Time to hold on, or let go?

By Mohanad Alwadiya

The year 2016 has certainly made its entrance with a bang.

By mid-January, the Royal Bank of Scotland’s dire warning to “sell everything except high quality bonds” had everyone’s tongues wagging, with some analysts saying that yes, 2016 could lead the US and European markets down a substantial plunge. On the other hand, a few critics of RBS’s dismal pronouncement have advised investors to stay calm but keep a close watch on events as they unfold.

Reflecting the property market slowdown which became more marked in 2015, some distress sales had already begun creeping into the market which left me a little intrigued. It reminded me of a meeting I had with one of our most loyal clients.

As the owner of a portfolio of apartments purchased in early 2011, the past few years had been an extremely lucrative time for this client, and his success has been a result of his astuteness, objectivity, and well-developed analytical and decision-making skills refined by years of experience in an exciting albeit sometimes-risky market.

The topic of our conversation was whether or not to sell his property assets as the market has certainly slowed. I was surprised by the question as he had always held the view that owning property was an important part of his overall investment portfolio, and the assets he is holding are of excellent quality located in some of Dubai’s well-established or iconic areas. Rather than make a hasty decision that might be regrettable, I conducted a thorough review and constructed a recommendation for his consideration and eventual decision.

When reviewing the portfolio, it became apparent to me that now, more than ever, property portfolios require very careful management. While on the face of it, an easy decision would be to sell our client’s entire portfolio – not for a substantial profit, but simply for a “return of investment,” to quote RBS. But the question remained, if he were to sell part of his property portfolio, where should the money be invested? There was no answer as there was no plan.

As part of our analysis, we found that by retaining his portfolio, our client would continue to receive an average of 6.8 percent net rental returns per annum on the adjusted value of his properties over the next 5 years. In addition, notwithstanding the recent cooling of the market, we estimated that he could expect, on average, a capital growth of at least 6 percent per annum over the next five years for an estimated net total return of 12 percent per annum, a return we considered conservative.

The review included careful analysis of current maintenance requirements, future capital works, market factors, regulatory developments, industry forecasts and trends, alternative opportunities, risk factors, and the likelihood of relevant future events, whether they be economic, political, regulatory or financial in nature.

When I asked our client what alternative investment could provide the same return without taking on greater or excessive levels of risk or incurring new investment transaction costs, none could be identified.

The example of our loyal client clearly illustrates that now, more than ever, property portfolios require very careful management. We all know the market has cooled, but this is hardly a reason to make rash decisions without looking forward and doing some proper analysis.

Wherever you look around the globe, yield and total returns are getting harder to find, and the value of established property portfolios with good occupancy levels and good projected tenant retention are increasing in comparative value all the time.

Those investors who hold and nurture their existing property asset portfolios will do very well over the next 5 years, particularly those who have diversified their holdings to include some of the more affordable asset types as well. Conversely, rather than selling existing assets, the opportunity to use existing equity to take advantage of the current market slowdown and finance new acquisitions and expand portfolios is one strategy that we are working on with several clients now.

Not everybody has the time or is comfortable with managing a property portfolio, especially in times of change. However, there is expertise available to help you, and you should consider engaging a good property manager who will ensure that you maximize returns from your property portfolio and enable your long-term portfolio strategy to be realized.

Think of your investment as your business, a business that will be affected by many different factors and events. Proper management is essential, and you need to ensure your business is in capable hands – providing you with the returns you expect with as little hassle as possible.

And even as other prominent financial institutions like Standard Chartered and JP Morgan have expressed somewhat similar sentiments in terms of oil prices and stocks respectively, those investors with sufficient liquidity, and who already enjoy ownership of a varied stock of high quality performing real estate assets may want to consider acquiring more property after proper due diligence.

All knowledgeable investors know that, when all else fails, real estate is one type of asset that increases in value over time (capital appreciation)… even after being subjected to market highs and lows.

In sum, if you have what it takes to hold on to a good quality real estate portfolio, do not even consider selling at this stage. If market prices give you good reason to acquire more, why not? Remember the market cycle – right now, if you can still afford to purchase property, go right ahead and buy – but, as always, with eyes wide open.

