TBY talks to Saeed Mohammed Al Qatami, CEO of Deyaar, on developing real estate in the UAE, the regulatory environment, and diversification plans.

What new hospitality projects are you bringing to Dubai in 2014?

We are set to undertake approximately 5 million square feet of projects in 2014. One-fifth of this will be allocated to the hospitality sector, either for serviced apartments or for the hotel business with four-and five-star hotels offering superior amenities. The main focus at first will be on serviced apartments, which are in high demand ahead of Expo 2020.

How is the Atria project developing?

The Atria is a project of approximately 725,000 square feet divided into two buildings, with amenities and retail services. Of the two buildings, one is a residential with 219 units of one, two, and three bedrooms, and has already sold out. Conceptualized by UK-based designers, yoo Studio, the hotel apartment tower, which is comprised of 347 units, will feature studios, one-, two-, and three-bedroom apartments, and three bedroom duplex units across a 30-floor complex. Our strategy is to give added value to our clients, not only with the brand name, but also with the interior design. Our designer is renowned as one of the best in the world.

“Dubai has streamlined its policies in a way that enables long-term, sustained development in the real estate and property sector."

What is your strategy for improving profitability?

In 2012, Deyaar turned AED38.6 million in consolidated net profit and, in 2013, we quadrupled that to an AED154.5 million consolidated net profit. We have seen growth in our stock and hope that profits will continue to rise for the next few years at least. Deyaar's strategy is to diversify its capabilities in the real estate sector and, accordingly, has decided to expand its development portfolio beyond commercial and residential properties, with the inclusion of hospitality projects. In line with our new direction, we have allotted up to 1 million square feet for hotel and serviced apartment projects in prime locations in the city in the coming years. We aim for the right mix, but we will also maintain our hospitality projects. Some of these properties will be retained as fully owned developments under Deyaar, while other projects will be sold to third-party investors.

Over 2013, Deyaar added around 600 units to its portfolio. How many units are you planning to add in 2014?

We are handing over 180 units. We also have previous stock that remains available. In terms of sales, there are about 500 units available in various areas. Also, through our joint ventures, such as Central Park, a mixed-used development located at the Dubai International Financial Centre (DIFC), a project with Dubai Properties, we will be adding a further 426, two-thirds of which are already sold.

What is the percentage of foreigners investing in the company?

Deyaar has been one of the most traded stocks on the Dubai Financial Market. The shareholding structure since we took the company public was a minimum of 51% for UAE nationals, with the rest being from the GCC. One of the main shareholders holds about a 41% stake. Another point decided on in 2013 was that the UAE listed company on the stock market would become listed in the Morgan Stanley Index, which allows our shareholders to trade their shares for international funds. This is something that usually comes with longer-term investment. The condition is that the company must have 20% to 25% foreign ownership. We offer value to our existing shareholders as well as interested parties from international markets. The company currently allocates 49% of shares to GCC citizens and foreign investors. However, foreign ownership must not exceed 25% of the total shares allocated. Emiratis, meanwhile, enjoy unlimited share allocation as long as the percentage of shares is maintained at 51% and above.

What is your opinion of Dubai's regulatory regime in the real estate sector?

Over the past few years, Dubai has streamlined its policies in a way that enables long-term, sustained development in the real estate and property sector, which I think is exceptional, considering this is still a nascent market. With all the regulations in place, it is only a matter of ensuring that developers comply with them before they launch their projects. Ideally, a project should be launched only after getting the master plan approved by the authorities, which should also ascertain that the plan is strictly adhered to during the execution stage as well. I believe that as key players in the real estate market, it is our responsibility toward the community and our stakeholders to offer uncompromising standards in terms of our products and services.

Currently, there is about $350 million being invested in the real estate and construction sector in Dubai. What is your opinion on this?

When I drive around the UAE, I see a huge growth in the number of projects. The federal and local governments have been spending heavily, and there are some projects emerging that will impact the industry overall. One major issue is related to labor. Following the crisis, many companies chose to let many laborers go. As these large projects require workers, the market may eventually face a skilled labor issue. This will impact the real estate industry as costs will increase. I do not anticipate any huge increases in material costs, but there will be an issue with labor.

What is your outlook for the real estate sector in 2014?

Dubai has always been competitive and attractive. For people planning to stay, there will always be demand for hotels. In 2014, we are confident of a leasing perspective, and expect there to hardly be any vacancies. As far as sales and the launching of new projects goes, this is dependent on market liquidity. If you have good projects, you will be able to sell them. If the location and quality are right, then people will be interested in buying it. I think this market will continue to grow, and people from the region will continue to have an interest in Dubai and invest in real estate here.

Does Deyaar have any plans for expansion?

We already have an international presence having completed a project in Lebanon, and have had investments in Turkey for several years. Unfortunately, for various reasons we had to exit the latter country in late 2013. This said, we are open to any opportunities that may arise in Turkey or the Middle East.

© The Business Year - July 2014