Lesley Sayle

The gap between supply and demand in Dubai is estimated to stand at 21,000 units this year and is expected to rise to 57,000 in 2017. Another report says that supply will surpass demand in the next 12 months, but a decline in prices is not expected until 2009. So, these are two contradictory reports. What is your opinion about how supply and demand will behave?

I genuinely believe that we’re going to continue growing with the country. There is definitely a demand. The government is now doing everything to support the growth of the country’s infrastructure. A couple of years ago, we had traffic problems, schooling problems, there was a shortage of flights and these are the things that support the growth of the country, it’s not just about individual developers building new offices and houses for people to live in, it’s not just real estate; the whole country has to grow. The government has taken dramatic steps; there’s the metro coming in now, I think even Abu Dhabi are intending to do a metro as well. So, it’s sustainable growth, in my opinion. We run a very high level of occupancy in our rental portfolio and in our sales strategy. Right now, I am actually ahead of my targets for the year. The demand is there but I think it’s becoming a smart demand; people are now a little bit more educated, there’s more choice so they’re actually thinking about what they’re buying, having a look at the different locations and what benefits they get, and value for money. I believe demand is growing but I think it will be smarter; it may not see the unusual circumstances we’ve had in the past where 500 units sold out overnight and people are queuing, that was the beginning of the market when people weren’t 100% sure of what it meant, its value and what they were buying into. Now, people are a lot more educated. However, it will continue to grow, most definitely.

Do you think demand is fueled by natural demographic growth or speculation?

There is speculation in every booming market, that’s just the way it works. However, this is sustainable. We’re seeing lots of people relocating from Europe, Europe is suffering in this department, there’s a downturn in real estate and commerce in Europe. Here, people are buying homes and actually moving in. The information that I had at the end of last year was that the population increase was about 44,000 people a month, which is immense. Obviously, a lot of that will be labor, but that is still an immense growth. If somebody comes out here to work, they need a home, they need somewhere for their children, so, it comes as a big package. Everybody benefits with the relocation of an entire family.

The Real Estate Regulatory Agency introduced significant legislative changes to the real estate market in Dubai such as condominium law, a new rent cap of 5% for 2008, freehold and escrow accounts among others. How do you assess this new legal framework?

I think it’s fundamental. It’s about time. I’m very happy about it. We, at Union Properties, have always had very intelligent contracts. The contracts that we use have been put together by European and American educated lawyers and we’ve always done it with our own experience of laws, within the laws that we have. However, the laws have never been there to back up the way we manage the properties, now they are. Different areas are affected by different laws; there’s freehold law, leasehold law, DIFC law, which is different, and the rental market. So, I think it’s beneficial. Obviously, it controls your profit margins to some degree but that’s only if it’s an occupied unit; if somebody moves out of the unit I have the right to re-price the property and change the value. So, these laws help to control things. Rental and schooling are the two highest expenses people have. So, I understand why the government is doing this. I have met with a number of members of RERA, I’ve attended all of their conferences and seminars and I’m thoroughly happy with what they’re doing. It’s good for everybody. Also, it’s good for the reputation of the country because outside people understand that the government cares and has active involvement in the private market. It isn’t just another free-for-all, which some people could be afraid of, it is controlled and monitored.

Is there any significant difference between Abu Dhabi and Dubai, for example?

They’re both done differently, they’re different countries. Each of the seven emirates has its own ruling family, it has its own separate laws and bylaws. There is an overall federal law, which governs the United Arab Emirates and things can refer through federal law. Initially, things are governed by local bylaws, and Dubai has its own. I think they will remain independent. They’re an independent country. For example, Sharjah is a very different emirate to Dubai, there’s not a lot of retail in there. I think each individual emirate and its government and rulers have an identity for where they would like that emirate to go, Dubai obviously being the most internationally recognized. I can see them remaining rather independent in that respect; I can see them all becoming like Dubai overnight. I think it’s quite nice if they don’t, for example the East coast is un-spoilt and natural and I think it’s nice that they remain that way, which I think the government wants.

