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 - - 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
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
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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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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
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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
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
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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
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
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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
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
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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Thank you f Thank you f Any que Any que for listening for listening estions? estions?
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Contact Details
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
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aki@isthmuspartners.ae
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Disclaimer
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