Transparency pays off for MAG Group after handover of AED450 million tower in Dubai Marina proves property development in Dubai can work

Honesty is best policy says expert

Transparency pays off for MAG Group after handover of AED450 million tower in Dubai Marina proves property development in Dubai can work

A consistent vision, open and transparent communication and a commitment to quality has helped Dubai-based property developer MAG Group Properties, to deliver what some real estate analysts have described as a model development.

MAG 218 a residential tower in Dubai Marina, was built at a cost of approximately AED450 million consisting of 555 apartments spread over 66 floors. The building was officially handed-over to investors earlier this year on 15 May. To date 530 apartments are occupied with nothing for sale or lease at present.

Commenting Mohammed Nimer, CEO of MAG Group Properties, said: “We stood firm by our strategy. From the outset we wanted to be totally transparent and deliver our promise of a quality development, to specification and on budget. This has paid off handsomely, not only for MAG Group but for the investors as well.”

First of all to enable MAG Group to build a quality mid-priced development it needed to keep its budget under control, choosing to self finance the project, rather than paying interest on a bank loan, which helped to keep the costs down.

Even when MAG Group had some issues regarding late payments from some investors they decided to carry on irrespective, taking the view that the priority was to protect the majority and complete the project.

MAG Group sent the investors detailed and regular updates with fresh images so that they could chart the progress of the development. Results were also posted onto the MAG Group website.

“When milestone payments became due, we had few problems collecting that money. The owners could see the progress we were making and it generated a great deal of trust between us, at a time when investor confidence in many regional projects was beginning to wane. This proves that honesty is the right policy and furthermore quality at the right price can work in Dubai,” added Nimer.

MAG 218 is a highly desirable residential building, not just because of its location and quality of finish but the highly competitive service charges which underscore the overall technical engineering excellence of the design and build.

“Service fees in Jumiera Lakes Towers average AED15 per square foot, the Marina itself averages around AED13 but MAG 218 charges less than AED9.5 per square foot, a very attractive proposition to owners and end users alike,” said Mazen Falhout, General Manager of MAGme Property Solutions, a division of MAG Group.

Currently a one-bedroom apartment leases for around AED70,000 per annum while a two-bedroom flat currently achieves annual rental income of about AED110,000.

As such the owners in MAG 218 are feeling the benefits of such economical service charges, according to Camilla Van Der Merwe, Head of Sales and Leasing at Asteco Property Management.

“This gives apartment owners a distinct advantage in a very competitive market sector. Owners of a one-bedroom apartment, could be paying as much as AED5,000 less than landlords from other developments pay annually,” said Van Der Merwe.

“For investors, end-users and or tenants, it is also comforting to know that the tower is well built and maintained, protecting investment and keeping fees to a minimum. In many ways MAG 218 could be described as a model development,” added Van Der Merwe.

Almost 90% of MAG 218 tower was sold out within months of its 2006 launch, with many investors initially paying an average of AED700 – 800 per square foot. Today, despite falling prices over the past two years, the apartments have still appreciated on average by at least 10%, especially for those investors who bought at or close to the launch price.

Photo-caption:

1. MAG 218 tower in Dubai Marina – a model development.

2. Mohammed Nimer, CEO, MAG Group Property – “Honesty is the best policy...”

About the MAG Group

The Dubai-based Moafaq Al Gaddah Group of Companies (the MAG Group) was established in 1978 and has grown into a multinational organisation with 18 offices in eight countries throughout Europe, the Middle East and Asia.

In the past five years the MAG Group Properties has invested in 12 properties at various stages of development across the residential, commercial and industrial sectors. The company focuses on projects that provide long-term benefits to investors and customers.

Property owners may get that ‘sinking’ feeling over fees

Property owners may get that ‘sinking’ feeling over fees

MAG Me Property Solution advises owners on ‘hidden’ depreciation costs of mechanical, electrical and plumbing (MEP) equipment

Owners of properties in the freehold areas of Dubai could be hit by major maintenance charges which should have been identified prior to purchase, according to the property management arm of a leading real estate developer.

“Some owners are jeopardising the return on their investments by not adequately accounting for depreciation on MEP equipment,” said Mazen Falhout, General Manager, MAGme Property Solutions, a division of the MAG Group.

Dubai property owners now have the opportunity to play an active role in the management of their properties as the new owners’ association management regulations, implemented by Dubai’s Real Estate Regulatory Authority (RERA) come into effect.

Full implementation of the regulations means that as well as routine maintenance and upkeep charges, owners will have to pay premiums to cover complete building insurance as well as an emergency reserve or ‘sinking’ fund to take care of larger maintenance work or replacement of essential equipment.

‘Sinking’ funds are essential to accumulate a reserve fund over time which helps to enhance not only the value of property for the current owner, but makes it more attractive for prospective buyers and the secondary market. It is also important that buyers verify whether such allocations have been made in the service fee budget before deciding to buy.

“When considering a real estate investment, prospective owners should always seek advice from professionals who can evaluate all potential operational costs, as well calculating depreciation or the appropriate deposits for a ‘sinking’ fund,” said Falhout.

“For example to replace a chiller in an average tower building costs around AED2-3 million, that amount must be built-in over ten years when it reaches the end of its working life. If there is no ‘sinking’ fund, owners have to foot the entire bill at that point of time which could be substantial,” he added.

As there is no conformity with common areas, each building or community must be assessed on a case by case basis, by professionals who understand maintenance of the complex engineering in these developments.

