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As the Chief Commercial Officer of one of the largest private developers in the UAE, Mustafa Pooya loves to be in prime position. The Marina is Pooya’s bastion; a community he has seen grow and one that the Select Group has shaped to a great extent, with ten of its major projects in the area.
For the group’s latest Dh3-billion flagship project, The Residences at Marina Gate, Pooya explains why as a developer it settled for one of the last available locations on the waterfront. For him, the stunning uninterrupted waterfront views matter. In a market where luxury doesn’t have an upper limit, he knows that investors and end users are ready to pay the right price for a premium product. Having delivered six million sq ft of real estate in the UAE, with another six million sq ft currently under way, Pooya explains why the latest offering is likely to stand tall at the gateway to the Marina.
Dubai Marina is clearly your stronghold. How have you seen the Marina grow and why did you decide to focus on the area?
We saw the long-term potential. The infrastructure requirements to build a marina are considerable, so when we were looking at a price point in terms of land value, and what we could sell, the numbers really stacked up. We always knew that the Marina would be a city within a city. This was the idea behind developing in a prime location. When you talk about luxury, the location plays a huge role. For us, Dubai Marina is prime location; so is Downtown Dubai and the Palm Jumeirah. We wanted to have our signature in a location that was prime and had the potential to grow.
Even during the global economic downturn when prices in the Marina came down to about Dh700-Dh900 a square foot, we were able to see that this would soon become one of the most sought-after places to live in Dubai. We saw a buying opportunity during this time. As developers we acquired land, as investors we acquired assets in the area. But we have also considered other high-end areas as well, such as the Palm and Downtown. Our continuous focus on Dubai Marina was organic and not engineered. We did not set out to become its largest private developers - I think our good fortune and ability to deliver projects on time brought us to this position. Our strength has been in the ability to complete what we started.
Are you dealing with a more aware market now? Have people becomemuch more conscious of what they are buying?
In 2013 and 2014, when we started looking at launching projects again, people asked us a lot of questions about what we’ve done in the past, our history and if we deliver on time. These are questions that weren’t necessarily being asked in 2005 and 2006. People had faith in Dubai. They didn’t care whether the Real Estate Regulatory Agency (Rera) was formed or if the escrow [law] existed. It was only after the downturn that people asked, “Wait a moment, what happens now? Who’s going to protect my interests?” Prior to the downturn, there was a clear lack of expertise in the market. For example, you started as an investor who bought an apartment, and then bought three apartments, followed by an entire floor of a building before finally deciding to become a developer, as many felt it was not such a hard job. But that is not how it works. That’s when a lot of people realised it was more complicated than it seemed.
Right from the beginning, we hired the best professionals to make sure that all Rera rules and regulations were being implemented. It’s important that people are asking more questions now because it only helps to reiterate our solid reputation.
In the financial downturn, you delivered 2,300 units when most developers were forced out of the market. What steps did you take to ensure financial discipline?
In the current market, you will do fine if you ensure that all Rera rules are being followed. Prior to 2008, you could buy a piece of land, not pay for it in full and launch a project. So essentially you were using investors’ money to fund the plot, and then further on to pay the contractor to start the project through to completion. So the first rule Rera implemented was that the land has to be paid in full. Next Rera introduced a lawthat said you can’t launch if you haven’t completed 20 per cent of the project — or alternatively you needed to put in a bank guarantee for the 20 per cent. You now require more cash as a developer to be able to launch a project. In the past, people were punting with other people’s money, and that’s never a good business plan.
When we launched a project, we made sure land was paid for in full. We made sure we could fund the development come what may. These steps ensured that we were sound enough to sell. Working with professionals and understanding what the construction costs would be have also helped. Today, Rera has taken additional steps. Up until July last year you could launch a project without a building permit in place. Today you need a building permit. This means that your entire design has to be completed in full and the main contractor has to be appointed. Sometimes it seems excessive, but it’s a good step. Which is why in the past year and half, not many private developers have launched. Previously, buying a piece of land meant you could bring it to market in three months. Now it takes 15-18 months to bring a project online.
Out of the three towers of your flagship project, The Residences at Marina Gate, two have been launched. How was the response?
Although people are talking about a softening market, a slower market, we have got a phenomenal response. The first tower (51 storeys with 399 units) was launched in April last year and it was immediately sold out. The second (64 storeys with 519 units) was launched in October. At that point people were questioning whether it was the right time to launch, would the market be able to absorb it. We are now close to two thirds of it being sold out. Whatever we released at launch is already sold out.
What stands out about the project?
The Residences is a threetower development on a single piece of land. Before we started developing, we went to Rera and split the land into three separate plots, which means each has its own escrow account and is a project by itself. This is how we have mitigated risk. Otherwise, it would have been a project with nearly 1,500 units altogether and if we hadn’t completed the third tower, then we couldn’t hand over keys for the first one. So dividing the plot mitigates risk for us as a developer and also for end users and investors.
The building has been designed keeping its residents in mind. There is a combined podium for all three towers and when you come up to the swimming pool level all the towers are interconnected. The towers face the water, so we’ve used a lot of glass. All the cladding is made of glass. The use of floor-to-ceiling glass will make a massive difference. It’s higher than what you usually find in Marina.
When will The Residences be delivered?
We will be delivering Marina Gate I in 2017, Gate II in 2018 and Gate III in 2019.
So who’s buying?
There is a fair mix of people, but it is mostly expats. In terms of nationalities, we have a lot of people both from the UK and the GCC - especially from Saudi Arabia.
However, if you were to break it down to the resident level, more than 50 per cent of the buyers live here in Dubai. The product that we are selling is an expensive product. And it is only those who recognise the location and its value who would like to buy. For example, prices at Marina Gate II start at Dh1.3 million for a onebedroom apartment all the way to Dh2.2 million. Price per square foot ranges from Dh1,900-Dh2,600.
These are high numbers, so if you don’t know the Dubai Marina, if you don’t understand the location, you would ask why am I paying so much?
In 2007-08 the Marina had one price and it hovered around Dh1,500 a square foot. Now prices in the Marina can vary from Dh1,200- Dh3,000 a square foot, depending on the location.
At Marina Gate II, we have one-, two- and threebedroom apartments, duplex villas on the podium level, half-floor penthouses and one full-floor penthouse. Prices range from Dh1.3 million- Dh30 million. At these prices people don’t come in as speculators. People who are buying from us come in either as long-term investors or end users.
When someone buys a Dh2.2-million apartment facing the marina instead of a Dh1.3-million unit, that’s telling you that he or she doesn’t care about the rental yield. It is for this reason that prices in Downtown are even higher than Dubai Marina.
Within the Downtown area, if you want to live in a Burj or Fountain-facing apartment, it will be more expensive than apartments that do not have these views.
You have also entered the hospitality sector in Dubai with the InterContinental Dubai Marina. Do you consider hospitality as an income-generating asset?
The InterContinental was not something that we acquired. It is a purpose-built hotel that we set out to build ourselves. The hospitality vision was always there. It’s a diversification of our portfolio, to make this a long-term, income-generating asset.
Have acquisitions also become part of your strategy?
When we saw an opportunity in the market, we jumped in. All through the downturn we were acquiring units here as well as in the UK. In 2013 we acquired the Marina tower from Emaar and then sold it [in units] in June 2013. Since our origins are in the UK, we have also gone about acquiring assets in Scotland, and more recently the Radisson Hotel in Birmingham and a distressed project in Nottingham that we completed as a developer.
Do you think Dubai is great value compared to other international cities?
Yes, definitely. Look at Singapore. Prices are $1,500 (Dh5,509)-$2,000 a square foot. Compared to that we are at best around $600- $700 a square foot and people still find it too expensive. I don’t think it’s expensive, it’s far from that. Compared to where we were in 2008, look at how much we’ve achieved today.
The tallest tower has been delivered, the Metro is a success, the Dubai Mall has become the most visited tourist attraction, Dubai airport has surpassed Heathrow as the busiest airport in the world for international passengers, and now you even have theme parks coming up. There is much better infrastructure than what we enjoyed earlier, tremendous safety and security.
The Dubai Government has added a lot of value to our lives. Why do you think people keep coming back here? It’s because Dubai has been able to position itself as a great destination, be it shopping, leisure or health care. There were 12 million tourists last year. The vision is to have 20 million tourists [annually] by 2020. That in itself is a massive undertaking and if Dubai can achieve it, then the sky is the limit.
Source: Esha Nag, Editor, Property Weekly