Escan plans to go public to finance major expansion
The CEO of Abu Dhabi’s Escan Real Estate Company spoke to Emirates Business about the property market in the capital amid fears that it is just a bubble. Khalid Al Shaali predicted strong growth and said his company plans to invest more than Dh20 billion in the next three years. Just a year old, Escan Properties has already seen its assets grow by 30 per cent and has expanded to other emirates and into new sectors, recently acquiring a property finance firm.
Escan is one year old. How do you assess the company’s performance and how much has it achieved?
After we established the company, we selected the best human resources and strategic partners to translate our goals. And although Escan started in Abu Dhabi, its projects are not confined to the capital but rather cover developments in Dubai and Fujairah. The aim is to achieve benefits for shareholders and to generate the highest investment return to win their, and our, real estate market partners’ confidence. The company’s assets have grown by 30 per cent since its establishment and it is now working to become a public shareholding company.
What is the volume of Escan’s investments and what are some of its upcoming projects?
We have several projects in Abu Dhabi, Dubai and Fujairah with investment value of about Dh5 billion, which will be increased to Dh20bn over the next three years. During the first quarter of the year, we will launch four projects with investment reaching Dh3bn. There will be two towers at Mohammed bin Zayed City in Abu Dhabi and another two in Dubai: one on Sheikh Zayed Road and the other at the Business Bay area. In Fujairah, Escan will start with two projects worth Dh1.4bn. The first is the Golden Sand Beach tourist project and the second is Al Fanar Towers in the heart of Fujairah.
How would you assess the real estate sector in Abu Dhabi over the coming years, and what are your future projects in the capital?
All indicators show that Abu Dhabi is in for an unprecedented phase of economic prosperity in all sectors. And both national and expatriate investors are confident in the leadership of the emirate.
Abu Dhabi has upgraded several legislations to create a proper atmosphere for investment and to encourage local and foreign capital to work in a reassured atmosphere. We will seek to boost our position in Abu Dhabi .
How do you see investment opportunities in Fujairah? What projects do you intend to build?
We have opted to invest in Fujairah, which is a business and tourist attraction, to take advantage of all the facilities it has. Escan is contributing to the development of the commercial and investment movement in Fujairah through Al Fanar Towers projects, the first by Escan in Fujairah, with investment of about Dh1bn. The towers are situated on the main street of Fujairah and on 22,500 square metres.
The project will have a shopping centre on the ground floor as well as three residential and commercial towers. It is the first project in the emirate that will allow 99-year freehold for expatriates. Another project is the Golden Sand Beach, a group of first-class hotels built with Dh400m investment. The project will also have swimming facilities on the beach designed to be in harmony with Arab culture.
Does Escan intend to invest in sectors other than real estate?
While it is true that we are a real estate company, but in the end we are also a company that seeks to amplify returns for our shareholders through diversifying investment tools. Recently we managed to acquire a 10 per cent share in a real estate finance company and we have become partners with big real estate developers who own shares in the company. Also, we see promising opportunities for investment in service sectors such as education and health, as well as industry, which has a promising future in the country.
Do you plan to invest internationally?
Looking for new opportunities in foreign markets is a strategic goal for us and after we consolidate the company’s position in the UAE, we will work to expand our projects to achieve an added value for our shareholders, both nationals and expatriates.
Do you believe the market will accommodate the current growth in the real estate market and can this growth lead to a surplus in the future?
I think the progress witnessed by the real estate market in the country is highly credible and is in line with the accelerating growth in the rest of the sectors. There are indicators and feasibility studies as well certain organisations that encourage and prepare the atmosphere for competition for the flow of more investment in the real estate sector. And I believe demand for residential units will be higher than supply, which means more flow of investment into this sector. Demand is still high in places such as Abu Dhabi, Dubai and Sharjah.
Prices of construction material have increased a great deal over the recent period. How would you explain this rise and has it affected your company?
The only reason for the rise in prices in the local market is the boom witnessed by the country’s construction sector. Also rising is the production cost as a result of increase in prices of raw materials in world markets. With the rise in construction material prices, the overall cost of construction projects and consequently residential and commercial unit rents will go up as well. However, I think the rise in rents as a result of construction material price rises have been illogical and exaggerated in many areas.
How do you see the future of real estate investment in the UAE?
The progress witnessed by UAE real estate in investment will continue to grow during the coming years in light of growing demand for residential units and investors’ desire to pump more capital into the sector. All indicators show that oil prices are bound to rise this year given the increasing demand in India and China, which means higher returns for the government and which will most probably direct part of the return to infrastructure projects or other investment projects to diversify sources of the national income. In the past, real estate investment was concentrated in Dubai, which actually managed to create investment opportunities for investors in this sector. Then other emirates followed, and we have seen how Abu Dhabi is racing with time and making superb progress in a short time. Other emirates such as Fujairah, Ajman, Umm Al Quwain and Ras Al Khaimah as well as Sharjah have also started to invest heavily in this sector. And this boom is not limited only to the UAE but can also be seen in other regional countries.
How would you assess the Gulf real estate market?
It enjoys big growth opportunities and absolutely can be described as a bubble since prices are still lower than many areas of the world. Also the growth witnessed by the region’s economies will give the real estate sector bigger real growth opportunities. About 60 per cent to 70 per cent of the some $15 billion in private investments in the region go to real estate.
How do you interpret the big increase? And when will prices be balanced?
The economic progress in the UAE has led to a shortage of residential and commercial units as a result of rising labour costs and the race by foreign companies to open branches in the country as well as the rising number of foreigners who like to work and reside in the UAE. This has lead to increase in rent by up to 100 per cent in some areas, which in many cases is not justified.
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