Serious About Sandoval
As Bavaria Gulf hands over phase one of its Dubai residential development in Jumeirah Village, director Raymond Lefevre comments on the impact of master-developer Nakheel?s recent financial challenges, but remains optimistic
The first phase of Bavaria Gulf’s Sandoval boutique residential development in Dubai’s Jumeirah Village , Dubai’s Jumeirah Village is complete, adding 36 townhouses to the emirate’s already oversupplied real estate market, but the developer’s director Raymond Lefevre remains confident about its prospects.
Having initially been due for handover at the end of March, the first phase met short delays due to a lag in the delivery of infrastructure works and services as Dubai World-owned Nakheel, the master-developer of Jumeirah Village among other major projects in Dubai, encountered widely-reported financial problems as it seeks to restructure US $10.5 billion owed to banks, contractors and service providers. “Investors understand that some of the delays are beyond our control and they have kept up with the news,” says Lefevre.
Most recently, Jumeirah Village was highlighted as one of the six projects — as well as Jumeirah Park, Al Furjan, Jumeirah Islands Mansions, Jumeirah Heights, Clusters and Al Badrah — that Nakheel intends to restart by early October.
INVESTOR FIRST
When it launched the development in 2007, Bavaria Gulf drew on more than 16 years’ experience in the German market by offering investors a construction-linked payment plan immediately; something other developers in the market have only recently implemented in response to difficulties in collecting payments.
“Some investors had cash-flow problems so we gave them extensions. We have had 95% of investors onboard since the launch of the project, less than 5% of these have cancelled. We have only sold to end users, no single investor has more than two units. This has worked well.
“Many of our clients have been living in the UAE for 10 to 15 years and have never purchased a property before. They are sophisticated buyers and assessed all aspects of the development before committing to take out the mortgage and have therefore stuck with the project.”
One of the challenges of selling to end users — rather than speculators looking to sell on properties at a profit — is their attention to detail and insistence on quality. To an end user, purchasing a property is a long-term investment that must live up to their requirements.
QUALITY EXPECTATIONS
To deliver on expectations, Bavaria Gulf became the first developer in the region to build to TUeF German quality standards.
“In Germany, end users want an independent expert to inspect the quality of the project during the construction phase. In other parts of the world, these inspections may only be carried out upon completion of the project; but that’s too late, any MEP snags for example have been covered up by that point. We have site checks and reports conducted by inspectors on a weekly basis and every three weeks a German inspector will fly in. Once the project is completed, TUeV certification will be awarded based on these reports and the finished project. “This gives an appreciation of value and quality assurance. We are able to offer very detailed specifications, which identify brands names and models of fittings used — combating any quality concerns.”
LONG-LIFE PROJECTS
This also elongates the lifecycle of the building, says Lefevre, and lowers maintenance and operation costs. Furthermore, many items are offered with a five-year warranty.
To achieve the TUeV standards, it was necessary for Bavaria Gulf to conduct workshops for workers on installation processes and best practice. Sourcing the materials was not a problem, he adds, but it was expensive. Implementing a higher grade of materials was also one of the requirements to meet LEED specifications, and in doing so, the developer has been able to reduce average water and consumption costs by up to 30%.
“The quality of the market is increasing. The Sandoval project comes under the Jebel Ali Free Zone jurisdiction, where standards for steel, concrete and sustainability are already high.”
While the developer says it benefited from reduced steel prices, overall it claims to have only benefitted “marginally” from a significant decrease in construction costs across the board.
“Most finishing materials — which are the most expensive — came from Germany and there has been no decrease in costs in Europe.”
Lefevre expect prices to rise again in the UAE within five years, alongside an anticipated return of market confidence.
“Over the next two years the market will need to absorb the units being delivered. Many of the projects that were expected to be delivered within three-to five years have been cancelled, which will have a positive impact on supply and demand.
Within five years I expect Dubai and the UAE will be in a stable position with prices going in the right direction.”
Phases two and three In the meantime, Bavaria Gulf is focused on completing its only existing UAE project; Sandoval.
The second phase of the development comprises 165 apartments and is 70% complete, and the contractor is currently working on MEP and finishing works. Lefevre expects part of the project to be completed by January 2011, dependent on progress of infrastructure works by Nakheel.
“The Jumeirah Village project manager has confirmed that infrastructure works will commence at the beginning of October and they will take 12 months maximum to complete. Nakheel has also committed to building parks and greenery, which will be big boost for the village.”
Phase three comprises Sandoval Park, which is already designed and ready to sell but is currently on hold. However, Lefevre tells us that the developer is now looking to commence construction on this phase in the third or last quarter of 2011.
“We want to take advantage of the current market situation because if you invest now at the most difficult time, the project will be finished in one and a half years ready for when the market picks up. And Lefevre is certain it will pick up:
