Dubai: In a property market flooded with new supply, a developer's patience can be severely tested. More so if he is carrying unsold inventory.
But that's not a sentiment which will find much favour with Shaikh Maktoum Hasher Al Maktoum, president of Al Fajer Properties. For him, it's having the stomach for the waiting game that will determine whether a developer can get the value he set out to achieve.
Failing to have patience will mean the potential investor rather than the developer walks off with the bragging rights.
Shaikh Maktoum has no intention of blinking first in this high-stakes game. Mind you, it's not just a handful of office units he has in his portfolio, but two completed Grade A commercial buildings in Jumeirah Lakes Towers.
With the serious investors circling the marketplace for quality picks, Shaikh Maktoum is biding his time. And he outlines how he will get the results he wants.
GULF NEWS: Are there investors out there interested in the bulk purchase?
Shaikh Maktoum Hasher Al Maktoum: Right now the market has shifted; it's not only segmented in terms of location, but also in quality and available square footage. So if a multinational wants to come, they are finding a lot of difficulty to get anything above 30,000 square feet in consolidated office space.
We have two office towers that belong to us and right now there are six bidders who want to buy in full. That's above 250,000 square feet.
In the last year, they have been going around the market to find a suitable location at a suitable price.
Inevitably, I would say, they are coming back to us about the two properties. They have been doing so again and again.
So, what's stopping you from sealing a deal?
It's the sale price. Our pricing is independent of what's being quoted in the rest of the market.
From a property perspective, the reason why the deal has not taken place is because of the gap in the price.
They are looking at the market price of Dh600 to Dh750 a square foot. The demand is either for units or large blocks of floors.
We are selling one whole block. What is a rare commodity right now is a fully-furnished Grade A office building and that's what we have.
Customers wanting 300,000 to 350,000 square feet of prime office space are finding that there is not anything that is completed with infrastructure and ready to move into within three months once the fit-outs are done.
Can you hold out for long?
I sure can afford to wait. The difference between us and the competition is that we have completed buildings and Grade A ones at that.
Commercial real estate has the highest potential for an upside. The larger the square footage a company is looking for, the more expensive the price.
If you are look at unit price, it's around Dh750 a square foot for an individual unit on average.
If you have a floor, it's actually lower on the pricing side. But if you are looking for two floors and more, prices start to go up again.
Everything can be sold at the right price and every product has its client. The market has found equilibrium after hitting the bottom a couple of times. It's now in the channel.
The end-user cannot afford to wait too long. If the channel goes up, the [price of the] exquisite project also goes up. We think we will close one deal between now and the end of the year.
What of the other towers you have in the portfolio?
We have delivered five towers, and that includes the flagship one. We are trying to sell two and of the other three, two are fully owned by investors and leased out.
We have become an agent to our customers and giving them priority in the leasing and sales. We are a one-stop shop for companies wishing to open in Dubai.
But Al Fajer Properties had other plots in JLT as well, didn't it?
We have mothballed the four projects, but have built provisions into these buildings to convert them into Grade A residential structures. We are not going by time, but by market condition.
We have a plan, but are waiting for the right time to activate it.
But doesn't holding on to projects constitute a cost for the company? Couldn't you have tried mixed-use as well?
Holding on is not a cost to us. We find that mixed-use structures do not work for us. I don't think it makes sense to be an office and smell curry or biriyani from an apartment.
If you are in an office building, it should be catered fully for that.
Given a certain size of development, yes a mixed-use can work. But pure-play towers are always better and I believe in specialisation.
And what of the other land bank you had?
I sold everything in 2008. I came into real estate in 2008. Al Fajer Properties was going through a severe crisis and I turned it around. We got to deliver 200 floors in 18 months and we were one of the few developers to deliver in 2009.
There was no construction and nothing but holes in the ground. We pumped in a significant amount of money. If I say it was a challenging situation, it would be a gross understatement.
Everyone would prefer to run a mile from a problem. It was a huge risk, but it was the right thing to do.
Beyond property do you plan to get into anything new?
As part of the overall portfolio, we would continue with the investments in property. I would say we are best privately owned developer.
As such, there are only a maximum of 10 or 12 good developers.
Is there a chance you might exit property development at some stage?
You exit your projects, but you do not exit your company. There are good opportunities still in the market.
There are half-finished projects and defaulting developers. Given our experience, we can assess a risk and turn it around. We can even come in on an advisory and management capacity into such projects.
You will want to go to a party that has done all if it before. If a foreign investor wants to come in and take over a half-finished building, he wouldn't have the local knowledge. That's what we can bring in.
What of your other interests?
I have multiple hats. Dubai International Holding has interests in mining. It's an international company when it comes to investments and we go where the opportunities are.
I take responsibility for my actions. The more challenges I have in my mind, the earlier I wake up, the more driven I am.
Business is not always glamorous and the best business is the least glamorous. In property we have had the crash and the huge discounting. The chances of having another crash are slim to none.
My investment strategy is built on a five-year model. I don't do things that are popular or the obvious thing to do.
Guess that means you will not be buying Apple stock?
No, if anything I would short them. I bought gold in 2007 and sold it in 2009. When I see everyone wanting to buy gold, that's when I exit.
