Salwan hopes to increase revenue by 120% in 2009
Jumeirah Business Residence is the largest single-phase project in the world. (DENNIS B MALLARI)
Anjana Kumar
Published Sunday, January 18, 2009
Dubai-based property management company, Salwan, expects to increase its revenues by 120 per cent in 2009 and will partner with a number of developers to increase its current portfolio, according to its chief executive.
"We are expecting to see a growth in our company revenues by 120 per cent in 2009," said Saeed Bushalat.
Salwan will also extend its presence to Abu Dhabi by the second quarter of 2009. "We are currently doing our feasibility studies for Abu Dhabi and if everything goes well we will start operations there," he said.
In an interview with Emirates Business, Bushalat said the company has plans to expand in the GCC market by end of 2010 and reach other international markets such as the United Kingdom and Spain by 2014.
Salwan is currently managing a portfolio of around 14,000 units, almost 80 per cent of which belongs to the Dubai Properties Group (DPG).
Is the current slowdown in the real estate sector having a negative effect on the property management industry?
Not really. On the contrary, once the handovers begin, that is when the job of the property management sector will start. A lot of developments launched previously will finish now and be handed over. Now is the time for property management to start its work. Our industry has nothing to do with the property sector sales. We anticipate the year 2009 to be the year for Salwan.
The current portfolio of units we have at Salwan number around 14,040, and almost 80 per cent of this belongs to the DPG. We expect to see an increase of 10,000 units in our portfolio in 2009, which will comprise both DPG units and the rest in our portfolio.
Right now we have a tie-up with the DPG. However, we are in talks with other developers to take them on board as our partners.
Salwan is a newly established company and we already have 14,000 units, which is a big number for us to handle. We are aiming to capture around 40 to 50 per cent of the market share in Dubai alone in about three years' time.
What is the life span that you will be able to give a building that has efficient property management systems in place?
The life of a building is enhanced if it has incorporated property management solutions. The yields or returns that a well-managed building will achieve can be as much as 30 per cent to 50 per cent higher than a building that is not well managed.
Having said that, it is important that every building, when completed, should have a dedicated property management team. Previously, buildings used to be managed by one company or one person who did everything from contracting and construction to even finance auditing. Such a building can never claim to be well managed.
Does the service charge of a building in any way depend on the tenant occupancy levels of the building? Is the service charge any less if there are larger occupancy figures?
No, the service charge is not based on the occupancy levels of a building. Everybody will be expected to pay the same service charge whether there is full occupancy or not. In JBR, for example, tenant occupancy levels are around 72 per cent. For the 28 per cent that is vacant, the landlord will have to foot the service charge bill, not the tenants.
Are the service charges on villas lower than in the apartments?
Service charges are indeed lower in villas than in apartments, and that is because there are not so many common areas in villas. It is a totally different concept. In a villa you only have the maintenance of the site. Again, it depends on how big the project is and what type of landscaping it has and its typical requirements.
What is the kind of savings that a villa owner can make in service charges as opposed to an apartment owner?
In an apartment building, the level of maintenance is always higher. Cracks in the common areas need to be fixed. If the elevator does not work, that needs to be fixed. In a villa on your own plot, there is little maintenance to do. And one can always hire another company for the maintenance of individual villas or outsource the work.
In JBR service charges have gone up from Dh9.5 per square foot to Dh21.75? What is the justification for this?
Firstly, JBR is the largest single-phase project in the world. Because it is big and the process of handing over and completing all the utilities and facilities in the development took a while, we initially decided to keep the charges to the minimum.
The Walk, for example, was not opened initially. Some other facilities had not yet come up as well, so it was not fair to charge the tenants a high service charge. But now we have been forced to increase the service charges since The Walk is ready and all the facilities have come up. Having said that, we are continuously working as hard as we can towards lowering the service charge as much as we can. We have a central trash system that needs electricity and maintenance. The District Cooling systems need to be maintained. Maintaining security guards also comes with its costs.
How did you deal with the complaints you received when you raised the service charges?
Only one per cent of the total number of tenants in JBR complained about the hike. We are in the process of establishing owner associations for every tower within JBR. The associations will have full rights to bring in their auditors and audit all our books.
You must have your fair share of challenges; how do you deal with them? Do you have a difficult time convincing developers to adopt proper property management?
There are always challenges in any business and the property management sector is like any other business. Salwan is a new company and we have to brand ourselves and sell that concept to developers and that is a challenge in itself. But, definitely, developers are showing a keenness to include property management systems as early as possible when building are nearing handover time. The mindset is changing. Developers are looking to involve property management companies to manage their buildings.
Would you be raising a rental portfolio for Dubai Properties?
We will not interfere with what Dubai Properties would like to build within its portfolio. But within the portfolio of Salwan itself, we have a number of rental products that will be coming into the fray this year. In Mirdiff alone we are looking to start managing around 4,000 units this year. We expect the year 2009 to look positive and the demand to still be high.
What are your thoughts on the rental index that will be set up by Rera?
The rental index will be very healthy in terms of creating the right rents across different areas of Dubai.
Are you expanding outside of Dubai? Is there a plan to step into international markets?
We are currently studying the real estate market in Abu Dhabi, and if our feasibility study reads well for the emirate we should be looking to be in Abu Dhabi by the second quarter of this year. We are considering expanding in other GCC markets by end of 2010. By 2014 we should be on international shores – like the UK and Spain. We are also aiming to reach out to other emirates in the UAE, such as Sharjah, Ajman, Umm Al Quwain and Fujairah.
What is coming up for Salwan in 2009?
From a leasing perspective, we have around 626 units of the '558 villas' – a development by DPG next to Al Waha. Also, we will start managing the 4,000 units that I mentioned in Mirdiff. On the freehold side, there will be the Phase I and Phase II of the 'The Villa' project, which will be developed by Dubai Properties and Executive Towers.
What are your thoughts on the recent slump in the real estate market in Dubai?
The global crisis is affecting countries and individuals at all levels. We should not think only about what is happening in Dubai alone.
The global situation will definitely affect us but the effect will be minimal as we have a strong government backing us. I do not believe the major investors in Dubai will sell their properties. The end of this year and the first quarter of the next will be a much better time for Dubai.
What are your thoughts on the rental market here?
My thoughts are positive and we are going to manage a huge leasing portfolio in 2009. Within the 14,040 units that we are currently managing, 6,900 units are in the freehold sector while the rest are all leasehold properties.
PROFILE: Saeed Bushalat, CEO, Salwan
Bushalat has been selected as one of the pioneers of the first batch of DPG's High Potential Leader (HPL) and Future Potential Leaders (FPL) programmes.
He is a member of the management committee of DPG and has been elected team leader for the Dubai Holding Excellence Committee Awards.
He is also a member of the 'Reward and Compensation Committee', reporting to DPG's Board of Directors.
Bushalat has a degree in Civil Engineering from the US and also holds an MBA.