Union Properties acts as a holding company for its subsidiaries, and offers development, management and maintenance of properties, as well as undertakes related real estate services, such as interior design, contracting, district cooling, project management, theme parks operations and motor racing track operations. How do you assess your corporate structure? How do the different units complement each other? What are the advantages?

The only thing that we don’t effectively do is we don’t construct, we’re not contractors and it’s not an area that we would ever be interested in going into. However, what we do is we have areas of expertise in all areas of the lifestyle of properties. There’s the design stage, we have experts in design, concept planning and financing; then it goes into the construction stage, we don’t build but we have got personnel who manage that process on behalf of the company and then there is a handover at the occupancy stage where it becomes my area, all of the marketing is done in-house, the financing is organised in-house not at a finance institution and I think with it comes more understanding of the world. There’s an understanding that we all have, we know the company’s philosophy, and we understand what the CEO and the Board of Directors is asking for and then we can collectively bring that together. We can also control our final product and for some of the services we consult with other developers.

How do you manage your relationship with contractors?

That would be our chief construction officer’s question. He has a very tough job on his hands. Obviously, he chooses qualified contractors and we build to international standards. At the moment, we have three international contractors working on our projects. So, there’s an element of security when you outsource.

As part of the Emirates Bank Group, UP has the solid support of a leading financial institution. In what ways will the new merger affect Union Properties?

Emirates Bank is a major shareholder; its standards are of an individual major shareholder. It’s always given good credence to the company, it’s more internationally known than Union Properties. Our focus has always been Dubai and this region, whereas Emirates Bank is internationally recognised, they have a branch in London and have had for years. So, it’s always been a very good association for us. I think the NBD-Emirates Bank merger will only make that stronger. Obviously, we have our own board of directors so, as a business, the work is coming from inside but the association and financing doesn’t always come from inside. We have a syndicated loan at the moment, for the vast majority of our projects, and 11 banks are a part of that syndicated loan of Dhs 2.7 billion. So, it’s a matter of value for money. Of course, as I consider it, it will only make us stronger.

Would it force you to carry out international expansion?

Our intention is to go international, anyway.

Your Gross Operating Profit was up by 26% for 2007. For the first quarter of 2008, your profit was 70%. What are your targets for 2008?

To be honest, this is not a question for me. My role is predominantly the real estate and management of the income generated from that. Obviously, some of the benefits to our bottom line are coming through our subsidiaries and other means. We also have effectively sold two of our projects.

You are currently developing Motor City, Index, and Limestone House with a combined value of around €2.24bn. Can you tell us more about these projects? What makes them unique?

Motorcity is the first project of its kind in the world. It’s been operational for about three and a half years. It started with the Dubai Autodrome, which is the racetrack. It’s developed into a development that consists of five components. Dubai Autodrome is the first one that we launched, about three and a half years ago, and we’ve been hosting a number of races; there’s also the race school with a race track. Second to that, we have the F1X. We have the worldwide right for F1X Formula 1 theme parks in the world. The first one is under construction at the moment, we’re groundbreaking, in Dubai. The intention is to create more around the world. We’ve already received interest from a number of countries that would like to do an F1X theme park. However, our focus is on the Dubai one first.

For an investor, what would he be able to experience?

There will be two residential developments. These are being sold on a freehold contract, which is governed by Australian freehold. One of them is predominantly an apartment development and it has about 2,500 to 3000 units. The second one is a villa development. The villa development is sold out. The apartment one is up to the fourth phase of release and already ahead of projections on that. Each time we release another phase, the price increases. Finally, we have the business park. This is one area where a lot of motor sports-related people have been interested. First of all, we’re building an auto mall, which is going to be a shopping centre for cars, but it will only have cars. It will have literally wall-to-wall cars on two storeys, so it’s a one-stop location for buying cars. However, at one end of the shopping centre we have a 30 to 35 storey building called the Control Tower, which will be an office building and we’re also selling that on freehold at the moment. Towards the end of the development, we have the Renaissance Hotel, which is also linked to it. Around that we have about 30 plots of land, some of which have been sold to individual investors and some of which we have retained for our own use, and developers have a three-year construction program. At this moment in time, the vast majority of Motor City is under construction. I will start to hand over the residential developments at the beginning of 2009. By the end of 2009, we will have handed everything over and expect to have completed the theme park by then. Everything you see on the master plan, with the exception of the individual small buildings, should be completed by the end of 2009.

