DIRC to unveil six new projects in Dubai by early 2009

Dubai Investments Real Estate Company (DIRC), the real estate arm of Dubai Investments (DI), will roll out six new projects in Dubai by early 2009, a top company executive said.

"DIRC has so far launched one project this year in Mirdiff Hills, which is a Dh2- billion mixed-use development. We will announce three more projects by year-end in Meydaan, Jumeirah Village and Maritime City. Another two will be launched early 2009," DI Chief Executive Khalid Kalban told Emirates Business.

Kalban believes DI will escape any market downturn because of its widely diversified portfolio, which is helping it stay balanced and minimises its risk profile.

"We have industrial investments, property investments and financial investments so if there is a downturn in the realty sector we hope the others will compensate us. In that respect, we are the most balanced company in the whole region. From a realty perspective, 50 per cent of our investment involves a long-term contract for Dubai Investments Park (DIP) with the buyers. Hence, no matter what happens in DIP, our investors will pay us rent because they are bound by contractual agreements."

He revealed that DI is negotiating to acquire two more companies in Saudi Arabia and is involved in a steel plant venture that is being built there. On the real estate front, the company is looking to develop a mixed-use project in the Eastern Province of Saudi Arabia.

DI, with paid-up capital of Dh3.2bn, is the largest investment company listed on the UAE stock exchanges. It comprises 46 companies under six divisions – Dubai Investments Industries, M'Sharie, Dubai Investments Park, Glass and Al Taif Investment. Excerpts:



What percentage of DI'S revenues comes from your real estate investments?

The real estate revenues were less than Dh1bn out of the company's total revenues of Dh2.7bn in the first half of 2008. If you look at the profitability of our real estate investments then they account for 65 to 70 per cent of our total profits.

Would you say you are treading cautiously in the real estate sector?

We are not being conservative, it is just the nature of business we are in. It just means better planning and looking at the risk profile of a project. In the realty front, there is no downturn risk since one sells from the drawing board but only a risk of delayed delivery of projects.

How many projects does DIRC plan to launch in the near future?

The company will roll out six new projects in Dubai. Four will be announced in 2008 and two at the beginning of 2009. DIRC has a number of projects under way across the UAE worth around Dh22bn. This value is apart from DI's other investments with Al Taif Investments, the joint venture between DI and Fujairah Investment Establishment, the investment arm of the Fujairah Government. Currently DIRC has projects at Dubai Investment Park, Mirdiff and Meydan in Dubai and in some upcoming developments in Abu Dhabi. The realty company has recently ventured into the hospitality sector through its subsidiary Al Mujama Real Estate by way of a contract signed with ANC Holdings. DIRC is also taking great strides in the realm of sports management through its partnership with Al Qudra Sports Management. One of our project, Septagon, a seven-tower office development in Dubai Investment Park, has already made a profit of around Dh300m. On Ritaj, a low-rise G+5 development with 2,200 units, is 60 per cent sold out so far and we are phasing our sales programme on this project.

What is the best way to get a project built on time?

This is now becoming a real problem. Contractors and developers have to work in partnership. It is not a one-way street anymore. And the contract between the developer and the contractor is not a straight one as some of the risk is taken by the developer and some by the contractor. A developer can no longer sell his project in one go because he will inevitably face price hikes, cost hikes and inflationary pressure.

Why did you choose Fujairah as the location for Dubai Investments' diversification module? Do you think the emirate has been a little late in jumping on to the bandwagon of setting itself as a realty destination unlike Ajman and Ras Al Khaimah?

We are looking at tapping into Fujairah's strategic location. Fujairah is a result of a spillover effect from Dubai. There is a lot of potential in the emirate waiting to be tapped. For example, because of the location there is natural gas line coming from Abu Dhabi to Fujairah. The main element of power is gas and since that is coming directly from Abu Dhabi, the emirate should not see an issue with regards to power. Also power lines are passing from Fujairah to other areas. Oil and petroleum pipes too have a direct access into Fujairah from Abu Dhabi. Fujairah is embarking on a gradual programme of development so unlike other emirates it will announce projects step by step.

Where is Al Taif Investment heading in the near future?

Al Taif in the last 15 months has embarked on four huge real estate projects and three manufacturing projects worth more than Dh3.7bn. The profitability of these ventures will essentially depend on Al Taif's execution of the projects. The potential for Al Taif is high since it is registered in Fujairah but actually does business globally. Its relationship with DI is a tag-along thing. If we get an investment opportunity then we shape that and also give it to Al Taif. We want Al Taif to be another Dubai Investments in Fujairah.

What is the break-up of the funding for Al Taif's ventures in Fujairah?

Thirty per cent of the Dh3.7bn will be taken care of internally and the remaining 70 per cent will either be borrowed from potential buyers of the units or banks or a combination of the two. The Fujairah Business Park venture is being built at a cost of Dh700m. The capital investment of Al Taif on this will be Dh500m and once the cash flow of that investment starts coming in we will add those revenues into the other projects. The plan is basically to run some part of the revenues of a project into the other.

Are you looking to acquire publicly-listed companies in the near future?

No. We think our strategy of acquiring medium-sized companies is working well. We buy private companies and later turn them into publicly-listed companies. This is our mission. This is why DI was created, to provide an investment opportunity for UAE residents. However, if we see right opportunity then we will think of acquiring a publicly-listed company. We currently have investors from Saudi Arabia, Kuwait and Bahrain.

What about India – you seem to have a lot of faith in that market?

Our exposure in India is more than Dh370m. We have put in a lot of investment there. I think India offers a lot of opportunities. Our investments are well distributed with a horizon of three to four years. There is a guaranteed return from that market. We are looking at the glass industry in India.

How much of the output from your construction material subsidiaries is being consumed within the UAE market?

It is all being consumed locally. When we started these subsidiaries we had a strategy that 40 per cent would be sold abroad but the market here is very active and we could not satisfy our local clients. In the glass industry we are the largest manufacturer in the region and we will be dominating the market very soon. We are building one of the largest glass manufacturing facility in the Middle East at the Industrial City of Abu Dhabi. Emirates Float Glass, in partnership with Italian engineering firm Ianua, will construct its second float glass manufacturing facility there, enabling it to become the largest single-location float glass manufacturing facility in the region with a production capacity of 1,200 tonnes per day. Aside this, we are acquiring two companies in Saudi Arabia and are establishing a processing unit in Qatar. By 2010 we think we can go back to our conventional markets like India, Europe and the GCC and provide clients our products.

Do you have any plan to float Emirates Glass?

We will first evaluate the company and then consider doing this. Everything that we have within DI is either for sale or earmarked for private placement or listing in the stock market, but at the proper time. We promised the market about two years ago that beginning in 2008, we will place a company either privately or by raising an IPO. We kept the promise with M'sharie. As a rule we will go by what the market is receptive to and what the market trend is at a given time, then place any of our companies or list them. The market for private equity was very good this year and that is why we went ahead with M'sharie.



Khalid Kalban
Managing Director and Chief Executive, Dubai Investments

Kalban has played a key role in establishing a number of leading companies in the UAE.

Apart from his role at DI, he is a member of the board of directors of Emirates NBD, Emirates International Brokerage, the Saudi International Petrochemical Company, Arab Insurance Group, Cayman Islands-based Dumoco and Thuraya Satellite Communications Company.

Kalban also holds senior positions in high-profile overseas companies including Singapore-based Al Khaleej Investment. He has a degree in business management from Arapahoe Community College and majored in management at the Metropolitan State College, both in the US.

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