Federal property law will help boost sector
(DENNIS B MALLARI)
RAK Properties was established in March 2005 with a paid-up capital of Dh2 billion.
Since then it has grown to become a leading property company in Ras Al Khaimah.
Currently, the company holds a major share of the property market in RAK and recently expanded its activities into the Abu Dhabi and Dubai markets.
Listed on the Abu Dhabi Securities Market, RAK Properties is also considering future overseas investment opportunities in Georgia, Tanzania, Morocco, Egypt and Sudan.
Mohammed Sultan Al Qadi, MD and CEO of RAK Properties spoke to Emirates Business about the company’s performance and expansion plans.
He also spoke about the challenges faced by the property sector and suggested ways to further enhance the sector’s performance to better position the UAE as a global property investment destination.
Would you tell us about RAK Properties?
RAK Properties is a public joint stock company listed on the Abu Dhabi Securities Market in October 2005.
Being the premier property developer in RAK, it is engaged in the development of a number of local projects worth Dh13 billion.
What was the government’s vision behind setting up this company?
The Government of Ras Al Khaimah’s Investment and Development Office (IDO) announced the establishment of RAK Properties to implement the vision of Crown Prince Sheikh Saud bin Saqr Al Qasimi to promote real estate, tourism and leisure facilities in Ras Al Khaimah.
The company’s founders, including the Government of Ras Al Khaimah, hold 45 per cent of the company’s share capital, while the remaining 55 per cent, or Dh1.1 million, was offered in an IPO to the UAE and GCC nationals and expatriates.
The IPO was 57 times oversubscribed attracting subscriptions worth Dh62.5bn.
How did you handle that situation?
To ensure strong small investor participation and fair allocation of shares, two categories of subscriptions were made, 200 million shares for small investors and 900 million for others.
Just more than 34 per cent of subscriptions in Category A shares were allotted to investors applying for amounts between Dh20,000 and Dh100,000, and 1.47 per cent of subscriptions for the remaining 900 million Category B shares in the issue, for amounts of Dh101,000 or above.
How was your business in 2007?
The firm has achieved the financial targets set by the board. Last year our profits xceeded Dh496 million and sales hit Dh1.1bn.
How was 2007 for the property sector in the UAE and in particular RAK?
The property sector in the country attracted big investors who trusted the market and grabbed investment opportunities.
All these were due to the facilities and regulations in place. Similarly, RAK’s property market has witnessed the entry of a number of companies participating in its large-scale development projects.
What challenges did you face last year?
The cost of building materials have gone up by 30 to 40 per cent and this is a major issue.
This has led to an increase in contractor’s costs.
The increase may be justified, but with these percentages, I believe there are exaggerations.
Last year also witnessed an increase in labour costs and some companies resorted to poaching professionals by offering them competitive packages.
Contractor delays in handing over projects were another problem the market faced last year.
This affected the reputation of developers.
Consultants are only a few in the market, so developers had to pay a high price to avail their services on time.
How can these issues be solved?
There should be a federal regulator for the real estate sector similar to the Telecom Regulatory Authority.
A federal real estate authority would regulate the sector by, for example, imposing rules, solving arguments put forward for raising prices, imposing a unified code of conduct on all companies and monitoring and meeting the market’s needs.
Such an authority would help build investor confidence as well as a competitive market.
Do you think a federal property law is urgently needed and would such a law further bolster the country’s worldwide position as an investment destination?
No doubt, having unified regulations in the form of a federal property law would bolster the country’s reputation and ensure its position as a reliable destination for real estate investment.
Such a law would give investors a clear idea of the terms and regulations governing the sector here. Hence it is recommended to have a unified property law in the UAE.
However, such a law must allow each emirate to implement its vision in accordance with its own circumstances.
What are the prospects for 2008 for your business and the sector?
We have already sold all the released units in our projects and we expect 2008 to bring us better results than last year. We are looking forward to increasing the company’s profits.
We are also confident the UAE real estate sector will continue to boom.
What challenges do you expect to face?
As in any business, the challenge before us is competition.
However, it’s a challenge that can be tuned into integration and synergies in services. Companies should co-operate to utilise one another’s experiences and duplicate uccessful initiatives.
How are you prepared to face the demands of the future?
We have acquired land in Dubai and plan to launch two projects. In the last three years we have consolidated our strength and are now capable of meeting the future needs.
We also have land in Georgia and Tanzania and are looking to starting construction this year. We are also considering investment opportunities in Morocco, Egypt and Sudan.
What is the size of RAK Properties and how would you rank your company?
We are the leading property company in RAK.
Our current total investments exceed Dh10.8bn. Mina Al Arab in Ras Al Khaimah is a Dh10bn multi-purpose project.
We will start handing over units in the first phase by 2009 and the whole project is scheduled for completion in 2012.
Our Julfar Towers is a Dh500-million project and is scheduled for handover during the first half of next year.
RAK Tower, our first initiative in Abu Dhabi, is a Dh300-million residential project on Al Reem Island. We have projects exceeding Dh30bn up to 2015.
How do you describe the performance of RAK Properties’ stock price?
The stock prices of listed companies fluctuate depending on bids and offers, speculation and some psychological factors.
With necessary regulations governing financial markets being put in place, the market performance has definitely improved.
What dividends have you distributed in 2006 and 2007?
We announced a 7.5 per cent dividend for 2006, after profits reached Dh473.897m.
The profit, earned during the first 19 months of operation, represents 23.69 per cent of capital and corresponds to earnings per share of 23.69 fils.
We have not decided about 2007.
Mohammed Sultan Al Qadi
MD and CEO of RAK Properties
Prior to joining RAK Properties as Managing Director and CEO in 2005, Mohammed Sultan Al Qadi held senior positions at etisalat, and was general manager of etisalat Ras Al Khaimah.
He was chairman of etisalat Zanzibar, “Zantel”, and spearheaded etisalat’s expansion into Sudan, which led to Kanartel – the country’s second fixed line operator, being established.
He is a board member of the World Commercial Bank and the Federal Electric and Water Authority.
He has participated in many leadership and professional training courses in Europe and East Asia.
Dh13bn: The firm is engaged in the development of local projects worth Dh13bn
7.5%: It announced 7.5 per cent dividends for 2006
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