What sort of investors are interested in this project?

We have both; we have residential freehold units, which are apartments and villa units, and we have the commercial units. Some of them have just bought a small location in the Control Tower and then we have some investors who have actually bought an entire plot with an FAR that allows them to build up to thirty floors. So, it’s from your average Mr and Mrs Smith with their children up to massive investors.

Are there some investors from Europe?

Predominantly, they’re from the region. We have a lot of repeat investors because of our reputation and the fact that we’ve previously launched. The properties have always had good value so there are investors that are very happy with that. The minute that we launch something they come down and invest again in the project.

Do you see an increase in interest from Europe in the UAE?

I have been seeing that for the last couple of years. Initially, most of the new investors were coming from the south of Spain and that was more related to homeowners, not commercial, and I think people were struggling to maintain their lifestyles in some of the European countries. That was where I started to notice the difference. The commercial investors are still predominantly from this region, I believe.

Another iconic project is Index, which is a high-tech, intelligent building. How is it special? There are many intelligent buildings on the market.

Firstly, it has been designed by the number one architect in the world. It’s a beautifully designed building and it’s very smart. The first 30 floors of the building are office floors, there’s a health club in the middle and the six floors at the top are pent houses. The office floor space is about 23,000 sq. ft., which is immense. There’s not a single column on the floor because what he has done is an amazing engineering and architectural design; he has put four huge columns that run down the length of the building and they actually support it. There is massive flexibility when designing the office space. There are also high speed lifts to the higher sections of the building. It’s a beautifully designed building and phenomenally put together. I worked very closely with this project and enjoyed every minute of it.

I can imagine there is great interest in this building. Are you sold out?

At the moment, we haven’t released the offices. There’s an enormous demand, I’ve been put under great pressure by a number of people wanting to purchase from the office floors but we weren’t ready to release them and I still haven’t released them onto the market yet.

Are there any celebrities or famous people interested in the apartments?

Not that I am aware of. I think most celebrities like to be on the beach front. This is in the IFC, the International Financial Centre and Lord Foster for putting a signature building in every financial centre in the world; he has one in London and New York. He chose Union Properties to put one in Dubai so we’re honoured.

You have received the Mohammed Bin Rashid Al Maktoum (MRM) Business Award for Real Estate Development. What does this award mean to you?

It’s an incredible honour. We love what we do, we have great standards, we are governed by a phenomenally intelligent CEO who we’ve got great faith in and we have a wonderful board of directors as well. We’re all part of one family, if you like. As you said earlier, we cover so many different disciplines that we all work very closely together. We are very proud of what we do. We’ve worked with some of the best architects in the world to produce ground-breaking projects like Motor City, and to have that recognised by the Sheikh Mohammed Bin Rashid Business Award when we weren’t even paying attention is a phenomenal compliment. We were approached about the award and we all contributed to the presentation. The assessors came into our office and met with us and it was a great opportunity to discuss what we do and we’re all passionate. However, it wasn’t just about the projects, it was about the people. They wanted to know the staffing we have, how the company behaves, if they all know what is going out and were actively. It went through every fundamental aspect of a business, and I thought that was great because it wasn’t just because you’ve done something as impressive as the Index, it was literally a business award. It was for how your company operates and who is involved and we answered all of the relevant questions. When they called us it was a great honour.

The award tries to recognize the successful companies that have contributed to the economic development of the UAE. What effects do you think Union Properties has had on Dubai, directly and indirectly?

