old Town Island near Dubai Mall in Dubai November 19, 2009. STOCK

(Photo by Jeff Topping/The National) *** Local Caption ***  JT001-1119-BURJ DUBAI STOCK_MG_3106.jpg

MAB Facilities Management has taken over the maintenance service contract at The Old Town island in Emaar Properties's sprawling Downtown Dubai development after a deal with Mace Macro, a unit of the UK's Mace Group, was cut short. Mace was originally awarded a three-year contract by Emaar, the UAE's largest developer, in 2008 to provide facilities management services to 400 villas and apartments, 120 shops and a hotel.

The Old Town is one of the largest residential projects within the Dh73.4 billion (US$19.98bn) Downtown development that opened in January and has the world's tallest tower, the Burj Khalifa, as its centrepiece. Although Mace Macro competed for the new contract and offered a lower price, it was awarded to MAB, which took it over at the start of this month after being handed an 11-month deal, according to a statement on the company's website.

"It was a decision that Emaar took and that's where it rests," said a person familiar with the matter, who asked to remain anonymous. Officials at Emaar were unavailable for comment. Developers in Dubai were slow to catch on to facilities management during the boom, with building maintenance an afterthought to speedy construction. The sector took off only in 2006, when it was forecast to be worth US$1.4bn a year for the following 25 years, thanks to the hundreds of new buildings that were planned.

But the financial crisis put the brakes on the development of new projects, with estimates from the property consultant Jones Lang LaSalle last year that $24bn worth of projects had either been scaled back, delayed or cancelled. Meanwhile, developers including Dubai Properties Group, Union Properties, Omniyat Properties and Abu Dhabi's Sorouh Real Estate set up their own property management companies as they focused on building maintenance as a new source of revenue.

"Sources of revenue among developers these days are fairly scarce ? and facilities management, while it's an expense, also generates revenues," said Michael Grose, a partner at the law firm Clyde & Company in Dubai. "It wouldn't surprise me if it [changing contractors] is more to do with trying to save costs and either taking it on themselves or re-letting the contract on a cheaper basis and keeping the surplus cash."

MAB said it would also provide services to Burj Views as part of the 11-month contract, and the Al Manzil and Qamardeen areas of Downtown Dubai on shorter-term deal. Developers, however, will soon have to hand control of the selection of maintenance firms over to homeowners as part of the new strata law. Although the changeover is meant to take effect next month, the transition could take another six months, according to Adrian Quinn, the chairman of Essential Community Management, a strata management company.

"But once an owners association is registered, it will have the right to cancel any existing contracts with service providers at the next general assembly," Mr Quinn said. Last month, Emaar Properties's maintenance unit was granted a licence in Dubai as the developer sought to consolidate its position in building management services.