Hoping to tap into the supply-demand imbalance in Abu Dhabi's premium housing segment, Capitala is going ahead with plans to bring 854 high-end apartments and 14 villas onstream by the first quarter of 2011. The upbeat mood about the incoming demand is evident from Capitala's conviction that investors in the project, Rihan Heights, can generate robust rental returns in the coming years.
"We anticipate high-end housing to remain positively undersupplied for the next two to three years at least. When Rihan Heights is completed next year, we will be just in time to [capitalise on] the undersupply," says Wong Heang Fine, CEO of Capitala. Launched at Dh2,500 per square foot during the cusp of the property boom, Rihan Heights is effectively 85 per cent sold out or booked, claims the CEO. Capitala is a joint venture company between Abu Dhabi's Mubadala and Singapore-based CapitaLand. Rihan Heights forms the first phase of Capitala's pilot mixed-use project, Arzanah.
Attracting investors
Locational advantage in the Shaikh Zayed Grand Mosque district and the community lifestyle have attracted Emirati investors to Rihan Heights, who have bought units in the hope of good rental returns. A few owner-occupiers and buyers of second homes also figure in the investor list. This buyer profile has, in turn, helped Capitala keep mortgage defaults to a minimum.
"There have been a few requests and we have been trying to accommodate them," says Fine, adding that Abu Dhabi Finance and the First Gulf Bank are on board, offering a loan-to-value (LTV) ratio of up to 85 per cent.
With Arzanah being its maiden project in Abu Dhabi, the developer points out how proceeds from off-plan sales will be strictly linked to construction of Rihan Heights. Not looking to tap external debt, Capitala is funding construction from its own equity.
"We will launch sales of the remaining units once construction is complete. We make sure that construction progress is independent of sales," the CEO adds.
Facilities offered
Rihan Heights, which comprises five residential towers and villas, will feature facilities such as swimming pools, a children's playground, gym and a clubhouse. Positioned on landscaped podiums, the towers will offer covered car parking, one-, two- and three-bedroom apartments, including duplex penthouses with private sky gardens. While the service charges are yet to be fixed for this development, each apartment owner will only pay the chilled water charges for his or her unit and not the general service fees levied on all.
"We will be pricing the service charges competitively, on par with other developers in the region and will also commensurate with the facilities," Fine says, adding that Capitala would seek third-party facilities management operators after one year of project completion.
While the Arzanah masterplan involves two land parcels, the developer is yet to decide on the product mix at the site in Khaleej Al Arabi Road. "At the moment, the masterplan of Arzanah calls for low-rise residential development in the second plot." The main precinct surrounding the Zayed sports stadium will be linked to the waterfront plot by two footbridges. The second plot is likely to feature waterfront villas, boardwalks and canal promenades.
In tune with the developer's emphasis on an active lifestyle, Arzanah will incorporate jogging and cycling trails, an aquatic centre and an indoor sports arena. Existing facilities include an ATP-standard International Tennis Complex, the Khalifa International Bowling Centre and the Abu Dhabi Ice Rink. While the sports infrastructure will be managed by Mubadala, the international school included in the Arzanah masterplan is likely to leverage these facilities. The non-involvement of sub-contractors will let Capitala focus solely on ascertaining the right product mix for subsequent phases in the $6 billion Arzanah. "We will wait for the market to stabilise before looking at what product to plan for the subsequent phases," the CEO says. He refers to how the Arzanah masterplan has remained unchanged, but the product mix has been adapted to conform to market demand. "We may add more two-bedroom units than one-bedroom apartments, depending on the market requirements. We strive not to be ahead of the market because then you can't sell," he adds.
While UAE developers typically retain units to add to their recurring income base, Capitala eschews, claiming it would lead to a conflict of interest with its buyers who are looking to earn rental returns. "Our objective as a developer is only to build and sell units." Given the prowess of Ascott Group, a wholly owned subsidiary of CapitaLand, in the operation and management of serviced residences, would Capitala take on leasing on behalf of its investors? "We may want to do that at a later stage. But, it's too premature to consider it now," says Fine.
Remaining true to its mixed-use credentials, Rihan Heights will also have a smattering of retail in the form of a supermarket and a hair styling saloon. Provisions for a hotel have also been incorporated.
Construction of Rihan Heights is now 30 per cent complete. The developer claims to be constantly negotiating with suppliers and contractors to achieve cost savings.
"Where we have achieved savings, we pass it back to the buyers, either through a reduction in sales prices or by providing them with better products, say white goods," says Fine.
Arzanah: fact file
The medical facilities in Arzanah will eventually include a Mubadala-owned medical complex, the Wooridul Spine Centre and the Abu Dhabi Knee and Sports Medicine Centre.
Capitala's land bank in Abu Dhabi is limited to the Arzanah plot, spanning 140 hectares. The facades of all the residential towers will be complete by Q4, 2010.
