One of Beirut’s most ambitious residential tower developments, Damac Tower, has now reached ground level. United Arab Emirates-based luxury developer Damac Properties is behind the venture, and Executive sat down with Managing Director Ziad el-Chaar to discuss the project and the company.
Can you tell us how many units in the Damac Tower have been sold?
In total we have sold approximately 45 percent of the units in the development. In the current business environment of Lebanon, which is challenging to all, we are selling more of the smaller units than the big units.
What makes your project appeal to buyers?
The starting point of a premium luxurious project is the location. The second point is that the uniqueness of this tower’s design complements the premium location. [The third factor] is that we brought in one of the top Italian designers in fashion and homes to design the interiors of this project, starting from the lobby and going into each and every apartment. The people that are buying and investing in this project will have a very exclusive property in a project that cannot be repeated in Beirut.
Are your prices competitive?
Our prices today are at an approximately 20 percent premium [over other projects in the central district]. But what I have told you in terms of advantages of our product, these are much higher than 20 percent, so you are actually getting a good bargain.
What do buyers of high-end luxury projects look for more than anything else?
When you talk about premium luxury, two things go hand in hand, which are uniqueness and exclusivity. [These] are very important for this type of customer.
One encounters different customer groups also in the luxury segment, for example those who understate their wealth and emphasize privacy versus those who emphasize prestige or those who buy a luxury property to leave something behind. Knowing these categories, what do you see as the main factors motivating the buyers of super-luxury apartments in our part of the world?
As we are talking about real estate, you can never separate real estate from return on investments because real estate is one of the best tools to complement your portfolio. This is definitely one of the factors, and when you look at our company, this is where people trust us because we are a developer that delivers.
The other element, which is important in towers but would not apply similarly if you were buying a mansion or villa, is property management. In strata management, which is management of shared ownership, you see many times a set of owners where perhaps one or two care about the investment and the building and several others do not understand the value of property management. The only protection for your investment is property management. One of the very important items that we put it in our sales contracts asks the owners’ association to appoint us as property managers for 15 years. We don’t just deliver the building and walk away.
Setting up property management for the one project in Beirut will obviously not involve economies of scale. Is it correct to assume that you do not have the objective to operate a large property management firm in Lebanon but only have a dedicated service for Damac Tower?
Correct. Our purpose is to be a developer and provide all the services around that development exclusively to our investors. I have to say one thing about the cost of property management. It is always related to the desire of the owners as to the services that they want. Our role comes [into play] when we gather the owners in an annual meeting where we show them a menu of services and the cost of those services.
And the decisions are then made by majority vote and are binding for all owners in the association?
Yes, and our role as property managers is to make sure that the decisions are implemented and to also assist the owners in the collection. Those high net worth individuals do not want to have to interfere in the upkeep of a building and we provide that service to them [at cost].
Does that mean that the value of the property management operation for you is in retaining the building’s incremental value gains?
We don’t have any interests in those buildings from a financial perspective, but a satisfied investor will spread the good word for the company and will possibly reinvest with us again in new projects.
What will be the additional cost of ownership per square meter (sqm) per year over the 15-year duration of the property management contract that buyers have to sign?
This is really hard to forecast for 15 years but we have created forecasts of service charges for the next two to three years. They are today approximately $30 per sqm per year.
Have your prices in Damac Tower Beirut gone up since we talked last?
Our prices in Beirut are premium prices and they have kept their value.
When discussing Damac in terms of competition, we have to talk on the regional level. In regard to Dubai as your main market, are you envious of Emaar Properties and their announcements of strong luxury demand where units in several projects were sold within hours?
You need to ask this question to Emaar because [on March 26] we had one of the biggest project launches in Dubai since 2008. We now have a property in Dubai which is called Damac Towers by Paramount. It is a mixture of the first luxury hotel by Paramount in the Middle East and three luxury hotel apartment towers branded by Paramount. We invited investors for the launch of phase one and phase one was sold in full on the night [of the launch].
How many units are in phase one?
You said in a statement that you have Lebanese investors?
We have some Lebanese investors, yes.
You have partnered with the Versace fashion brand and now with the Paramount entertainment brand. How important is branding for you in marketing a project?
[Property consultancy] Knight Frank released a study in December 2012 on the value of branding and they found that for a market like Dubai, the branded product is demanding 60 percent higher value than the non-branded product.
Weren’t there some celebrity-branded towers in Dubai that flopped gloriously?
Branding has to add value. When you bring Versace to a Damac tower or, as we have done in Dubai, [fashion brand] Fendi, to a real estate project, both Versace and Fendi are very strong in interiors and you will get those interiors infused into your towers. Paramount is an entertainment company and they are bringing all their entertainment elements into the hospitality [aspect].
But isn’t the Paramount Resorts and Hotels actually a UAE-based company licensed to use the Paramount brand but owned by a Lebanese businessman, Ghassan Aridi? It is not a unit of Paramount Pictures?
The Paramount licensing division licensed Paramount Hotels and Resorts to a group of investors who have the exclusive use of the brand and resources for, I think, 50 years. This group of investors is going to seven cities, Dubai being one of them, to collaborate with developers like ourselves. The final brand and support you get from Paramount Pictures in Los Angeles.
What brought Ziad el-Chaar into the property market and what is your passion about properties?
I have worked with two companies in my life and was always in business development. The real passion is in making sure that the business is growing, to enjoy that growth and making sure that the people who invest with you also see that growth.