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While Ishraqah Investments has quite a few land plots, it is not rushing into new developments. Its Dh2.5-billion portfolio consists of the Seasons Community in Jumeirah Village Circle (JVC), which has been handed over to buyers, The Onyx, which is nearing completion near Emaar Business Park, and a few concepts for its land bank in JVC.
Ammar Sweis runs a tight ship as the company’s CEO. He joined Ishraqah as Chief Financial Officer in 2008, before becoming chief executive in 2013. PW finds out how he led the successful completion of Ishraqah’s flagship project and how he is managing future developments.
Can you talk about your development philosophy?
We study the market to understand the suitable time to launch new projects, looking at areas such as Meydan, Dubailand and Business Bay. A year and a half ago, we had certain developments under review on our nine plots in JVC, but decided to delay plans for new developments and focus on the completion of our large-scale, mixed-use project, The Onyx.
At that time we were convinced that there was a significant demand in the market for more affordable villa projects, especially in Dh2 million-Dh3.5 million segment. This is where buying instead of renting makes sense, fostering a sustainable market. In the meantime, others have decided to develop this sector.
Why didn’t you go ahead?
At the time, we were a bit concerned that speculation might start again because of the magnitude of new projects announced. Speculators usually assume they can sell property having paid 30-50 per cent, but due to the market softening, properties have become a hard sell because premiums are flat or below original price in certain areas and projects.
It’s OK to have a certain percentage of speculators in the market, but when there are concerns that prices will drop, speculators might rush to sell and buyers usually take a wait-and-see attitude.
So you expect a bubble?
No, I don’t expect a bubble, thanks to the new rules and regulations, but there is a wait-and-see attitude these days, which started a few months back. However, we are seeing this changing now, since it’s a good time to buy, although I expect some hesitation from buyers to continue throughout the year.
Most developers are phasing out large projects, as it’s better to launch and develop them in parts. Once projects are handed over or near completion you can expand to new areas within the master plan.
Additionally, investors and buyers are more educated than before. Good developments with the right location, project mix, good floor plans and finishing will continue to sell and the prices will be stable. Large ones that are poorly managed in terms of infrastructure works, construction phasing, sales strategy and project financing will suffer in the short term, but do fine in the long term.
The number of phased units coming to the market is not alarming. There’s also huge demand from people in the region who want to live, invest or buy a vacation home in the UAE.
You mentioned speculation. Is it back?
It’s difficult to estimate the amount of speculation in the market, but I don’t think the number of speculators who don’t have the funds to make the next unit instalment is big today. At The Onyx, investors buy to lease their units, sell at a later stage or settle as end users. We don’t sell multiple units or full floors to investors we don’t know to limit speculation so we can be sure a buyer has sufficient funds to make timely payments until completion. Even with the Seasons Community we never sold more than five town homes to one individual.
The market will do all right as long as rents don’t drop significantly in the coming months. Buyers and investors will keep their property as an investment if they can make reasonable returns. You will only start seeing a bigger impact on rents when more properties are available by the end of this year or early next year.
Your Seasons Community was delayed. How is it doing now?
It was a large development of around Dh750 million. We had some issues with payment delays by banks that were financing half of the units. However, when we handed over the project by mid-2013, buyers actually ended up being happy about the delay, because prices went up and peaked in early 2014 in JVC. So they made a profit by selling or renting out the property, as rents went up significantly as well. Today, the project is 90 per cent occupied.
You mentioned that The Onyx is attracting a lot of interest.
Yes, we relaunched the project recently with attractive prices and payment plans. The interest from potential investors was beyond our expectations. [It gained notice] because of its excellent location on Shaikh Zayed Road, mix of offices, residences, hotel and retail, attention to finishing and quality, as well as carefully studied floor plans. We also have a retail consultant on board to get operational matters and mix of shops and restaurants right — these will be medium- to high-end as that is still missing in The Greens and nearby Tecom.
We will probably start leasing our retail space in summer. The hotel tower in the project was sold to a Kuwaiti business family and will be operated as a four-star boutique property.
You converted some of the offices to residences. Are offices not selling well?
We redesigned the project and introduced residential components by changing the upper 13 floors of one office tower when the market changed a few years back and demand for offices decreased significantly. These floors had been sold mostly to shareholders and related parties and we reached an agreement with the few remaining investors by moving them to other offices or residential units, after getting the authorities’ approval to change its use.
We had to slow down construction while the owners injected cash into the project as we had zero collection for almost two years with no demand for office space. Investors could buy much cheaper ready offices at that time, so many [buyers] defaulted. We only terminated units if the investor showed no interest in continuing. Those who stayed got discounts as compensation for the delay in completing the project, which was beyond our control. Once we finished the redesign we entered a fast-track construction programme.
Office sales during the relaunch have been higher than residential, probably because we have 400 extra spaces assigned as visitor parking, a retail mix and hotel, which means business people can stay at the hotel and walk to the office. This is in addition to our location. Buyers are also looking at well-planned and quality finished office buildings, [with amenities] such as high-speed elevators.
The downturn meant some developers had to cut costs to complete [their properties]. High-end office space is limited in Dubai. We haven’t cut corners but upgraded many components.
Who is buying and at what price?
Holding groups, high-profile individuals and investors who believe this kind of offices can give them the right returns. We have asked our investors to start with their fit-out right after handover to finish within a year and a half from completion. We don’t want the project to be a construction site for the next five years as it wouldn’t be convenient for residents and hotel guests.
Our shareholders also have offices and residences at The Onyx. There is a market for serviced offices and we have some vacant units, which we might keep to lease to large tenants. Around 70 per cent of the project has been sold. Prices depend on the views — the sea, the Palm Jumeirah, golf course, etc. The rate starts at Dh1,300 and goes up to Dh1,700 per square foot. These prices should increase by year end, when we near completion.
How is residential faring?
The shareholders may hold or sell but we have about 30 per cent available. The unit sizes are bigger than average with a nice floor plan, maid’s and storage [rooms] and big kitchen and living area. The two bedrooms ae around 1,750 sq ft. Depending on the view, the net prices for large units start at Dh1,300 and go up to Dh1,800 per square foot.
End users and long-term investors who believe in the market are the ones buying. The payment plan is 10 per cent down payment, 15 per cent every three months and then 60 per cent once it is finished. The plan will be revisited in the next couple of months as the project nears completion.
When will you complete the project?
Our target is to have the hotel with most offices and retail outlets up and running by mid to end of 2016. The residences will be ready by the end of the year, and as we have a separate entrance, elevators and parking, residents can move in any time.
Source: Nicole Walter, Special to Property Weekly