Mohanad Alwadiya: The Godfather of real estate strikes back
Gulf Property exclusive
When a boat sinks, its passengers try to grab onto the last piece of wood to survive. When a tiger attacks a village for his ‘meal of the day’ – each villager tries to outrun the other in his ‘run for life’. If only he could outrun one person, then he would have a chance to live – because the tiger would need just one villager for that day. None of them have the luxury to think of others’ welfare.
Where survival of the fittest is the name of the game, one would hardly have the time, resource or inclination to think of others’ welfare. However, there are exceptions to the rule. Mohanad Alwadiya, Managing Director of Harbor Real Estate, is perhaps one rare exception who did exactly that.
When the global financial crisis hit the UAE’s real estate and construction sectors in 2008-09, the scenario was somewhat close to that of the ‘survival of the fittest’ in its worst form. Surviving a day was an achievement. However, some people and companies survived the crisis that continued for four years – from October 2008 till September 2012. It was a hell of an achievement.
Mohanad is one of them. He is not only a survivor, but he survived the crisis in style — by helping his clients in dire straits.
“Our approach has always been ‘what more could I do for you’ – as opposed to – ‘what could you do for me’,” Mohanad Alwadiya, Managing Director of Harbor Real Estate, tells Gulf Property in an exclusive interview. “This has been the key of our success – by extending a helping hand to clients.”
This attitude has led Harbor Real Estate reach new heights and gain market trust. So, it helped the company not only expand its scope of operations and offer end-to-end property and asset management solutions, but also helped pioneer the business and gain new clients.
“It was a learning curve and we learned the hard way. But we remained focused and honest to our clients and so clients stayed with us. In fact, our reputation helped generate more leads through our clientele and others came to us to serve them,” Mohanad says. “Today, we do not have to chase clients. They find us.”
He is one man who constantly finds ways to maximise the wealth of their institutional clients – in the thick and thin and even during the height of financial crisis. Mohannad stormed to fame by turning around Harbor’s then-flagging fortunes by shifting their business from a mere real estate brokerage firm to a complete end-to-end property and asset management solutions provider at the height of the financial crisis in 2008-09 – when clients wanted to ‘get more for less’ for their properties.
Today Harbor Real Estate has more than 6,000 units valued at more than Dh14.8 billion worth of real assets under management, providing all types of facilities and asset management services for institutional clients. Mohanad has acquired the industry intelligence by dint of his knowledge, experience, wisdom, vision and his insights.
There is one more thing about Mohanad that makes him stand out. Unlike many business leaders who do not want to share their ‘trade secrets’ or the keys to their success, Mohanad is very happy and very vocal to share his industry knowledge, insights and intelligence — to improve the business practices and upgrade the business environment, especially in the real estate sector.
Mohanad has been called ‘Mr Fix-It’ or ‘The Oracle of Real Estate’ and other similar titles, but his achievements and influence in shaping up the property management sector can only be summed under one title: ‘The Godfather of Asset Management’.
He is an industry thought leader, a trainer, an expert in real estate and asset management in his own right. Gulf Property spoke to Mohanad Alwadiya on wide-ranging issues related to real estate and the current market scenario including lower oil price and its impact on the sector – for our readers. Excerpts:
Gulf Property: How do you evaluate the decline in oil price and its impact on the real estate market?
Mohanad Alwadiya: It seems everyone is panicking with the news of oil price decline. As oil price increase has a mixed effects on oil exporters and importers, similarly oil price decline has mixed effects.
Obviously oil exporters will lose revenue that is like a huge national savings for oil importing countries as they now shell out less than half for the same amount of oil. They will now have more disposable income that they could spend on development works.
However, oil price decline is not a bad thing. It will actually help make the market more mature. The market needs to run on non-oil macro-economic fundamentals. This will make the market more resilient and less dependent on oil prices and other external shocks.
For the short term, I do not see major implications on the region’s real estate sector as most Gulf governments are cash-rich anyway, and they will continue to spend heavily on infrastructure and housing – that will continue to drive demand.