Impact of Expo 2020 bid win for Dubai

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It’s hard to imagine the scale of Expo 2020 and therefore easy to underestimate its impact. It is the third largest event in the world with only the Olympics and the Soccer World Cup being larger however, while the Olympics and World Cup are conducted over a relatively short period of time, the Expo will be conducted over 6 months.

It is estimated that over 270,000 jobs will be created in Dubai with 90% of them in the period 2018 to 2021. The majority of these jobs are expected to be created in the tourism and hospitality sector while 80,000 jobs are expected to be created in the construction industry, the majority of which will be required to build the Expo site itself. Located in Jebel Ali, the Expo site will encompass 438 hectares and will consist almost entirely of hospitality and tourism amenities with at least 180 exhibition pavilions to cater for the 25 million visitors who 20% during the 6 months of the Expo.

The total costs are estimated at $8.8 billion with $7 billion required to develop the city-wide infrastructure, the Expo Area and its surrounding site. The benefits to the UAE economy from infrastructural investment, job growth, and massive increase in tourist revenue are enormous and obvious. Economies grow on the back of investment and investments of this scale are rare as are the resulting benefits in terms attracting more tourist dollars and further embellishing the brand Dubai. For Real Estate, hosting the World Cup is likely to create a boom in the industry. The last city to host a World Expo was Shanghai in 2010. Despite being held during the worst global recession in history, property values grew in excess of 60% in the 12 months before the event was held. While Dubai may not achieve such stellar value growth, the predictable surge in demand for accommodation of all types, from labor camps to apartments to executive Villas, for the additional 270,000 or so new job holders is sure to have a significant effect on values.

In addition, demand for office and commercial space is also likely to increase as existing businesses expand and new business entities set up operations to support the conduct of the event or service the bevy of new business operators or the millions of additional visitors. There is no doubt that the Expo will help re-balance supply and demand in this area. Retail space is likely to be at a premium as visitors will not confine their spending to the Expo site alone. In addition, 25 million visitors require a place to stay and, with Dubai’s hotel industry already enjoying consistently high occupancy rates, more hotels need to be built and serviced. Many of these are already planned as part of Mohammed Bin Rashid city.

Nakheel welcomes Waitrose to Palm Jumeirah mall

Dubai, 3 October 2013: Nakheel today confirmed upscale British supermarket chain Waitrose as a first and flagship tenant at the AED2.5 billion Nakheel Mall on Palm Jumeirah. Waitrose will occupy a 4,200 square metre area at Nakheel’s new retail, dining and entertainment complex, which will open in 2016.  More than 100,000 sqm of shop space, spread over five levels, is available. Ali Rashid Lootah, Chairman of Nakheel, said:  “We are delighted to welcome Waitrose to Nakheel Mall, which will create focal point for Palm Jumeirah and bring a new dimension to shopping, dining and leisure in Dubai.  It will enhance the services and facilities for residents of The Palm, and provide an exciting new destination for people across the UAE, including the millions of tourists who visit each year.” Mr Ali Albwardy, Chairman of Fine Fare Food Market, added: “Nakheel Mall on Palm Jumeirah is an exciting retail development and we are delighted to be represented there. Waitrose aims to combine the convenience of a supermarket with the expertise and service of a specialist shop and we looking forward to bringing this experience closer to the residents and visitors to the Palm.”

Nakheel Mall – endorsed earlier this year by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai – will be built in the centre of Palm Jumeirah’s trunk. Ground work is underway, with construction beginning by the end of 2013. A 50-storey, five star hotel will also be built alongside the Nakheel Mall.

The Nakheel Mall and Hotel complex will have three basement parking levels, 4,000 parking bays, a 1,000 sqm indoor garden and a 180 metre high viewing deck with panoramic views of Palm Jumeirah and the Dubai skyline. There will be more than 300 shops, including Waitrose and two anchor department stores, a nine-screen cinema and six medical clinics.  The Mall will also have a roof plaza with restaurants and cafes as well as a host of eateries inside.

