IFA expects to sell office space on Palm Jumeirah at a premium

The Palm Jumeirah has emerged as the focal point for Kuwait-based IFA Hotels & Resorts' investment in Dubai, forming the bulk of an estimated $5.4 billion (Dh19.83bn) spent so far.

IFA has already invested $3.5bn on the man-made island with its Palm Golden Mile development, a joint venture with Nakheel, which makes up 65 per cent of its total projects in the emirate. The firm, whose profits grew by 236 per cent in 2007, is hosting a private auction on June 21 to sell off four of its freehold office buildings, part of 10 buildings that make up the mixed-use development on the island's trunk.

IFA's Vice-President of Vacation Ownership, Piaras Moriarty, talked to Emirates Business about why the company chose to forego a market listing and auction off the office space instead. He also discussed further investment plans in Dubai, where he sees growth doubling or tripling in the next three to five years with IFA's investments and projects likely to follow a similar route. "We're on that train and as the projects continue expanding our organisation, we'll continue to develop projects in Dubai and in the region," said Moriarty.



—Can you tell us a bit about your joint venture projects with Nakheel?

—The Palm Golden Mile is a mix of residential, retail and commercial space, comprising 10 buildings. In total there is just over square 220,000 feet of office space in the 10 buildings. We're going to be launching about 80,000 square feet of space during this auction. On offer is a very unique office space and it's the first freehold office space to be available for sale on The Palm Jumeirah.

Recently we started our second joint venture with Nakheel for two additional plots on the crescent next to the Kingdom of Sheba development. What we bring to the table is the asset management, sales and marketing, the design and development, and ultimately also the management of that project through Fairmont Hotels and Resorts.

—Why did you choose to host an auction to sell the Golden Mile freehold office space?

—When you're faced with a property that is really unique and very difficult to price, an auction can be a way of setting a benchmark and finding out really what the consumer is willing to pay for that property, therefore determining its value. Over the past three years we've been getting persistent requests to sell this office space and to sell this retail space to individual investors.

We were never really sure at what price to set that product on the market. Obviously you want it to sell but you don't want to sell under value. We thought, finally we're now nine months away from the handover and it's time to get that office space sold and delivered. So we're doing an auction on June 21 at the Fairmont Hotel. It's the first auction we're doing in Dubai.

—How do you expect prices will compare to other high-end office space in Dubai, for example the Trump Tower or Burj Dubai?

—We expect sales will be on the high-end of the market. Burj Dubai is now I think about Dh6,000 a square foot, Maritime City is about Dh4,500 or Dh5,500. Is the Golden Mile or is The Palm Jumeirah above that or below that? We think it will be on the high-end of the market but to what level consumers are willing to pay for that office space, we're keen to find out as well.

—What type of bidders are you expecting at the auction?

—We're only allowing about 150 people to take part in the auction. There have been two types of attendees; end-users, who are a variety of business owners from law firms to media houses to doctors, dentists, plastic surgions. And then there are the investors, who are interested in purchasing the space in order to lease it or re-sell it later on.

—How much are your total investments in Dubai?

—We've invested $3.5bn on The Palm Jumeirah, and that's the bulk of our spend – it's about 65 per cent of our total projects. We're developing about 4,000 keys [apartments, villas, etc] on the island. We've also got projects on Jumeirah Lake Towers.

—What kind of growth is the company seeing overall?

—We're looking at doubling every two years in terms of growth. We are in a very rapid growth phase. Profits are going up, growth is increasing 100 per cent. Growth in terms of profits was 236 per cent last year over the year before, with total profits at about $8 million. In terms of market growth, we've entered eight markets over the past two years, including the United Kingdom, the Netherlands, Seychelles, and Namibia. We are focusing on Dubai. I see growth here really doubling or tripling in the next three to five years and as a result, IFA's investments and projects in Dubai are likely to follow a similar route. There are also new areas where we will be expanding internationally that we can't talk about yet.

But they are all markets that are at the beginning of their growth phases. We're looking in Saudi Arabia, in South America and North America… and Thailand is also very important to us at the moment.

—Where do you see office space availability in Dubai in the coming years?

—I think there will still be shortage of space the way Dubai is growing at this rate. Remember Dubai is at the beginning of its expansion; we still have Dubailand, and other developments, to really come into play. Obviously businesses will flourish and they will need space. We are packed to the limit and I'm sure other organisations are feeling the same issue.

—How much of your portfolio is made up of timeshare products?

—Right now it's about 10 per cent. If you look at the profitability of different components, vacation ownership per foot is the most profitable, then it would be private residence club, then residential, and then hotel. So you have a longer term to generate profits from vacation ownership that's more profitable per foot.

—Any other timeshare plans for Dubai in the works?

—So far we've launched two vacation ownership-type products here – the yacht ownership club and the private residence club in the Kingdom of Sheba, which had 25 per cent sellout in the first year. We've doubled the prices from launch to today on that product. The vacation ownership component will launch after the summer and we'll go for a soft start building up to delivery of that project just after 2010.

It's a very important part of our business strategy – it guarantees occupancy and opens up our client base considerably. The extension won't have any vacation ownership but it's about 10 per cent at the moment of the [entire] Kingdom of Sheba.

—Where do you see the vacation ownership segment of the market going?

—Currently five per cent of the world's vacation ownership projects are located in the Middle East region. And if you look at the qualified consumer base here, these probably should be in the region of 15 per cent. So there is quite a lot of room for expansion in terms of development and consumers of the region. We are developing vacation ownership projects in order to get into that market.

—Do you have any expansion plans in the UAE outside Dubai?

—We're obviously looking at every opportunity closely but we have not entered into any projects outside Dubai in the UAE.

—Does your company have plans for any acquisitions?

—We are involved in acquisitions. In January 2007 we acquired 24.5 per cent of a Thai developer called Raimon Land, listed on the Thai stock exchange. They're residential property developers in Thailand with about 11 projects in total currently. We acquired part of that company, and with our experience we will go in and hopefully add a hospitality angle to those projects.

Acquisitions and partnerships will carry on; we're always looking at opportunities to enter new markets.





PROFILE: Piaras Moriarty, Vice-President, IFA Vacation Ownership

Moriarty joined IFA Hotels & Resorts in 2004 to analyse its specific needs for the successful introduction of IFA fractional and vacation ownership products in Dubai.

He also heads property sales for all products in the Middle East, including freehold residences, fractional ownership and vacation club.

Moriarty has 20 years of leadership experience building marketing infrastructure and guiding top-tier companies to integrate shared ownership products into their product mix. His previous timeshare marketing experience includes a stellar track record with Marriott's Vacation Club International in the Middle East.

Moriarty has also successfully launched the IFA Yacht Ownership Club, which is the first of its kind in the world.