Besides, a huge young population getting into employment would need new homes to raise families – so the demand will continue to grow, thus, we would see increased development activities.
A lot of people have observed that 2014 ended slow, somehow ushering in an apparently sluggish start for 2015, but what are your own projections for this year?
People are right in saying there has been a general slowdown in real estate activity during the close of 2014, and which has also continued well into this year.
However, instead of seeing this apparent slackening in the market as a negative economic indicator, I see it as an excellent sign of the Dubai property market’s continuing maturation and stabilisation. My thoughts on 2015 are as follows:
First… As the broader economy continues to grow, the market will continue to benefit from current demand. The Dubai economy has been doing quite well, and economic growth is strong at around 4.5 per cent, with independent bodies such as the International Monetary Fund (IMF) forecasting 5%+ economic growth every year through to the end of the decade. With oil representing only about 4 per cent of the GDP, the economy is being driven by non-oil economic fundamentals such as tourism and trade, and a slew of new projects to grow these important revenue-generating economic segments.
Second… Investing in real estate means you are investing in the economy, and the effect of the upcoming Expo 2020 on the UAE economy cannot be understated in terms of generating demand for real estate assets. Dubai hosting the World Expo will provide additional impetus for the industry to enjoy continued growth, and the predictable surge in demand for accommodation and commercial space of all types – from labour camps to offices to warehouses to apartments to executive villas – will certainly have a significant effect on real estate values.
Third… Financing is more affordable than ever, but the low mortgage rates of today will probably not be available in 2 or 3 years’ time. The likelihood of interest rate rises in the United States will make financing UAE mortgages increasingly more costly due, primarily to the AED being pegged to the USD. So if one is to take advantage of the current mortgage scenario, there is no better time than now.
Fourth… The industry itself is undergoing structural changes that will enable a greater degree of stability and better support, and will contribute ongoing economic growth. For example, reviews and recommendations have been completed and provided to ensure that Dubai’s economic growth is not inhibited by a shortage in affordable housing. This demonstrates a desire to ensure that the industry is in a state of equilibrium, and can efficiently meet the demands of a burgeoning population that will be characterized by rapidly expanding lower to middle income segments. The opportunities in satisfying this growing need are immediate and significant.
Fifth… Being mindful of the lessons learned from the recent past, there has been and continues to be an unprecedented level of governance, oversight and scrutiny that the industry is being subjected to. Ongoing developments in the industry’s regulatory framework and the implementation of laws and regulations to safeguard both consumer and investor interests, the overall industry and the economy at large from rampant and irresponsible speculative, predatory and unethical practices, reveal a mature and balanced approach to shaping an industry which will continue to exhibit sustainable growth over the long term. The industry is much more resilient in 2015, and investor, not speculator, confidence has made a big comeback.
Finally, if you are after superior yield with minimal capital outlay, Dubai real estate is still hard to beat. Affordable properties in developments such as Queue Point, Skycourts, International City, Dubai Sports City, Discovery Gardens and JLT are all benefitting from the stabilizing economy.
How do you evaluate the current market scenario? Have you observed any remarkable changes?
I expect the market to slow down further in a responsible manner – unlike what we all witnessed in 2008-09 when prices fell like anything. This time around it will be soft landing as opposed to steep fall – more like the matured and developed markets.
In fact, I like what’s happening in the market now. There is a new set of speculators in the market who are cash rich. They have hard cash to invest and they are here with real money. So, they are not bank-rolled, unlike the speculators of 2007-09.
This time banks are unable to lend much, although they have ample liquidity. They are finding it hard to convince end-users to apply for mortgage, even though the mortgage rates have come to the historic lowest level. Banks are competing against each other by lowering mortgage rates, which has come down to 2.99 per cent level. However, buyers are also equally cautious. No one wants to go back to the 2008-09 situation.
Let’s talk about some hard facts that our readers will find practicable in the arena of property investment especially now that more off-plan projects are being launched, albeit with stricter measures. How do you gauge the investment potential of unfinished or off-plan projects?
The fundamentals still apply. First of all, make sure that an off-plan purchase is consistent with your property portfolio strategy. If so, then proceed as there are some great opportunities to be had.