Source: propertyonline.ae

Crystal Lagoons to bring world’s largest crystalline manmade lagoon to Dubai

Dubai, 02 October 2013. Multinational Crystal Lagoons Corp. the patented technology developer of giant crystalline lagoons, marks its return to Cityscape in Dubai, which starts on the 8th October, with the launch of its latest and grandest project to date, which once completed will be entered into the Guinness Book of World Records.

Crystal Lagoons has signed a deal to construct the world’s largest manmade lagoon, covering 40 hectares, almost four-times bigger than the world’s largest existing lagoon. Located in the upscale Mohammed Bin Rashid City – District One residential community, located in the heart of Dubai, the lagoon will form an integral part of the US$7 billion project. Mohammed Bin Rashid City – District One is a prestigious joint venture between Dubai-based Meydan Group and Real Estate developer, Sobha Group.

The new lagoon with its expansive custom-made beaches, which offer unlimited scope for swimming, water sports and other water based leisure activities, will be a core amenity within Mohammed Bin Rashid City – District One’s fourty seven million square feet of freehold land. This expansive development will feature luxury residences, green parklands, waterways, a high end shopping and dining pavilion and large recreational spaces creating one of the lowest density developments in the heart of any international city.

“Caribbean landscapes are no longer exclusive to tropical destinations. Our pioneering concept and state-of-the-art technology, which allows for sustainable, swimmable, turquoise lagoons of unlimited sizes to be built and maintained at low cost anywhere in the world, is proving extremely popular with our growing list of partners across the Middle East,” said Kevin P Morgan, CEO, Crystal Lagoons. “Dubai gives us an outstanding strategic position in the Middle East, and the opportunity to participate in a world-class development that adds prestige to our current project portfolio,” he added. Mohammed Bin Rashid City (MBRC) is a planned mixed-use development containing four components; family tourism, retail, the arts and entrepreneurship and innovation. One interesting feature will be a public park larger than Hyde Park in London.

Crystal Lagoons’ global portfolio of 250 projects located in 50 countries includes five high-profile Middle East based developments. The company has completed two lagoons in the popular Egyptian resort of Sharm El Sheikh – including currently the world’s largest lagoon at 12 hectares – and another completed project in Jordan, along with two other projects under development in Oman and the UAE. “As the only company in the world offering this concept and technology, we continue to expand globally and revolutionize the real estate market by partnering with international developers and resort operators to improve overall sales prices, velocity, and project densities. Based on our track

record in the Middle East, we have proven that our technology can add value to a top destination, making beachfront real estate a reality anywhere in the world,” said Morgan. The company is currently in discussions for a number of exciting new tourism projects in Saudi Arabia, Qatar, the UAE and Egypt, and Morgan emphasises the region’s attractiveness as investment in tourism infrastructure continues to outpace other global markets. Crystal Lagoons’ portfolio of regional projects also includes the completed 4.29-hectare Dead Sea Lagoon in Jordan, a project developed in partnership with Turath for Tourism & Real Estate Projects, and the under development 4-hectare lagoon located within the new Barka Resort in Oman. The Alargan-developed resort is situated 50 kilometres west of the capital, Muscat, and the lagoon has become the focal point of the community, which also offers three hotels, serviced apartments, villas, townhouses, apartments and a souk.

With the announcement of its new Dubai project, Crystal Lagoons is also on the way to securing its third Guinness World Records’ title for the world’s largest swimming pool, building on the success of its San Alfonso del Mar, Chile, and Sharm El Sheik, Egypt, locations. The only global company with the technological capability to make the development of giant bodies of water economically viable, Crystal Lagoons is positioning itself as offering a unique product differentiator to high-profile tourism and real estate projects around the world.

Its technology makes it possible for people to enjoy an authentic beach experience in previously unimaginable locations, such as the desert or in the centre of major cities, with the potential to add economic value to new tourism destinations and real estate projects. Crystal Lagoons uses up to 100 times less chemicals than traditional pool systems and only two per cent of the energy required by conventional filtering technologies, making the lagoons incredibly sustainable. The largest real estate event in the Middle East, Cityscape Global 2013 takes place from 8-10 October 2013 at the Dubai International Convention and Exhibition Centre.

