Bavaria Gulf to launch new businesses via joint ventures

Bavaria Gulf, a Dubai-based boutique developer, is seeking joint ventures to expand its development portfolio across the UAE, a senior company executive said. “We are planning joint ventures and are holding several negotiations with investors who believe in the philosophy of our company,” Chairman Dr Shahriar Daneshjoo told Emirates Business in an interview.

After launching Sandoval Townhouses and Apartments in Jumeriah Village last year, the company will announce a Dh500 million residential project in the same community after the holy month of Ramadan.

You entered the Dubai realty market in 2006, but your project was launched only a year later?

We entered the UAE market in early 2006 with the purchase of land. However, it took us almost one year to plan our activities. It was in early 2007 that we decided to relocate our headquarters to the emirate. We did not want to enter this market and commit mistakes. So we took the first full-year here for planning and went to market in December 2007 with the launch of Sandoval Townhouses in Jumeirah Village. This year we will again launch a new brand and new projects.

What is your investment plan for this year?

We have strategically planned to achieve a growth rate of 30 per cent per year and have been achieving this for years. Moreover, we have decided to establish new business units in the UAE and are currently working very hard on them. We will also be launching a Dh500 million residential project in Jumeirah Village after Ramadan.

Can you give us a brief of these new business units?

The new business unit will handle development services, which will provide services to clients who want to resell their property. They can list all the properties they have purchased from us and then we can bring them back to the market.

Moreover, we will establish our facility management unit next year.

You are concentrating on Jumeirah Village. Why not other master developments in Dubai?

We believe in the future of Jumeirah Village. It is unique in terms of location as it is in the heart of Dubai and very close to the new airport. Our investors have already seen an appreciation of 20 per cent in the past three months, making a 100 per cent return on equity. We feel Jumeirah Village has the potential to gain 50 per cent by the end of the year.

Have you started construction on your two projects?

Construction will start in the third quarter and the contractor has committed to hand over the projects by the end of 2009.

Do you plan to form joint ventures in the country?

At the moment we are in negotiations with several investors who believe in our company’s philosophy. They own land and, through the joint venture, we will develop them and establish new brands. In one case, we are talking about two ground-plus-40 buildings.

Would you have brand ambassadors endorsing your properties?

We lay more emphasis on creating the right product and try to find a good balance between marketing and product quality. We believe in providing service to end-users.

Dubai is coming out with new laws and regulations such as escrow account and strata law to regulate real estate development. What impact do you think they will have on the real estate market?

We were among the first companies to set up an escrow account. We started to be compliant with Law No8 in October 2007 when many of the companies failed to comply with escrow account guidelines by the January 1 deadline. We are working with TUeV Germany, an independent quality assurance association, which is a first in the Middle East.

Does TUeV certification offer value to you and your investors?

From day one, we have appointed TUeV to check our design and help us optimise it in such a way that maintenance costs are reduced. They are experts and know what they are talking about. They even come to our construction site and monitor the quality of our construction. They are a third-party advisor to us and bring huge value to our clients.

What do you perceive as major hurdles for the booming realty market?

There is shortage of raw materials because China, India and neighbouring countries such as Saudi Arabia and Qatar are booming. We are competing with all and the big challenge is to get raw materials. We see that a lot of companies here don’t have enough resources to deliver on time and this is something we need to improve. However, in the European markets, everything is more or less on time. Finding the right contractor is another challenge. Moreover, we don’t have enough labourers in Dubai to serve all the projects.

Since our core business is development and we don’t have plans to start any contracting company, we are talking to a local contracting company to whom we shall go exclusively for our projects. And it makes sense as we save time if we have long-term relations with them. In Germany, we have suppliers with whom we have been working for more than seven years.

Do you have plans to launch your brand across the Gulf?

No, we are not looking at expanding our reach to other Gulf countries this year. We are in talks to form joint ventures in Abu Dhabi and Ras Al Khaimah. Even investors from Ajman have approached us.

As your peers in Dubai have acquired international companies, do you have similar plans?

No. Bavaria Gulf is quite successful and we get a positive response from the market.

Are returns on real estate in Dubai higher than in Germany?

Returns are certainly lower in Germany. The population there is becoming old and is decreasing. The market is very slow, with the average age of buyers being 47 years.

When do you perceive a slowdown in the UAE realty market to happen?

I believe the market will continue to boom until 2011, but during 2011-12 it will reach a high level of consolidation. The primary reason is that prices in Dubai are still reasonable and have not achieved international levels yet. So until 2011 we have potential to go up and thereafter we will continue with reasonable growth in Dubai.

Profile: Shahriar Daneshjoo

Chairman, Bavaria Gulf

As Chairman, Shahriar Daneshjoo combines international exposure in strategic sales management, gained at global giants such as Dell, Sun Microsystems and Hitachi, with academic excellence. With a post-graduate degree in marketing and psychology, followed by a doctorate in social psychology, the Iranian-born German envisions making Bavaria Gulf the preferred choice of homeowners across the UAE.

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