| 03 Sep 2010 |
|
Giving tender touch to stalled projects
- Text size
Friday, Sep 03, 2010
Gulf News
Silver Heights finds a different approach for its next phase of evolution
Dubai It was circumstance rather than anything else that prompted Silver Heights Real Estate to take a different approach for its next phase of evolution.
The Dubai-based firm had until now concentrated on real estate brokerage services and transactional activity as the twin prongs of its business.
It has now added a third — that of taking on stalled projects and then nursing them past the completion line. For Samir Munshi, managing director, it was the best possible — even the sole — solution.
“With the market situation being what it is, there was just no other alternative for survival,” said Munshi. “That’s when the first approaches were made to us by certain developers who wanted to exit their projects for a variety of reasons, chief among them being they no longer had the cash to build.
“It was a unique area of potential we were faced with. Rather than finding third-party buyers for such projects in a difficult market situation, we decided to take them on ourselves in conjunction with a select group of investors who were thinking along the same lines.
Due diligence
“While taking control of the development, we are in no hurry to sell it off either — buyers seem to have lost faith in the developer community. Our intention is to sell closer to the project’s finish.”
Now, the firm is moving on to larger — or should it be taller? — things. It has identified a few residential high-rise projects in Jumeirah Lakes Towers and Dubai Marina for possible acquisitions. Negotiations are on with a couple of the current projects owners.
“The cost of construction has stabilised, while land values in both JLT and Dubai Marina are now at Dh120 to Dh160 a square foot,” said Munshi. “But the selling price of the property is radically different, and would be around Dh700 in JLT and Dh800 in Dubai Marina post the downturn.
“That still leaves room for healthy margins and our estimate is for an internal rate of return [IRR] of 30 per cent a year.”
As a preference, Silver Heights would consider those projects announced a good year or two before the market crash. Munshi’s contention is that the original prices on these are closer to what’s prevailing now.
And having made a start with a project in Jumeirah Village, Munshi is open to possibilities for additional ones in that cluster. As with many observers in the marketplace, he retains a sense of optimism that Nakheel’s relaunch of construction activity in October would attract renewed interest in the master-developer’s existing portfolio, which includes Jumeirah Village. Land in Jumeirah Village is presently around Dh80 a square foot, according to Munshi.
The preference is for residential developments, and especially for those which can be completed within a 12 to 18 month timeframe. According to Munshi, the upfront investments to acquire a projects need not be that high — “It could be anywhere between Dh5 to Dh40 million, and at those levels it’s still possible to get the returns we seek.”
To ease the fund flow, Silver Heights is tapping prospective developer-partners and high networth investors from India. Moreover, some Indian banks, it is claimed, are willing to offer bridge loans to these investors against collateral in India. These funds could then be deployed into select projects in Dubai managed by Silver Heights.
Once a project elicits its interest, the company does an exhaustive due diligence and an audit on how buyer funds were used by the present owner. The legal status of the project as well as any claims against it are also looked into.
“If the current owner is open to our offer, a deal can be arranged which would involve cash or ownership of a certain built-up area in the project for him,” said Munshi. “Or it could be a combination of both.”
comment
Biggest stumbling block
Getting project owners to come up with the actual facts are proving the biggest stumbling block for Silver Heights in acquiring stalled developments.
“Many still seem to be in a state of denial,” said Samir Munshi. “As soon as they see someone is interested, they come up with a completely different picture of the project’s status. Their profitability projections have no basis in fact.”
— M.N.
While taking control of the development, ?we are in no hurry to sell it off either — buyers seem to have lost faith in the developer community. Our intention is to sell closer to the project’s finish.”
Samir Munshi
Managing director of Silver Heights Real Estate
By Manoj Nair?Associate Editor
© Gulf News 2010. All rights reserved.
Zawya is a distributor (and not a publisher) of content supplied by third parties and subscribers. Any opinions, advice, statements, services, offers, or other information or content expressed or made available by those third parties, including information providers, subscribers or other users of the Service, are those of the respective author(s) or distributor(s) and not of the Company. The Company neither endorses nor is responsible for the accuracy or reliability of any opinion, advice or statement made on the Service by anyone other than authorized Service employee spokespersons while acting in their official capacities. The Company is not responsible for any infringement of intellectual property rights or breach of any applicable law or regulation, including regulation in relation to financial services or the distribution of financial products, defamation, data protection, telecommunications (including regulations relating to excessive use, spamming or other abusive activities) or obscene, offensive or illegal content). Under no circumstances will the Company be liable for any loss or damage caused by a member's reliance on information obtained through the Service. It is the responsibility of member to evaluate the accuracy, completeness or usefulness of any information, opinion, advice or other content available through the Service. Please seek the advice of professionals, as appropriate, regarding the evaluation of any specific information, opinion, advice or other content.
Read the full Member Agreement
http://www.zawya.com/legal/NewsLetter.cfm?name=disclaimer
Loading ...
Post a Comment
1.1 Contain any material which is libelous or defamatory of any person, is obscene, offensive, hateful or inflammatory or causes damage to the reputation of any person or organisation.
1.2 Promote sexually explicit material, violence, discrimination based on race, sex, religion, nationality, disability, sexual orientation or age or any illegal activity.
1.3 Be made in breach of any legal duty owed to a third party, such as a contractual duty or a duty of confidence.
1.4 Be threatening, abuse or invade another's privacy, or cause annoyance, inconvenience or needless anxiety.
1.5 Be used to impersonate any person, to misrepresent your identity or affiliation with any person, or be likely to deceive any person.
1.6 Give the impression that they represent Zawya.
1.7 Advocate, promote or assist any unlawful act such as (by way of example only) copyright infringement or computer misuse.