After seeing some delays in expansion beyond the Gulf Cooperation Council countries, Dubai-based luxury developer Damac Properties is moving closer to completion of regional projects. These include a residential tower in Beirut where interiors from the lobby to the last apartment will bear the identity of fashion brand, Versace Home. Executive inquired with Damac General Manager Ziad el-Chaar on the company’s strategy.
What can you tell us about the state of the Damac Beirut project?
This project has reached an important construction milestone. We finished the last foundation [at the end of July] and reaching this in downtown Beirut took some time, because we had some challenging excavation [working] next to the tunnel connecting the InterContinental Hotel area to Ashrafieh.
When are you planning final delivery of the project?
We are hoping to finish the entire project within 30 months from January 2013.
When the Damac Tower project was first presented in 2010, there was talk of a starting price for a unit at $700,000. How have things developed on the pricing?
The pricing has definitely progressed since we have launched and most of the units that this talk was about were units on the third, fourth and fifth floors. Those units are depleted now and we are now selling units on higher floors with superb sea views. The prices of those units differ from the prices of the units that we started with.
How much has pricing gone up?
Our prices have progressed since the launch in excess of 20 percent. A price growth of approximately 10 percent per annum is huge in the real estate market. This is not usual. It is a strong market that grows at 10 percent.
Lebanese real estate developers saw strong price increases from 2005 to 2010, but since then things have slowed for them and market indicators point to weakening of demand for large, high-end units. Was that also your experience?
When we launched this project, we came in at a totally independent section of the market because we launched with interior design by Versace Home.
So you do not see yourself competing with the other developers of high-end towers down at the sea front?
We are in a category of our own. The fashion branding that we have provided with that project has taken it to a totally different level [than other projects in central Beirut].
Does that mean you are not planning other projects in Lebanon?
We are always on the lookout for new projects but we are not planning a second project by Versace, because this project is very exclusive for a long time for the current buyers.
So whoever buys a unit in the project today knows that there will be no Versace 2, 3 or 4 towers coming up anywhere nearby in the near future?
Not in the near future at all.
But you do have a second Versace project?
In Saudi Arabia, but they are in totally different markets. One is in Solidere in Beirut and the other is on the Corniche in Jeddah. The attraction of the project in Solidere is mainly for the many Lebanese expats and many GCC buyers, but in Saudi Arabia only Saudis can buy.
Saudi buyers play a role in Lebanon. Does what you say imply that there is no overlap between your clients in Saudi Arabia and buyers of the project here?
On the contrary, we see many of our Saudi investors invest with us in Dubai, investing with us in Saudi and investing with us in Beirut. It was one of the main drivers for us to launch a project in Beirut, that many of our current investors wanted a project in Beirut.
One of the topics in high-end real estate is a developer’s branding. Is Damac as well known in the Lebanese market as you are in the United Arab Emirates and GCC?
We entered Lebanon aggressively two years ago while we have been in the GCC market for the past 10 years. This is an eight-year difference and perhaps you see us not advertising the brand so much in Lebanon because most of our buyers are living outside Lebanon. This is where we put heavy advertising for the Lebanese product, to invite investors from outside Lebanon to invest here.
In regional expansion, you were addressing Egypt and Jordan besides Lebanon. Has the unrest of the ‘Arab Spring’ and the civil war in Syria affected your strategic expansion?
We are still aggressively building our project in downtown Amman, in Abdali. We are going to start handover definitely next year of this 35-story tower, the highest residential project in Jordan. In Cairo we are aggressively finishing our Park Avenue mall in the 6th of October [City] area and handover started last March.
When will the mall be opening?
Based on the programs of the shop owners’ fit-out, we hope to be open by the end of 2013.
Is this a solitary project or do you plan more mall ventures?
The mall project was a successful venture for us. That mall is not a shoebox mall. It is a retail strip of shops where you can enjoy indoor and outdoor walkways throughout the year. We are on the lookout to replicate that elsewhere; the challenge is to find a suitable plot of land.
You were also engaged in a resort project on the Red Sea in Egypt but there were allegations of impropriety in the deal for this land, issued by the Egyptian government after the fall of the Mubarak administration. Is there still ambiguity about the resort project or has it been buried?
This is now a subject of international arbitration.
How do you see supply and demand factors in the luxury and super-luxury segments go together with the mood of the ‘Arab Spring’?
I don’t think I can reply to that question in regard to the ‘Arab Spring’. What I can tell you is that demand for luxury real estate is still growing and in Dubai, we recently introduced a new category, which is the luxury serviced apartment. We aspire to be the number one operator of luxury serviced apartments in four years from today. Our aspiration is to manage 4,000 units.
In Dubai or anywhere?
In the areas where we are present today, which is Dubai, Abu Dhabi, Doha, Jeddah, Beirut, Amman and Cairo.
Your track record as developer began in 2002. Is it correct that you have delivered more high-end units as a luxury, private developer in the Middle East than anybody else? And how many units have you delivered to date?
We say we have delivered approximately 7,500 units in 36 buildings and currently have approximately 10,000 units under construction in 50 buildings.
What was the worst delay that you suffered in any of the projects during the UAE downturn?
We had some acceptable delays in some of the projects but these were mostly due to challenges in the new [Dubai] master plan.
How long is acceptable?
It depends, it usually is in months.
You mean in months and not in years?
It appears that you are venturing into two new areas: the development and operation of luxury serviced apartments, and the mall business. Are you then moving toward services more than build and deliver?
We are moving more and more into the hospitality business, yes. Our new offering will include the sale of luxury serviced apartments and the operations of those units in the hospitality sector.
Does this mean you have to reinvent the company in structural terms by building new capacities and expanding human resources?
We are building a massive hospitality division in our company.
Can you tell us how much you are investing in financial terms into building these capacities?
I don’t have that number now. I will let you know once we deliver that budget.
Returning to the Damac Tower in Beirut, we would of course like to know what the tower’s top floor will see as price per square meter.
We have not reached the top floor yet. We are still selling [units] in the middle of the project and the prices are, on average, between $10,000 and $12,000 per square meter.