As a developer of high-end exclusive projects, from residential and commercial to hospitality, H&H stands out with its decision to stay niche. Think O14, a commercial building in Business Bay whose “skin” reminds one of Swiss cheese, or its Four Seasons projects, The Galleria on Al Wasl Road, and villa compounds. Its latest project, Residence 22 in Business Bay right on the Dubai Canal, is a reflection of H&H’s development philosophy.
“This project would give you a glimpse of what we’re all about,” says Miltos Bossinis, CEO of H&H Investment and Development, who sat down with PW to tell us more about the company’s projects.
You developed and are managing Residence 22. Why lease and not sell these apartments?
It could make sense for the owner to sell it piece by piece as an investment, if required. But in general, we rather create a long-term investment to add to our portfolio. We’ll never grow exponentially big but rather be successful with niche quality investments, not mass production.
The offices at O14 were sold. How is it doing now?
We have grown into a vertically integrated developer, starting with a few developments here and there, such as O14. Each floor was carefully sold to different individuals, friends and family. It’s still relevant in terms of standards and reputable tenants. It’s a carefully done inside job, we didn’t go to the market to sell it.
How do you balance a high-profile building portfolio with the expenses of maintaining them, yet staying profitable?
The trick is to stay relevant and fresh, whatever property you have. That doesn’t apply only to paint and decoration, but each product must have different aspects to remain relevant. In a building like Residence 22, it’s very simple, we keep it relevant by offering new amenities and services. For instance, getting the concierge to offer different services. This enables you to demand higher rents. In hotels it works by adding more food and beverage concepts, so they remain the talk of the town.
What causes some developments, which were once successful, to nosedive during a weaker market?
Dubai suffers from a little bit of “nextism”. By that I mean even before something new has come to the market, everybody is already looking for the next thing. If you try to build something that will be immune to nextism, it would be one of the reasons to not nose dive.
So, you shouldn’t go flash in the design, this would get dated very soon, not over promise and under deliver, which does happen too often. Keep the basic recipe simple, update with services and amenities then you will bounce nicely, even if the market is down, and at least you’ll be at the top end of the low market. This is where we’re coming from.
Another challenge in the market is the maintenance of the assets. You manage owner associations (OAs) for others, what’s your secret?
It is easy when you have one fully owned building, like Residence 22, there is no need for an OA. But we do have a licence for managing OAs and we do it for a few projects sold piece by piece, and yes it’s a challenge, the framework is grey. What we do as a recipe is studying in-depth who the developer was, because the legal system is structured in a way that the developer is responsible going forward. So the developer has to get the money and liaise with the OA in order to deliver.
The combination of choosing the developer very carefully and keeping him involved is the dark art that we practice. Because if you go rogue you’ll never get the money from the tenants, they will not be happy and pay, and because there is no legal recourse, we cannot recover the money.
It all goes back to the developer. We try to maintain a good relationship with him so we know the money gets topped up, if required, because he would not want his building to deteriorate. Unfortunately, there is no scientific answer; it’s trial and error and very hard.
Talking of the market, any thoughts on where we are heading?
The market is challenging but not in a bubble sort of way. It’s maturing. The banks help us see what’s going on in real estate. They are being more cautious, while the developers are still pushing to build more. The more the city matures, the more the careless oversupply will disappear. Some say the market is bad. Why? Because the products that were randomly positioned by someone who said, “oh we have a piece of land so let’s build apartments because we can sell them, without thinking or planning”, I think those guys will have a problem.
Where is this oversupply?
When we say there is oversupply coming and what are we going to do with it, the majority is not in central areas, it’s in the new areas on the outskirts of Dubai.
The big families, who buy land there, will build and wait, no problem, they are not flippers.
But what happens when a big family goes in and invests, everybody else wants to be there as well. Then the statistics of what’s coming up looks scary. However, investors are still interested. Rents coming down is also a sign of the market maturing. Well, that’s fine, because at one point everything drops. Even the Ferraris become the Audis, the super villa, the town house, everything becomes more normal, this is where we’re going.
How do you know a building idea is worth pursuing, what’s your niche recipe?
We have a land bank, but even if it’s an amazing piece of land and we don’t really have a good idea or believe in a project, we just don’t build.
We also know how to wait, until we know what’s happening in the area, where the market is heading, what are the neighbours doing, what is the next big thing that will happen. For example, will there be an island in front of my seafront property and I won’t have a seafront anymore. We’re not starting 10 projects at the same time, maybe one project this year, two the next and so on.
It’s about carefully structuring development, having a gut feeling for the market and knowledge. Because we have lot of different properties, we have our ear very close to the market, we know what the retail, residential, hospitality and office sectors are doing.
We also have a very good understanding of both expat and local sentiments, as our investments are mixed, targeting both. So we listen to the market, and our own divisions in the company. Then we look at locations, run the numbers, which I believe a lot of developers in Dubai only run on the side. We do the opposite; we’re very cautious about the business case.
For example, we’re going to build another Galleria Mall in Al Barsha, but only after checking with the existing tenants as we did with the one in Al Wasl. It’s a matter of trust you create as well.
Many people just get all excited, and want to build something grand but forget about the financials and fail. Keeping it modest is the way to do it.
You have a lot of hospitality projects, why the preference?
In this market it’s a great investment, if you have the right product, but at the same time it is because we’re passionate about hospitality.
We’re lucky to work with equally passionate operators, like Four Seasons. We try to infuse an aspect of hospitality into all of our products; for example, our manager of Residence 22 is an ex-hotel manager.
You also have an interesting portfolio of traditional villa compounds, versus new, in Jumeirah, which are more sought after?
People do prefer to live in more contemporary modern compounds, or houses, but there is a way to mix it. We have the new-built Galleria Villas all leased at Dh400,000 a piece, no one wants to leave, and the older Splendour Villas renting at Dh300,000, a totally different product, also successful.
We refurbished all of them. It’sa traditional compound from the outside, but when you enter its contemporary, like Galleria. We gutted everything just leaving the shell, which has the old character, but replaced interiors air-con etc. it is very nice to live in a place like this, retaining the character.
On the opposite scale you have also developed Rivington Heights, an affordable project in Al Warsan 4 (International City)?
Yes, we are in the process of leasing it. Due to its high specs we are directing our efforts to lease it as staff accommodation to a five star hotel, which would be a nice tenant for us. Otherwise we’ll lease it piece by piece.
If your expectations for rental yields are not outrageous, and you think you have to make double digits no matter what, then that’s a nice solid business case.
Talking generally, what is a reasonable yield in your view?
It depends on the product and area, how much you spent on the land. There are products where 9 per cent is a very nice yield to have as a developer. However, it all depends what does this 9 percent mean in financial terms, it could be with or without the land. But if you have to put a number, I would say 9 per cent plus is good.
Any projects on the drawing board you could reveal, such as the World Islands D 51 project?
Yes, we still have the two islands. We’re currently repackaging it, one scenario is to build a single villa for an HNWI on it to be managed by a five-star hotel operator.
It’s a little bit different from our usual style, but we believe that these are the type of tenants The World islands should command, why would I want to live on an island with 30 others?
Then we’re planning to pull down one of our towers on Sheikh Zayed Road, because it is only 15 storeys and 25 years old, and the value of the land is much higher than the building on it right now. So we have a higher residential tower for it on the drawing board.