“In tower buildings it could be something as simple as electricity supply for lifts, air conditioning, pool chillers, lighting and even car park barriers. With rents falling at least 40% over the last 12 months, many owners are now faced with fees that they cannot simply pass on to tenants if they want to remain competitive in the market,” said Falhout.

“What might seem on the surface to be a good sales price may not be cost-effective over time, when the so called hidden capital and their respective operational expenses have been factored in.

“Prior to June 2008, investors did not care too much about service charges or operational costs, many were only speculating on the rising price. Now that party is over and owners now have to be responsible for their investments,”
added Falhout.

MAGme was specifically set up to provide an array of real estate management services from sales and marketing to property management and owners’ association management.

“Originally we were predominantly instructed to manage, promote and market the developed projects of our sister company, MAG Group Properties. However as we created business relationships with other developers we began to manage their buildings as well as advising investors,” said Falhout.

With so much stock to be completed over the next five years, Falhout believes that the property management sector will grow substantially over that period.

“It’s only natural. The cycle begins with design and investment, through to development, marketing and sales and then handover. Once that occurs owners must manage their property, irrespective of which way the market price is headed,” he added.

Although the macro economic factors such as the dollar-euro and dollar-sterling exchange rates are putting Dubai at a disadvantage at the moment, many Russians, Iranians, Indians and other Arab nationals are entering the market.

“Many overseas buyers are now looking for bargains, they are not concerned about market liquidity, they either have substantial deposits or the means to buy outright,” said Falhout.

Apart from falling prices, another reason for this confidence in Dubai according to Falhout is that Dubai is still way ahead of all other GCC real estate markets in terms of maturity, sophistication and regulation. “Any freehold property even comes complete with a complimentary world-class infrastructure,” he said.

Photo caption: For example to replace a chiller in an average tower building costs around AED2-3 million, that amount must be built-in over ten years when it reaches the end of its working life. If there is no ‘sinking’ fund, the owner has to foot the entire bill - Mazen Falhout, General Manager, MAGme property solutions, a division of the MAG Group.

CEO of MAG Group Property Development outlines proposals to help Dubai’s housing market thrive once again

Property chief eyes real estate recovery

CEO of MAG Group Property Development outlines proposals to help Dubai’s housing market thrive once again

The CEO of MAG Group Property Development, Mohammed Nimer, believes improved liquidity, greater transparency and tougher regulations will be key to the recovery of Dubai’s real estate market.

Nimer, talking yesterday at the Infrastructure and Property Development MEA Summit at the Park Hyatt Dubai hotel, also explained that liquidity and issues surrounding visas will also play important roles.

When addressing the issues of transparency and liquidity, Nimer told the audience at the Park Hyatt Dubai hotel: “Improved liquidity, greater transparency and tougher regulations are needed more than ever to reassure and protect legitimate investors seeking a reasonable reward for a reasonable risk.
“Critical in my view from an investment perspective will be affordability, transparency, return on investment and trustworthy partners. If recent events have taught us anything it is that we must operate in an environment of complete transparency and robust regulation.

“But improved liquidity is also vital to recovery. Transparency and regulation inspire confidence but liquidity makes sales. Mortgage facilities, registration of owners’ association, REITs entering the market can be expected to fuel transactional activity in the coming years,” added Nimer during his presentation entitled “Improving the properties framework to attract and retain investors”.

During his presentation on day one of the three-day summit, the CEO outlined suggestions including relaxing visa rules to attract international investors, who are still nervous following the global financial crisis.

“The relaxation of visa rules is a federal issue but it needs to be consistent and investor friendly. Malaysia and Thailand lead emerging markets in encouraging international property buyers and as such this country could learn from them,” explained Nimer.

“The UAE also needs to attract more expatriate workers and foreign companies as the future depends on population growth and increasing business relationships with rest of world.”

Nimer also outlined how this year will set the precedent for the future, highlighting the need for action to encourage the green shoots of recovery in the local real estate market to flourish.

“The UAE needs to go back to basics. Solid market fundamentals as opposed to sentiment are always at the heart of a sustainable recovery and 2010 is a crucial year for determining the direction of the UAE’s real estate industry as the world pursues post-crisis recovery,” he said.

Nimer brings more than 30 years’ experience in construction and property development to the summit. Having worked in both the Middle East and North America, he has experience in developing both commercial and residential low- and high-rise buildings.

The MAG Group CEO joined a list of distinguished speakers, which also included Jeffrey Willis, Chairman of the Emirates Green Building Council and Gurjit Singh, COO of Sorouh Real Estate Development, to discuss such topics as Upgrading Urban Planning & Design, Green Building and The Return to Value at this three-day summit.

About the MAG Group

The Dubai-based Moafaq Al Gaddah Group of Companies (the MAG Group) was established in 1978 and has grown into a multinational organisation with 18 offices in eight countries throughout Europe, the Middle East and Asia.

In the last five years the MAG Group Properties has invested in 12 properties at various stages of development across the residential, commercial and industrial sectors. The company focuses on projects that provide long-term benefits to investors and customers.

In total MAG has a property portfolio in excess of AED3 billion and was one of the first developers to create Escrow accounts for all of its projects, long before the Dubai Government introduced Law number 8. In October last year, MAG Property Development was awarded ISO 9001 certification by risk management company Det Norske Veritas (DNV). MAG still remains one of the few developers in the region to be accredited to that standard.