Source: propertyonline

Full steam ahead for Mohammed Bin Rashid City District One

Dubai-UAE, 02 October 2013: Meydan Sobha FZ LLC, today announced that District One, Dubai’s marquee development located in Mohammed Bin Rashid City, is making rapid progress with the construction of its Show Village. The Show Village, which will act as a unique showcase of the prestigious Meydan Sobha development, is already approximately 80 per cent complete and when finished will comprise nine show villas, a demonstration of the world-leading Crystal Lagoon feature, extensive landscaping and a bespoke sales centre.

District One is an exclusive residential destination situated in a prime location in the heart of Dubai, a mere 2.9 kilometres from the Burj Khalifa. The expansive development is just five minutes from the entertainment and financial centres of the city, but it will be one of the lowest density residential developments in any international city, with over 65 per cent of its 1,100 acres dedicated to open and green space. Launched by Meydan Sobha, an equally owned joint venture between Meydan Group LLC and Sobha Developers Ltd, the project, which will be delivered in four phases, will be completed in approximately seven years.

The nine actual villas in the Show Village will offer buyers a preview of what their future life of luxury will look like as they will be identical in every respect to the homes that residents will be able to buy. One of the unique selling propositions of District One will be the world’s biggest manmade lagoon, which is being constructed by globally renowned Crystal Lagoons, and the Show Village will also include a portion of the actual lagoon built using the same technology.

Commenting on the development, Mr. Saeed Humaid Al Tayer, Chairman and CEO of Meydan Group said: “Mohammed Bin Rashid City-District One is poised to become a monumental destination in Dubai, offering a residential development in the heart of the city that is currently unique to anything else in the region. The development also includes various attraction points ranging from parks, man-made beaches and the largest Crystal lagoon in the world to sports fields with cycling tracks, an equestrian club and shopping & dinning promenade with an array of restaurants. With master planning, aesthetic design and build of the highest quality, the show villas’ completion provides customers with the ability to physically experience their future lifestyle in a true and meaningful manner.” Prospective buyers in District One will have the option of distinct villa styles and a vast array of floor plans, ranging from four to eight bedrooms.  The project embodies a lifestyle that blends luxury with natural beauty and nouvelle residential. “With a three-decade-long pedigree of developing and constructing lifestyle destinations, District One will be the jewel in Sobha’s crown,” said Mr. PNC Menon, Founder and Chairman of Sobha Group.

“We expect to complete the nine villas by November. Our partnership with Meydan will enable us to deliver expertise, choice and quality to an entirely new community in the heart of Dubai.” In addition to the stunning villas themselves and the vast lagoon, District One will also deliver a phenomenal range of features and activities including parks, manmade beaches, canals, water sports, and even an equestrian club with riding trails. The development will also feature a promenade with a wide selection of stores, restaurants, cafes, lively bistros and entertainment options.

Source: propertyonline

High expectations for Cityscape Global 2013

The 12th edition of the Middle East’s largest and most influential property event will take place from 8-10 October at the Dubai World Trade Centre, and has been extended to two additional exhibition halls this year, covering more than 25,000 square metres of exhibition space. With more than 200 international and regional exhibitors taking part, the global real estate showcase has been on a consistent upward growth curve since 2009, and will be the largest it has been in four years. Even so, its organisers, Informa Exhibitions, hadn’t anticipated such a strong exhibitor response months before the show opens. “With Cityscape Global being the barometer of the local and international real estate market, we were always anticipating continued growth of the show.

The demand for exhibition space that we have received over the last couple of months in particular, however, has been quite overwhelming,” said Wouter Molman, exhibition director of Cityscape Global.

“There is definitely a heightened buzz about the exhibition this year which has resulted in the difficult decision to turn away exhibitor requests because we simply don’t have any more space to accommodate them. “The good news is that those companies which were ready early and confirmed their space will have a global audience of more than 25,000 participants to showcase their latest property developments and peripheral real estate products and services.” Molman added that he expects a large number of major announcements to be made by participating exhibitors both leading up to, and during Cityscape Global, as developers work hard behind the scenes to build up investor interest to coincide with the three-day event. This year will also see an increased participation from Qatar based companies, with major projects from key developers Barwa Real Estate Company, Mall of Qatar, Msheireb Properties, and United Development Company, all taking

centre stage. Abdulla Hassan Al Mehshadi, CEO of Msheireb Properties, said: “Msheireb Properties is delighted to be taking part in Cityscape Global 2013. For us, it represents an opportunity to showcase our flagship project Msheireb Downtown Doha and the pioneering work we are currently undertaking in the field of sustainability urban development.” Another stand that will be a major attraction for crowds will be that of the Dubai-based Diamond Developers, which will showcase its AED1 billion, 46 hectare Dubai Sustainable City development, the Emirate’s first fully sustainable real estate project. Faris Saeed, CEO of Diamond Developers, commented: “Under the slogan ‘Sustainable living’ we will be presenting at Cityscape Global a day of a family living in a sustainable community.

Dubai Sustainable City is a new generation of community planning, and we will showcase the multiple benefits of living in a sustainable environment with emphasis on green, social and economic aspects of sustainability. We are thrilled to share our vision and experience in sustainability solutions that seek to make Dubai the region’s benchmark for sustainable development.”  Ahmad Al Matrooshi, managing director of Emaar Properties, Foundation Sponsors at Cityscape Global, added: “Cityscape Global is the region’s premier property exhibition that attracts visitors from around the world. As a foundation sponsor of the event, we will once again showcase our established and upcoming project portfolio to a distinguished audience encompassing industry professionals across all facets. The exhibition is a key index of the performance of Dubai’s property sector.”

Source: propertyonline / Property Times magazine

LD takes steps to stabilize sales and rental markets

Dubai’s Land Department (LD) is taking further steps to stabilize the market, taking the rent committee under its wings and doubling the property registration fees. The IMF recently alerted of the risk of a property bubble emerging in Dubai, and this increase in registration fees may just be what the doctor ordered.

“We studied this increase in the fees actually before the warning was issued by the IMF, and although we believe our decision is in line with the IMF’s concerns and increasing the fees to 4% will limit any indications of a bubble happening, limiting unhealthy flipping, we don’t agree that there is a bubble forming. On the contrary, we believe the market has reached maturity, is stable, with actual projects not speculation and the values today are at the right level for a global city like Dubai,” says Sultan Butti bin Mejren, the director general of the Land Department of Dubai (LD).
The increased fee from 2% to 4% to register a property on the land department’s interim or completed real estate registry applies to all properties, except industrial and warehousing, from October. As per law buyers and sellers are expected to continue sharing the fees on a 50-50 basis.  The LD has recorded AED162 billion covering 44,000 transactions since the first nine months of this year. In comparison the same period last year saw transactions of Dh90 billion and Dh145 billion for thewhole year. Clearly the market is on the go. “It is good they’re trying to curb flipping, we would suggest a property tax and this is a good example of that. We’ll see how well the 4% will work but the experience in Singapore and Hong Kong is that transaction tax is s god way to reduce the amount of dissuading buyers selling on too quickly,” comments Craig Plumb, head of research at Jones Lang LaSalle – MENA.
Equally rents are on the way up. The LD hopes by moving the existing rents committee under Dubai Municipality into its judiciary remit, it will stabilize rent levels and decrease the number of disputes. The rentdispute settlement centre promises to speed up procedures and benchmark them to, if needed, introduce new laws, revise application fees and even the rent index.
“The LD has some very experienced people, so hopefully this new Centre will be a good thing for the market, but it remains to be seen how the transition goes and whether the new Centre looks at things the same way as the Rents Committee did,” comments Michael Lunjevich, partner at Hadef & Partners. The centre will open 60 days from when the already issued decree to form it is published in the Official Gazette. The next opportunity is October. “We expect to open by December,” confirms Sultan.
source: propertyonline / Property Times magazine