Possessing a diverse and vast background in business creation and development, vice chairman and CEO of Saraya Holdings, Ali Kolaghassi, is quite an influential individual; he is also vice chairman of Saraya Aviation, vice president of Saudi Oger Ltd., senior advisor to Saad Hariri, chairman of Saraya Real Estate MENA Funds, and the list goes on. Executive sat down with Mr. Kolaghassi for an exclusive one-on-one interview.
E How would you describe Saraya’s ownership structure?
Saraya Holdings is a DIFC registered company based in Dubai. We are a holding company that is primarily owned by Sheikh Saad Hariri, and he is the chairman of the board.
The model that we rely on primarily is the private-public [partnership], where governments come in as partners and they contribute the land to the project. We focus on this model because we want governments to be involved in our projects as they assist in permitting, the zoning, the approvals, etc.
As Saraya Holdings, we focus on emerging markets; we look at locations that we can turn into destinations. Wherever we feel is a unique spot that has a huge potential for growth, we focus on it. We don’t want to stop there: today, your biggest challenge in any opportunity — especially if you’re focusing on an ‘emerging spot’ — is how to make sure that the services are associated with everything you develop. We’re going beyond the traditional real estate developer, to enhance it with the services. Thus, we will provide you with a unique lifestyle experience; we will take care of you the minute you decide that you want to escape.
We also have our own transportation fleet, all types of luxurious categories. Our destinations are mixed-use destinations; we have hotels, retail, entertainment and residential. Our residential owner gets all the services that a hotel guest can get. Most importantly, he doesn’t have to worry about his facility in terms of regular maintenance. Also, we are studying options to offer our second home buyers opportunities to benefit from their investments by creating additional revenue streams such as studying rental program options, fractional ownership options, etc.
As a developer I’m interested in taking care of my investors, where I can maximize the return for them, and I want to maximize the return for my homebuyers. A homebuyer, also, becomes a source of revenue for the project, because he is coming with his family and they will use all of the facilities made available by us — i.e. the beach clubs, restaurants, water parks, etc.
To make us unique, we partnered with the best. For our projects, we brought in names like Jumeirah, Taj Exotica, W Hotel, St Regis, Westin, Luxury Collection, Banyan Tree, Nikki Beach, etc. Also, we’re partnering with experienced people to create Saraya Holiday packages.
We have a very aggressive plan in the pipeline. Three years ago we announced our first project at the WEF on the Dead Sea. So far we have five destinations around the globe: Saraya Aqaba, Saraya Dead Sea, Saraya Ras Al Khaimah, Saraya Bandar Jissah, and Saraya Sochi. We also have a few in the works that we will announce before the end of the year. We have plans to go into the financial market; that’s why we hired Deutsche Bank as our financial advisor.
We did this in a very short period of time — I rely on a very good team that I have, which enables us to do this. The spirit at Saraya is that we are a big family, and in order for us to succeed everybody has to have a specific role. More importantly, of course, from an operational perspective we did not create a separate management team for each project, because in my opinion that is not cost efficient, nor effective. Hence, we created a centralized pool that we named Saraya Development Group (SDG) that everybody is based in, and which is a house of expertise. You have competencies, whether in finance, corporate finance, MIS, program management, design and construction, marketing, etc. These take care of all the projects. Every project has a GM who reports to the board and is the check and balance between the pool and the board, because with every project there are different partners.
It is a unique setup and one that has allowed us to progress, to reduce the operational costs, to establish a learning curve and ultimately this house of SDG will graduate people of experience and knowledge … this is how you start building the team.
E What is the strategy you are implementing for your projects? What is the timeline of this strategy?
For every project we can’t say there is one specific strategy. Of course the locations differ for each project. We always talk about the private-public model, but for example Saraya Sochi was private-private; we partnered with Sistema Hals on a 50/50 basis in Russia. The concept for each project as a strategy is that we have to be the lead developer — we have our terms of conditions, we have our shareholder agreements, our Saraya Realty contacts, our centralized marketing, and our management. But to decide on a location, there must be a checklist, which has to be met. For example, does this place have a potential? Does it have the geographical requirements: the beach, the sand, the climate, etc.? Will they support us with the infrastructure, the initiatives, the master plan, etc? Is there easy access to the airport? All these elements are taken into consideration, because they are the only way for a project to succeed.
