RAK Properties PJSC, the developer that built Ras Al Khaimah’s first manmade islands, expects to collect at least 1.74 billion dirhams ($474 million) this year as buyers of completed properties make final payments.
The company will complete 3,073 apartments, villas and offices this year starting in February, Chief Executive Officer Mohammed Sultan Al Qadi said in an interview this week. Most buyers have already paid 45 percent of the value of properties they purchased before groundbreaking began, he said. They must complete all payments before getting their keys.
“Our worst-case scenario would be to have only 60 percent of buyers make their final payment,” Al Qadi said. “We expect the balance to be settled this year and that is a challenge.”
The worst financial turmoil since the Great Depression has forced banks to tighten mortgage lending, squeezing out speculators who fueled a five-year property boom in the United Arab Emirates. Real-estate prices in Dubai dropped by almost 60 percent from their peak in mid-2008, while values in larger neighbor Abu Dhabi declined by more than 30 percent. Ras Al Khaimah is one seven emirates that make up the U.A.E.
Since its establishment in 2006, RAK Properties has collected 900 million dirhams in payments from buyers of properties that mostly haven’t been built yet. The company is still owed 2.9 billion dirhams from buyers, the CEO said.
The company will complete two residential and office buildings, known as the Julfar Towers, by the end of February. It also plans to hand over keys to 212 homes at RAK Towers in Abu Dhabi next month, Al Qadi said.
Mina Al Arab
About 20 buildings in the second phase of Mina Al Arab, a beach resort in the northern part of the U.A.E., will be completed in the middle of 2011. An additional 213 villas there will be transferred to buyers in March, the CEO said.
“Most of our buyers have paid up to 45 percent and I don’t think those will run away,” Al Qadi said. “The only problem may be with Mina Al Arab as buyers there paid, on average, 35 percent of the price and there is a big number of bulk buyers and those are having problems.”
In 2009, RAK Properties halted planned construction of parts of the Mina Al Arab project, which includes five hotels, a marina and a shopping center. The company now intends to revive plans for a five-star hotel with about 400 rooms as it tries to attract more residents to the development, the CEO said.
“My priority is to go for a hotel in Mina Al Arab this year to add value to the project,” Al Qadi said. The company may seek a $120 million to $130 million loan for the hotel, he said. To manage the hotel, the developer will select one of five operators it previously signed agreements with, such as Hilton Worldwide Inc., InterContinental Hotels Group Plc and Rotana Hotel Management Corp.
RAK Properties, which has $100 million in debt, didn’t use the remaining $80 million of a loan that was secured to ensure it could continue operating in case of unexpected amounts of defaults or delayed buyer payments, Al Qadi said.
RAK Properties is working to help troubled buyers by letting them return some properties or switch to smaller units. The returned or remaining homes and offices will be rented to generate recurring income for the company, he said.
“We are trying a lot of options to help them because we know the situation,” he said. “If someone bought 20 properties, we are trying to help them bring that down to 16.”
Demand for rentals in Mina Al Arab is “healthy,” with yearly rents for villas and townhouses there ranging from 100,000 dirhams to 150,000 dirhams, he said.