The total investment portfolio of Cirrus Developments, a Dubai-based property developer, will pass the Dh20 billion mark in the next 12 months, according to the company’s Chairman Behnam Eshragh.
“We expect to launch Dh20bn worth of projects over the next 12 months across the prime plots that we have acquired in free zone locations. Since October 2007, we have launched over Dh3bn worth of projects in the UAE,” he told Emirates Business during a wide-ranging interview.
Do you plan to acquire more land in any of the other emirates?
Our development team is currently running feasibility studies on a number of master developments across the UAE, but at this stage our focus has been on master developments around Dubai. We believe that Dubai represents a fantastic opportunity for investors and end users.
When do you plan to commence your regional foray? Any projects being planned in Iran?
The whole region’s real-estate sector is very dynamic and there are good opportunities around the GCC. However, we believe that since Dubai has taken the lead in many areas, such as the Trust Law, our focus for the time being will remain in the UAE. At this time we do not have any plans for Iran.
Are you facing a talent crunch, since it is becoming increasingly difficult to get experienced and talented people in real estate?
As a developer, we aim to deliver 100 per cent customer satisfaction. We look for people who are exceptionally talented and who can demonstrate a positive energy and attitude in making things happen.
We have been very fortunate in being able to recruit a high-performing team across all of our functions.
Does technology aid in selling apartments, and does it offer you an edge over the competition?
We strongly believe in offering technology that works for the customer. And by that we mean technology that does not clutter the environment, is unobtrusive and above all, easy to use.
Too much technology can be a little overwhelming and most of the time is underused. Moreover, servicing and maintaining high-end technology can be costly for both the user and the facility manager.
How much do you expect prices of raw materials to go up by in 2008? And how are you planning to offset the cost escalation?
If the last year is anything to go by, we would expect a continuation of rising raw material costs, although this is not a certainty. We take a very prudent approach in planning our business and ensure that we have done proper due diligence to offset inflationary pressures in the economy.
Has the rising cost of construction and labour hit your bottom line and if so, by what percentage?
All developers are feeling the cost pressures, but we have been proactive in looking at how we can become more efficient in terms of building design and the utilisation of new technology in key areas such as environmental sustainability.
Getting good contractors is a notoriously difficult job. Do you have plans to acquire or start up your own construction company?
A lot of our senior management time is focused on building long-lasting and profitable relationships with suppliers and other stakeholders in our value chain. This means, not only critically evaluating contractors who we want to work with, but at the same time allowing them to understand the levels of professionalism that we aspire for.
If we have a perfect fit with a contractor on the basic fundamentals of the business approach and we find there is a common business philosophy and language, which we share with them, then the process becomes a lot more easier. We have taken this approach to our business and are very comfortable that this is paying dividends in terms of securing contractors.
Dubai is coming out with new laws and regulations such as the escrow account and strata law to regulate key areas of real estate development. What impact are they having on the real estate market?
Since we were among the first to activate a trust account, we believe these new laws are a great plus point for Dubai. It will create a cadre of world-class developers that can be successful in any market since they are used to operating their business in regulated marketplaces.
In fact, all of those involved in the real-estate sector will benefit, as customers will purchase with greater confidence since their funds are held in a trust account and contractors and those involved in the development process will be paid on time from the trust account.
Investment banks and property consultants point to rising delays in completion of various projects around the UAE. What is the status of your projects?
One of the statements that is levelled against property developers in Dubai is that none of them deliver their projects on time. They are all late. The trust account mitigates this risk, as independent authorities such as the trust agent, external auditor and Dubai land department tightly regulate cash flow of developers. This ensures that revenues being generated on projects are aligned with the construction cash flows, which have been approved by the land department.
As a result the market will see more real-estate funds being created, as there will be a greater assurance that the developer will be delivering target return yields on time. In terms of our own projects, we are currently on plan with all of them and expect to deliver as per the commitments we have made. We adopt a fast-track approach to development, which means that we package our construction process in a more optimal manner so that things are delivered on time and to plan.
Do you believe that the emirate should have a common property law?
This is something we are sure the relevant authorities are considering. There would certainly be benefits to this approach for everyone involved in the real estate sector.
Any plans to raise debt to fund your projects?
At this time, we are not planning on raising any debt, since the projects are financed through shareholder funds and off-plan sales.
Will the market cool down in coming years?
The market at this time is very buoyant and we expect it to be so in the near future. What gives us confidence is that a lot of investment is being made into the supporting infrastructure, such as utilities, roads and transportation networks. This along with the market becoming more regulated leads us to believe that the market will continue growing for the next five years.
PROFILE: Behnam Shams Eshragh, Chairman and Chief Executive,
Eshragh through his family business in Iran has been actively involved in general trading and real estate development. He and his family through their company Estack and other subsidiaries have generated high-income returning yields from their real-estate business. Whilst studying in Vancouver, Canada, Eshragh was able to set up a dotcom company, which he then sold on to a major Canadian entertainment house.
Through Polar International Marketing and Global Trade Finance and its subsidiaries Eshragh has been involved in trading steel, home appliances and furniture.
Since 2005, Eshragh has been a 25 per cent shareholder in real estate developments in Dubai valued at more than Dh55 million, which have been sold out and have generated a healthy return. He was responsible for developing the Kaizen One Tower in Jumeirah Village South amongst others.
Cirrus to invest Dh20bn over the next 12 months