Location is critical and cannot be underestimated because it is a prime determinant of a property’s value. The value of a particular location is usually derived from the levels of lifestyle convenience, pleasure, harmony, security, future economic value or even status that can be derived from the property.
Whether it be an outstanding view or proximity to dining, entertainment and business districts, or access to schools, hospitals or public transport, or being neighbourly with some celebrity types, the perceived benefits that a location may bring to a prospective buyer accounts for a big chunk of a property’s total value.
The asset type is also important. What type of asset will be in demand in the future? Will it be affordable apartments? Townhouses for the middle income earners? Villas for the wealthy? Be smart about the ‘product’ that you buy into. Look for certain property types complete with amenities and facilities in locations which you believe will be keenly sought in the future.
Do not assume that all property types in all locations will improve their values homogeneously. No market works this way. Remember that it will be future demand which will determine the value of your property.
You need to do some careful financial analysis which will enable you to determine the value of the discount that you anticipate receiving by buying off-plan versus buying a completed property. You should sit down with your broker and determine the net advantage to you by buying off-plan. Many projects are being sold with easy payment plans which can be of tremendous value to you in minimizing your capital exposure before completion of construction.
You need to be conversant with financial concepts such as net present value (NPV) and internal rate of return (IRR) to guide you in your decision-making when assessing your alternatives.
How would you differentiate long-term gainers from those who ultimately fail?
Of all my clients, those who have had the greatest success possess the ability to think long term, make rational, well-researched and carefully thought out decisions with the end objectives in mind, and they also understand that every real estate industry globally will go through cycles of growth and contraction.
They do not get duped into making short-term decisions based on inevitable market fluctuations, and they treat disturbing headlines as the catalyst for gaining a greater understanding of the underlying events that are shaping the industry, and if any opportunities may conceivably arise. This is what I like to describe as proactive investing.
You have been teaching brokers at the Dubai Real Estate Institute (DREI) to strengthen professionalism in real estate business. How do you evaluate the success of Dubai in setting up the rules and regulations for the real estate sector.
Dubai has now become a benchmark for real estate business and practice in the Middle East.
It has set a beautiful example that other neighbouring states and governments are pursuing to achieve.
I have been asked to share the Dubai knowhow in real estate sector and help governments to create a similar regulatory regime so that they remain better prepared for crises.
Dubai has come a long way in developing the rules and regulations for the real estate sector within such a short time. It has gone through a very exciting as well as a very painful experience – which has taught all of us some important lessons.
What Dubai has achieved in the last few years, others would have taken a few decades to do the same.
What is your key to success? Or in other words what are your unique selling points (USPs)?
We offer a holistic approach. We not only maximise the rents or take care of day-to-day maintenance. We maximise the wealth and value of the asset for our clients.
We engage with the client on a long-term basis and try to understand their needs and draw up plans accordingly. When it comes to property and asset management, we do everything for them, including offering strategic and investment advisory and help them gain maximum revenues.
It’s more than a one-stop-shop service. We give strategic advisory and long-term forward directions – more as consultants, in addition to taking care of their assets and ensuring a continuous increase in shareholder value.
For example, if the inflation rate is around 4 per cent and your zakat is at 2.5 per cent, you need to grow at more than 6.5 per cent rate. So, we advise clients to invest in assets that will fetch more than 6.5 per cent per annum in terms of ongoing yields and capital appreciation.
So, that’s where we make a big difference in the services we provide our clients.
How do you see the UAE real estate market going forward?
We see a 5-7 per cent increase in rents – a very high yield in addition to 6-9 per cent capital appreciation till Expo 2020.
One good thing is that the market will continue to behave like that of a matured market. No room for cowboys. It’s more structured and there are no hidden surprises. I think, that’s really good for the Dubai market.
The regulatory environment in Dubai is almost airtight – not much room is left for foul play. It’s a fair playground for all stakeholders and would help everyone make money in a responsible way.
So, those who are looking for easy and quick bucks – Dubai might not be your playground anymore. You have to play by the rules, and here, Dubai rules.