A leading South Korean realtor has struck gold in the Middle East, particularly in Dubai, as a developer and a contractor to join the big league of real estate majors in the world.
Sungwon Corporation, which has built more than 140,000 homes in Korea, is already promoting the concept of healthy living by launching two projects in Dubai. In its role as a contractor, it has set a new benchmark for quality and speed in the industry.
“We don’t target all types of project; we target only high-profile projects where we can add value, either by quality or speed. That’s where our differentiation comes from compared to others,” Richard Lee, Vice-President, Sungwon Corporation Middle East, told Emirates Business.
Currently, Sungwon is working on two of its own projects in addition two other projects in Al Qouz and Dubai Marina.
“We have about four more projects lined up as contractors. Though these projects will start later this year, we have already started mobilising operations.”
The company, which specialises in the “design build” concept, is offering its expertise to third-party developers.
“Investors [who have land but no real estate development experience] tend to rely on our experience as a developer and contractor. They can rely on us for good designs and proper feasibility studies and accurate cost estimates,” Lee said.
LOW PROFIT MARGINS
For Sungwon, profit margins are lower in Dubai compared to South Korea, where it has been in the real estate business for the past 30 years. “We have a huge network of suppliers and sub-contractors in place and we know the market quite well in South Korea,” said Lee.
“The Dubai market is still new for us and we are still studying its potential. Currently, we are looking to place ourselves more competitively in price and cost terms.”
The realty company claims to be one of the best in Asia in terms of providing competitive pricing, highest quality and higher speed.
“In order to achieve these three criteria, we have to use the best labour, managers and know how. Unlike local companies, we bring all this from Korea and other countries.”
However, the big worry for the developer is the rising cost of land in Dubai.
“Land prices escalated phenomenally in the last three months of last year. What has been worrying is that the escalation has not been gradual. If I wanted to buy the same plot in Business Bay that I bought 18 months back, I would have to pay almost double the amount,” said Lee.
When asked why the company did not purchase more plots, he said: “We concentrate all our efforts on one project at a time. We don’t have a policy of buying plots in a row and then start selling projects.”
Founded in 1978, Sungwon is a large-scale integrated real estate development, construction and engineering company that employs more than 2,000 people. It is a publicly traded firm, which is listed on the Korean Stock Exchange. It focuses on luxury residential and commercial complexes, civil works, environmental plants and special projects such as championship golf courses and world-class stadia and resorts.
In Dubai, the company has launched Santevill (pictured above), a mixed-use development in Business Bay and Santeview, a $300 million (Dh1.1 billlion) mixed-use tower in Cultural Village.
“We chose Business Bay as we believe it will be the centre of Middle East business. The district will have numerous commercial towers where several professionals will be working. Keeping this in mind, we started constructing a luxury residential tower to cater to those wishing to live closer to work.”
Culture Village was chosen because of its proximity to the Dubai Creek, Lee said, adding: “We saw the site to be best suited for a residential and office complex.”
Sungwon has a large plot in the Lagoons and plans to construct high-rise residential tower there at the cost of more than Dh1 billion. “We are planning to build a residential tower in the Lagoons. We are still working on the project and an announcement will be made later this year.”
In May last year, Sungwon signed an important contract estimated at a $20 billion with Deira Investment Company, a newly created Dubai Government entity, to redevelop areas of old Dubai. Under the agreement, the Korean company will build houses, shopping malls, public facilities and harbour facilities in Deira.
Unlike other countries where their leading construction companies look for greener pastures overseas, the Korean construction companies were confined to their own boundaries. After the Second World War and the Korean War in 1953 the infrastructure was demolished in the country, so local companies concentrated their energies on their homeland. “With the assistance of the United States Government, United Nations and World Bank, we reconstructed our country and all of that was done by Korean companies,” Lee said.
Later in the 1970s, South Korean construction companies started venturing overseas and came to the Middle East.
“We sent a lot of labourers to construct roads and power plants in Saudi Arabia, Kuwait, Bahrain, and the UAE. However, the biggest difference was that our labourers came with our Korean companies and went back with them.”
Once again, Korean companies along with their labourers are coming back to the Middle East, Lee said.
“We are bringing in Korean, Vietnamese and Mongolian workers, who we believe are more productive.”
In Qatar, Kuwait, Lebanon and Bahrain, the company is going to give priority to investing in public work on roads, railway tracks, sewage treatment plants, tunnels and bridges. The company recently won a Dh400 million contract from Bahrain to construct a massive flyover. The Isa Town Gate Intersection project is Sungwon’s first civil works project and its biggest road project in the Middle East.
“Our contract is the perfect example of a level playing field, as authorities were open to explore new construction techniques.”
The company is soon going to start participating in road construction work in Dubai, said the vice-president.
Sungwon is in talks with two investors to construct towers with more than 100 floors in Dubai.
“We are already in deep study to build towers with 100 plus floors. We are currently working on the design and concept for them,” said Lee.
As to the construction of ground plus 50- to 80-storey towers, the company is holding talks with a dozen investors.
The criteria for awarding a building licence to developers in Dubai are based on height and getting an ‘unlimited’ height licence is an arduous task.
Korean construction companies are known for building the world’s tallest towers including the Burj Dubai and Petronas Towers.
Korean firm strikes gold in the UAE