DUBAI: There were some dark mutterings in May this year when Ziad El-Chaar resigned his position as managing director of Damac Properties, the Dubai based developer.
It was said there had been a major fall-out with Hussain Sajwani, the founder and chairman of the group, over management style and the direction of the luxury developer, that led to his abrupt departure.
Some of those aspersions were laid to rest when, a few weeks later, El-Chaar was named as chief executive of Dar Al-Arkan, the biggest real estate group in Saudi Arabia, and, at a recent meeting back in Dubai, the 48 year old Lebanese man was happy to set the record 100 percent straight.
“The headhunters are always busy in the region. I wanted to go and be a CEO of a real estate developer and take charge of the whole process, from planning and development thorough to sales.”
“At Damac, there was a relatively young founder and chairman who wanted to be involved in all aspects of the business. But I have a great deal of respect for Mr.Sajwani. I was at his house just a few weeks ago and we’re still very friendly,” El-Chaar said.
In fact, the opportunity to take charge of Dar Al-Arkan — known as DAAR in the property business — enabled El-Chaar to get back to one of the things he had originally joined Damac to do: Manage the international expansion of a regional group that had global ambitions.
He was head of Damac’s international operations for a number of years before, in a sign of the esteem in which he was held by Sajwani, he got promoted up to the MD’s job and board member role.
“DAAR is the number one in the Kingdom in terms of deliveries, market capitalization and land bank. It is a household name. But I think it was seen as something of a ‘sleeping beauty’. Now it’s our time to shine as an international developer,” he said.
El Chaar was in Dubai to mark the first stage if that international expansion — the unveiling of a $218 million project to build a luxury apartment block, called the I Love Florence Tower, by the side of the Dubai Water Canal, in partnership with Italian fashion designer Roberto Cavalli.
It is the latest in a series of collusions between real estate developers and up-market fashion brands like Armani and Versace, which have added even more glitter to the Dubai property scene. But the new DAAR tower is aimed unashamedly beyond the UAE. “It’s a project outside of Saudi but designed to cater for the Saudi customer. The Dubai launch was amazing. I’ve been doing these for years at Damac, but I’ve never seen 420 people show up on the first day. Around 150 flew in from Saudi just for the event,” said El-Chaar.
“In Dubai, Saudi customers’ first response is ‘we want to be in Downtown’, near the Burj Khalifa, the Water Canal and the Dubai Mall. There is not much land available there, but we’ve already decided our next development will be in the same area,” he added.
The Florence Tower is scheduled to open in June 2021, and could be the start of a wider alliance between DAAR and the Italians.
“We might consider launching Cavalli in Saudi. The market would be good for a limited release of high quality branded real estate, where you roll out a certain number of properties. Luxury brands like Bentley or Rolex have standard designs, but they also produce limited editions that guarantee exclusivity.
“Cavalli is the perfect partner. They have experience in interior design with materials like tiles, textiles and marbles. The Roberto Cavalli shop in Riyadh is one of their top 5 best-selling shops in the world.
“We’re working on things with Cavalli in Saudi. It has to be acceptable to local culture and taste, of course, but it also has to be commercial. I think there is a longing in the Saudi market for a product like this, especially for the younger generation of house buyers,” said El-Chaar.
In the Kingdom, DAAR is focused mostly on the residential market, with developments in Riyadh, Jeddah, Makkah and Madinah. The two “big priorities” are the Shams Ar Riyadh development to the north of the city, and another along Palestine Road in Jeddah, which El Chaar said is becoming the “development spine” of the Red Sea city.
“It’s 130m higher than the rest of the city, which makes a good deal of sense from a climate perspective,” he added.
But he sees the opportunity for a new kind of residential brand in Saudi Arabia. “We’re looking to produce more villas, town houses, two-story houses, but with new products and new brands. If you look at the villa market now in Saudi, it seems like they are all the same design. There is no innovation. But there is clearly a demand for individuality because people still like to build their own residence. We’re looking to appeal to that,” he said.
Themed residential estates, with different villa designs, colors and facades, such as have been pioneered by Emaar and Damac in Dubai, look to be the way of the future in Saudi Arabian real estate.
El-Chaar also sees a lot of potential in the market for serviced apartments in Saudi Arabia, especially in Riyadh, where they are often more attractive for short-stay visitors than hotels rooms and also for Saudi citizens looking for weekend accommodation.
But there are significant differences between the property markets of Saudi Arabia and the UAE. One is that property is regarded as a long term investment. “In Saudi, real estate is often the first option for investment. It’s part of the culture, part of the process of preserving wealth and hand it down to the next generation,” he said.
The other big difference is in the attitude to off-plan sales, which UAE developers have made a speciality, sometimes with negative effects, as during the global financial crisis in 2009-10, when real estate values virtually collapsed in the UAE.
“The off-plan model is not that well developed in Saudi Arabia, but it will become more so. An off plan law was passed around 2012 and an agency set up, and became a separate agency of the ministry of housing last year. We are going to register for the off-plan model. The strategy is beginning to show through already,” he said.
Like in the wider economy and in social issues, the property market in the Kingdom is on the verge of a transformation. “There are big changes coming. The real estate laws have always been clear, but off-plan sales and mortgage promotions will change things. The government has signed up with the banks to provide “profit share” arrangements that offer incentives to potential mortgage holders.
“There has never really been a property crash in the Kingdom, just normal phases of the business cycle, not a liquidity issue. And there are steps that have been taken to protect the market. For example, the Public Investment Fund will buy portfolios of mortgages from banks to protect them from volatility,” he added.
The other major recent initiative in Saudi Arabia real estate was the “white land tax” which imposed a levy on undeveloped land, which had a small effect on DAAR’s business. “But because in most places we’ve put in infrastructure that means the land is being developed, so the effect was limited,” said El-Chaar.
“Our land bank has been accumulated over the past 25 years. We bought land from a variety of people, mainly investors who owned it and would sell when they wanted to realize some value. A developer needs years to accumulate that kind of wealth,” he explained.
There are still issues to be overcome in Saudi Arabia in the real estate market, where it can take a long time to get projects up and running.
“Timing and implementation is a challenge in Saudi. Going through the whole development process is still time consuming. It is not just bureaucracy, it’s just a complicated process to buy and develop on a big block of land. But it’s normal for the region. Even in Dubai it takes long time to get a master plan done,” he said.
Was corruption an factor? El-Chaar was non-committal. “My focus is on real estate development, and I can only say there are a lot of factors that affect property development, negatively and positively. We’ve just got to push through regardless of what’s happening in the wider market,” he said.
The next phase of the international expansion plan is likely to include London, which is a market El-Chaar knows well and where DAAR already has an office, and Bosnia, which is an increasingly popular destination for Saudi real estate investors.
“The London market has been volatile, but sometimes volatility makes for an attractive acquisition opportunity. London is an easier market than Bosnia because the legal structure is there already. Land titles are clearer and more established. In Bosnia, you often get multiple owners, which makes buying large sites more complicated. It’s largely a fresh field development in Bosnia,” he explained.
But, with the economic transformation under way in Saudi Arabia, there is much to keep El-Chaar and DAAR busy in the Kingdom. Its Al Qasr Mall in Riyadh has already given over a big chunk of space for a cinema venue, which will open next year, though an operator has not yet been chosen.
And beyond that, the opportunities seem unlimited. “Have you seen the size of Neom? It’s bigger than two Lebanons. I’m sure every developer in the world will be involved in that,” he said.