I think with every successful property, you’re adding to the growth of the country. As long as our properties are expanding, people and families are moving, offices are opening up, new businesses are started and so on. We have many associations; we have a very strong relationship with the Marriott hotel, we have three Marriott locations right now and we’re opening a couple more Marriott locations in Motor City. We have a relationship with Regus from the UK, we provide short-term office locations, where you can move into an office and it’s fully equipped; it’s a fully serviced office location. You can rent an office for a day or you can be there on an annual contract. We diversify. I think we’re not just adding to the skyline, we’re also giving people homes, we’re opening shopping centres, and we’re developing places for people to go for entertainment. In so many different ways, we are adding to the growth of the country because our focus isn’t just about building apartment buildings and filling them, it’s communities and whole lifestyles. For example, Motor City itself: you could live there, you could work there, you could send your children to school there – there are private schools there, and you could go shopping there. There are so many different aspects to it and you don’t even need to be involved in the race; the way that the residential developments are set up means you can be as independent of the whole development as you like. You can be as involved in the motor industry as you choose.

How do you address corporate social responsibility at Union Properties? Is it environmentally friendly?

Definitely. We do everything we can to reduce expenses, especially utilities because they are eventually payable by the homeowners so we have the responsibility to drop those costs. There’s a market for industry but, where we can, we definitely keep it environmentally friendly. One of the other things that we’ve done is with regards to the irrigation of the green areas. A green community is predominantly known as a green area and Dubai is a hot, dry country so obviously the water consumption is a major factor. One of the things we do is we send waste water to treatment plants and that is then used for irrigation of all of the green areas in our residential complex. This takes down the actual cost and also there is less water wasted.

In your opinion what is Union Properties brand associated with?

I would say quality and attention to detail. Those are the two statements that I would automatically give. I think those aspects stoke the reputation that we have. There’s also the branding of our projects, such as the green community, of which we have done three. When I am about to launch green community phase three, I have about 650 units and 2,500 people who want to invest there. I reviewed them on a one-to-one basis because I did not allow false investors, I wanted homeowners and that’s what we got. I think diversification has helped with what we do. The Uptown Motor City project is actually aimed at middle to low income bracket. Not everybody can afford a very big luxury house or would like to maintain a big garden – it’s expensive. So, the fact that we actually look at cases from more than one section of the market shows our attention to detail. We provide what people want. If it doesn’t satisfy the requirements of the end user then it doesn’t matter how good it is, or how environmentally friendly, it’s still empty. It has to be what people want and I would say we have accomplished that.

What are your international expansion plans?

F1X theme parks: the intention is to drive that out internationally. It could also be done for some of the branded projects that we have. There are a number of locations that the company are looking right now but nothing has been decided yet. I would imagine within this year we will announce our first international project.

You’ve been here for 16 years. What is your personal ambition for Union Properties?I

t’s very hard to explain but I am permanently motivated to try as hard as I can. I am not the ultimate decision maker. Effectively, when things are created, my role kicks in once the construction has been done. Obviously, I do get involved during the design stage. All the projects are exciting: Motor City, the DIFC project – when I met the Fosters in London for the first time it was awe-inspiring, Limestone House, and the Ritz-Carlton. There’s nothing I’m aspiring to, I just want to keep doing what we’re doing because not everything they do has to be a five star hotel or a Formula 1 racetrack, but the houses we build are for somebody and I have to think about how they will access it and how a family will live there and the same goes for shopping centres – big or small. I love the fact that whatever we do, it really matters. To me, as long as I’m being given these properties to work with, I’m very happy doing what I do. I love working here. People who are moving into the developments are satisfied with what they are getting. If you walk round the developments, especially the green community, it just captures everybody’s hearts; the kids are out playing and it’s a safe community in a safe location. I’ve been in the Middle East for 21 years and I’ve never seen that before. Things are changing now, it’s becoming more of a community where people actually know their neighbours, and I love that. Dubai is much more open and there’s much more going on. I’m happy to be part of it.

Do you have any final message?

I can only speak from my experience. I’m English, I was born in England but I’ve lived here for a very long time. I’ve seen the country go through many changes and I still hold it in great respect. It’s a relatively crime-free, exciting country. I have a son who was born and educated here and I just think it’s a great lifestyle. You have to be respectful of the law and of other people’s cultures and nationalities but the opportunities are very exciting for anybody. I think it’s a lovely place to live. I’ve lived in London and the south of Spain and I would recommend it here as a lifestyle for anybody.