Off Plan Develop ment: What Now For Sales? MENARES Conference e 3 - - PowerPoint PPT Presentation

off plan develop ment what now for sales
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Off Plan Develop ment: What Now For Sales? MENARES Conference e 3 - - PowerPoint PPT Presentation

Off Plan Develop ment: What Now For Sales? MENARES Conference e 3 rd October, 2010 Our report covers a number of topic cs, but I would like to focus on solutions today focus on solutions today Covered d Topics Greenfield economies


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SLIDE 1

Off Plan Develop

MENARES Conference 3rd October, 2010

ment: What Now For Sales?

e

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SLIDE 2

Our report covers a number of topic focus on solutions today focus on solutions today

Covered Greenfield economies

ᅳ What buyers look for y ᅳ What developers look for ᅳ How to resolve the differences

Economies with legacy off-plan sales

Our report looks at a number of other topics:

  • How off-plan sales in Dubai have fallen since 2008
  • How the economic crises has treated market partic
  • Lessons from Western markets

Please read important disclaimer at the end of the presentation

cs, but I would like to

d Topics

The ideas I will present today are t d b ki M not ground breaking. Many are

  • bvious to market participants. It

is implementation that is important

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important.

cipants

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SLIDE 3

Buyers need to trust that any prope be delivered be delivered

Transparency From Developer Recourse Fro Legal Framewo Due Diligence By Buyer The right infrastructure can instil trust, but buyer need to do their own homework also The right infrastructure can instil trust, but buyer need to do their own homework also

Please read important disclaimer at the end of the presentation

need to do their own homework also need to do their own homework also

erty they buy off-plan will

Buyer Requirements

Developers are the first stakeholder that can Developers are the first stakeholder that can have an effect on a buyer’s trust position

ᅳ Buyers need to get real information about the progress

  • f any construction project

m

  • rk

ᅳ Developers need to spend some time on proper reporting, not merely pictures and a short blurb on progress ᅳ Variations and changes to an extent are usual, so developers should not be timid about informing or developers should not be timid about informing or involving buyers ᅳ Telling buyers of changing timelines allows them to plan also

The legal framework needs to be clear and The legal framework needs to be clear and complete

ᅳ Buyers need to be able to rely not just on the law, but its application when they have legitimate reasons for suing a developer a developer ᅳ Application must be even and timely

Finally, buyers needs to carry out their own due diligence g

ᅳ Understand the market including demand and supply factors, availability of financing, how adverse market conditions will affect their property values ᅳ Read the contract being entered into

rs rs

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ᅳ Buyers need to own the risk they undertake and if an investment fails, they will be the ones taking the loss

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SLIDE 4

Developers need to ensure they ade risks they are taking in a relatively s risks they are taking in a relatively s

Risk vs

Ret Return Risk Return Risk Equity Financial Leverage Operational Leverage Sales Commercial Buyers Lower Employee The Right People Lower Employee Costs The Right People

Please read important disclaimer at the end of the presentation

Developers need to find the optimal ris Developers need to find the optimal ris

equately understand the stable environment stable environment

Return

urn At some point we pass Risk p p the optimal level of risk

Reducing Risk in Environment

Stable Processes No Hidden Costs Experience Valued

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sk level, not look at returns in isolation sk level, not look at returns in isolation

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SLIDE 5

Off-plan sales are key to developme application matters more than strat application matters more than strat

Framework for Off-Plan Sales Framework for Off-Plan Sales

Buyers a

Larger

Trust Legal Framework

and Deve

g Deposits Real Equity

Legal Framework Trust in Developer

elopers

Equity

The Market

Supply and Demand Dynamics Developer Delivery and Quality

Please read important disclaimer at the end of the presentation

The Market

ent activities, but egy egy

Competing Needs Resolution

All stakeholders need to be realistic All stakeholders need to be realistic

ᅳ Buyers and seller have to focus on the long term, as this is not a trading asset; it is a buy and hold asset ᅳ Developers need equity and buyers need

ulatory

Failed Projects Developers need equity and buyers need deposits ᅳ Real due diligence has to happen including looking at market dynamics, understanding the reasons for buying and reading the

and Regu

Sales Contracts j Fund y g g contracts

Off-plan can help production and reduce risk

Less leverage used reducing funding costs

Legal

Contracts ᅳ Less leverage used reducing funding costs ᅳ Allows testing of market attractiveness of product