E What is your investment strategy? Has it remained consistent?
We have certain expectations for each project from a commercial return, but we look at each project as a stand-alone case. Sometimes in a project there are returns that are different from another — it all depends on the risk, the political risk, the importance, and how much we forecast as the increase in value. There are certain countries where you go for the security factor, and you’re happy with a 15-18% return. Other projects, the only way you will enter it in the first place is if you see a return in the high 30s. Each one is evaluated on its own criteria.
We have also tried to open to the public an opportunity to co-invest in Saraya, so we created the Real Estate MENA Fund with the Arab Bank for $250 million. Saraya has created the first fund, which saw its first investment in Saraya Ras Al Khaimah, and we are creating the second as well.
E What are the current issues and concerns that Saraya faces in Jordan and elsewhere in the MENA region?
If you ask me what the biggest challenge is — I’m not going to tell you execution or finance, I’m going to tell you it is human resources. In order to combine Saraya’s concept altogether, the only way to do this is by having all the right people on board.
Another big challenge, faced by any developer, is the escalating cost of materials. Of course, there is also a financial crunch in the international markets.
E What do you believe is the need for these kinds of mixed-use development projects? Is it a social, demographic need?
Today in our part of the world, it’s a young population; especially in Jordan and the GCC, about 50% of the population is still young and under the age of 18. These have requirements for housing, education, for entertainment. So whatever we develop on a local level as an opportunity has to be attractive to them for various reasons: number one, the cost of international travel has increased significantly.
In the destinations that we are developing, we can operate for nine to 11 months due to nice weather and it thus gives us a competitive edge. We can offer the same services as European destinations and the same qualities but at more competitive rates. Also, on an international level, a lot of markets are opening up to the Middle East. Russia, for example, is a big market that is opening up to the ME. Apparently, around 2% of the Chinese population are expected to become regular travelers to this part of the world. If we can capture a fraction of this, that will get the results that we have offered.
E How would you describe, overall, the nature of development projects in the MENA region?
Some people say there is an over-development to what is being offered in the market. But whatever is being offered is sold on the spot. The Dubai model, for example, is a perfect model. When the prices reached $1,500 we said, “It has reached a peak,” but today it is at $3,000. Tomorrow it may be at $4,000, but there will end up being a correction. Jordan, for example, is in its initial stages of development. We are operating with 100% occupancy; the rates have more than tripled in the last two years — Amman is a specific example. Now look at the Dead Sea: hotels are operating at close to 100% occupancy while the rates have more than doubled. Lebanon, with all its political turbulence, has 100% occupancy in its hotels; and the same happens in Egypt. There is a major growth in the number of tourists, whether on a national or regional level.
E How does Saraya demarcate its offer compared to other developers in the region?
We are not just a real estate developer, and that is exactly why we are different — because we want to offer a lifestyle. A lifestyle which comprises of all that a traveler may require from accommodation, transportation, entertainment and other specific needs and requirements. This put together as a package under one brand makes us unique. We believe when you are buying into a Saraya property, you are not just buying a house but also buying into a whole experience. If you buy into the destination club, you’re buying into all the other experiences and destinations.
E In ruling out the template, how adaptive could it be to regional and international markets? Or are you going to reconsider the whole concept for every country?
You have to examine each case-by-case. If you look at each market, each one has certain unique elements that you have to take into consideration. For example, are my tourists going to be local, regional, or international? For Ras Al Khaimah, for example, basically the tourists are sun seekers and they realize that Dubai is too expensive for them now and are willing to accept something that is 40 minutes away. In Oman, we are looking at the Indian subcontinent — the high end — because Oman is very appealing to them. Also, the English tourists love Oman. Here in Jordan it is more for the locals or for the Jordanians who live in the GCC. Every market is different in a way, but a template of the concept is what we have developed — and we will make adjustments and modifications as per the requirements for each project.
