RAK property prices will double in two years
Khoie Properties, the real estate arm of the $2 billion UAE-based Khoie Group, was one of the early movers in the Ras Al Khaimah property development market when the company announced the Dh1bn La Hoya Bay in Al Marjan Island development.
In addition, Khoie Properties has gone on to acquire land worth Dh750 million across Dubai and Abu Dhabi, and will announce Dh3bn worth of projects in the two emirates by the end of this year.
The group is also branching out into the financial sector with a subsidiary called Khoie Finance, which will be registered at the Dubai International Financial Centre (DIFC).
In an interview with Emirates Business, Frank Khoie, Chief Executive of Khoie Properties and the Group, said: "The paper work is still underway and we hope the final approvals from DIFC will come through by early 2009.
"We already have in-house financing options but we are looking to set up something on the lines of what finance companies in Dubai are offering."
Beside Khoie Properties, other group subsidiaries include Khoie Constructions, Khoie Trading, Khoie Industries and Khoie Education. Excerpts:
Give us a construction update on La Hoya Bay?
There are five elements in the project: La Hoya Bay Residences, La Hoya Bay Business Village, La Hoya Bay Regency, La Hoya Bay Hotels and Apartments and La Hoya Bay Marina and Yacht Club.
The first comprises seven towers and 1400 residential apartments. We are nearing 20 per cent completion of the project and have currently finished the first level on the residences. Our target is to complete the project by March 2009.
La Hoya Bay Business Village is a half-a-million square feet of office and retail space and is scheduled for completion by March 2009 as well.
La Hoya Bay Marina and Yacht Club are in the design stages currently. We plan to provide 500 berths for boats in front of the hotel. It will be completed by December 2009.
The La Hoya Bay Regency, an old European-style village development, will be completed by December 2010.
The La Hoya Bay Hotels and Apartments will be a three-cluster development connected to each other, offering 200 five star hotel units along with 700 serviced apartments. It will be completed by June 2010.
You are announcing projects in Dubai and Abu Dhabi but is your focus largely on Ras Al Khaimah?
Not really. We will look for opportunities in Dubai, Abu Dhabi and Ras Al Khaimah equally. These are our three main focus areas. Ideally, our business sense tells us to go where the opportunity is.
What are the key features of the La Hoya Bay development?
On La Hoya Bay alone, we are building 5000 residential units, half-a-million square feet of office space, a total of 200 five star hotel rooms plus a cluster of approximately 5,000 serviced apartments.
Further, we are taking the logistics of transportation within the development very seriously. We will buy 50 taxi boats and 50 cars, which will be used to provide chauffer-driven private taxi service.
Each of our subsidiary companies that are providing infrastructure within La Hoya Bay has invested a minimum Dh1m on just the infrastructure of the project.
The office space within the project will function as a free zone. An investor buying office space in La Hoya Bay will automatically get a free zone licence. We obtained the free zone permit from the authorities at a very early stage of the project and to date in Ras Al Khaimah the La Hoya Bay is the only exclusive free zone development.
What are your plans for Abu Dhabi and Dubai?
We have a land bank worth Dh750m across Dubai and Abu Dhabi. Whatever we build there will be community-oriented developments along the lines of La Hoya Bay. We will not simply build one single tower and call it a property development. We will announce projects worth Dh2.5bn in Dubai alone and Dh1bn in Abu Dhabi by end of this year.
With the high inflation in the country, which is expected to rise further in 2009, have your profit margins come down?
Unquestionably, there is a certain amount of pressure being built up by the constantly rising oil prices and the competition. Our property prices are appreciating 10 per cent every month.
The net profits average 15 to 20 per cent. We don't think that is low as our volume of sales is high. As an example, for someone with a turnover of Dh100,000, earning a revenue of Dh15,000 could be a small amount. But for someone making sales of Dh1bn or Dh2bn, the total value of the revenue earned at a similar profit percentage will be substantial. Even after the rising costs that we need to consider, our net profit at 15 to 20 per cent is still high in global terms.
What is Ras Al Khaimah doing regarding infrastructure development?
Infrastructure development implies taking care of four essential factors – water, power, sewerage system and telecommunications. As far as telecommunications are concerned, Etisalat is doing a good job. For water and sewage, there are desalination plants already in place and a sewerage system is being worked out. As regards power, the issue is that it takes time to build power stations. Power shortages are everywhere, even in Dubai, but we know massive power plants are being constructed all over the UAE. Until they are completed there are always alternative generators to provide power. On the La Hoya Bay project, we don't have a sub-station set up, but power will either come directly from Ras Al Khaimah Investment Authority (Rakia) or the Federal Electricity and Water Authority. In addition, there will be one sub-station of 400 megawatts in order to provide sufficient power to the entire island.
Where is Ras Al Khaimah heading at the moment?
Prices in Ras Al Khaimah are only one–third or half of Dubai prices. So there can be only one prediction for the emirate, and that is an upward movement of property prices. We anticipate prices to double in Ras Al Khaimah in two years' time.
There is talk of a possible oversupply looming in Dubai and many say developers are currently riding a wave in the realty sector and not really heeding the warning signals. What are your comments?
Oversupply could become a reality in the market, but it will correct itself when prices come down. There is no uniform law in corporate behaviour. Every developer has his own intelligence gathering and analysis team to advise him.
We believe in sustainable development and long-term thinking. We have our cash flows all worked out and we are being advised by professional consulting companies such as Ernst & Young and by banks such as National Bank of Dubai and Abu Dhabi Commercial Bank.
Property is always cyclical and in Dubai there is a desperate need for low-cost housing with services. We are planning on adding 3,000 low-cost housing units in Ajman as soon as we find suitable land.
Do you have a fixed payment plan that you are adopting on your projects?
Developers need to gain the confidence of the buyers in the market, particularly since they are buying off-plan from us. As a rule, all our projects offer 30 per cent payment until completion and 70 per cent pre-approved 10-year in-house financing from Khoie Properties.
The in-house financing option is not mandatory but it's just an added service we offer. We think we are fairly competitive with respect to what Amlak and Tamweel have to offer. We are charging an interest rate of 1.5 per cent per month.
PROFILE: Frank Khoie, Khoie Properties CEO
Khoie started his first business venture in 1972 at just 23 years of age, when he formed IPC Engineering Company in Tehran, which brought him revenues of $280,000 (Dh1.02 million).
Moving to the US in 1975, Khoie formed Sood Industries, a Los Angeles-based assembling, interfacing, marketing and servicing vertical. He also formed CNC machine tools that further fetched him $3.5m by 1989. In 2001, Khoie decided to move to Dubai, where he first established Khoie Technology for the home automation business followed by Khoie Power – a general contracting company.
In 2002, he formed a joint venture with 32 Group Properties and launched the 40-storey Pacific Office Tower, a $50 million project at Dubai's Jumeirah Lake Towers. In 2003, he set up the Khoie Group geared towards the construction boom in the UAE, and Khoie Properties in 2004.