Financial institutes need to act as a check and balance within the market

ᅳ Institutional money needs to understand developments better before committing ᅳ Mortgage providers need to understand the risks associated with the buyer and developer

The legal environment must be

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g stable and enforceable to ensure recourse is available

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SLIDE 6

Times may remain tough for some y awaiting higher valuations will com awaiting higher valuations will com

Robust Financial Models

Tools For Decision

Good

Decision Making

Buyer Groups Communication A li d L

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Applied Lega Framework

years, but inaction and pound problems pound problems

  • It doesn’t matter how big your slice is if

the whole pie becomes smaller the whole pie becomes smaller

ᅳ Each day decisions are delayed, the pie becomes smaller as capital is wasted

  • Decisions need to be made and action
  • Decisions need to be made and action

taken quickly

ᅳ Developer’s have to start this process, as they are in the middle as they are in the middle ᅳ Every decision delayed just means two decisions will have to be made tomorrow

  • Lenders must realise they are

Lenders must realise they are stakeholders in the process and should either:

ᅳ Facilitate completion, which may require Facilitate completion, which may require restructuring ᅳ Exit their position, which may mean selling at a discount

  • Contractors may have to forgo their

profits until the end

  • Developers must realise their equity is

l

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p q y the first loss piece

l

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SLIDE 7

The full report and this presentation website with our other reports (www website with our other reports (www

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n will be available on our w IsthmusPartners ae) w.IsthmusPartners.ae)

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SLIDE 8

Thank you f Thank you f Any que Any que for listening for listening estions? estions?

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SLIDE 9

Contact Details

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SLIDE 10

Contact Details

Please contact us if you have any questions on o Isthmus Partners FZC PO Box 65736 D b i Dubai United Arab Emirates Telephone: +971 4 312 4908 Telephone: +971 4 312 4908 Website: www.ist Email details: General e-mail: info@is General e mail: info@is Sukhdev Hansra, Partner shansra Javier Cervino, CFA, Partner jcervino Javier Cervino, CFA, Partner jcervino Anastasia Kozyraki, CFA, Partner akozyra

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  • ur services. Our contact details are:

thmuspartners.ae sthmuspartners.ae sthmuspartners.ae a@isthmuspartners.ae

  • @isthmuspartners.ae
  • @isthmuspartners.ae

aki@isthmuspartners.ae

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Disclaimer

This document has been prepared by Isthmus Partners FZC, a limited liability compan relation to the activities of and services provided by Isthmus Partners (the “Activities”) relation to the activities of, and services provided by, Isthmus Partners (the Activities ) herein (the “Information”) does not purport to be complete. No person has been authori will be set forth in this document and any statements made that are not contained therei We are providing the Information to you for information purposes only and without repre without any responsibility on our part to revise or update the Information. As a condition any way arising therefrom to you or any other entity (for any loss or damage, direct or in This document is confidential and is intended solely for the information of the person t part, to third parties except as agreed in writing by us. In addition, you agree that, pro returned to us and you agree that all intellectual property rights subsisting in the Informa In considering any performance data contained herein, each prospective investor, client and there can be no assurance that the Activities undertaken on behalf of such inv assurance that unrealised investments will be realised at the valuations shown as act value of the assets and market conditions at the time of disposition, any related tra assumptions on which the valuations contained herein are based. Nothing contained he Activities undertaken on behalf of prospective investors, clients or partners. Except where otherwise indicated herein, the Information provided herein is based on m not be updated or otherwise revised to reflect information that subsequently becomes av Certain information contained in this presentation constitutes “forward-looking stateme Certain information contained in this presentation constitutes forward looking stateme “will”, “should”, “except”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continu

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