Theme song from the CBS’s tv show, The Unit. Check out Robert Duncan’s work here.

I think I’m getting quite good at these gripe posts - hopefully this should be the last one for sometime. (Ok, maybe not!)

Going back to April 2007, I wrote about Burj Dubai Square and my thoughts on the project as an investment. It turns out that the investment was a good one, with prices appreciating by forty to fifty percent to date.

We purchased a unit in Burj Dubai Square as the new corporate offices for al bogari in late May 2007. We were reliably told that since the project was almost complete, handover was imminent.

When we received the contract a few weeks later, the handover date indicated was September 2007. A far cry from our expectation of June or July 2007. No matter, it was only a few months.

When the September deadline approached, Emaar issued an official letter to us, indicating that handover had to be pushed back to December 2007 in order to ensure that ‘the best quality property’ was delivered to it’s customers.

The months went by and the December deadline approached. Four or five days before the deadline, a new letter was issued stating that handover had to again be pushed back to March 2008, citing the ‘quality property’ excuse.

This project was now really starting to hurt us, since we had put a lot things on hold so that we could carry them out once we had moved into the new offices.

We continued to push Emaar for answers, through as many avenues as possible including their sales staff, their customer care center as well as their strangely thin ‘commercial team’. You would think that the largest property developer in the region would be able to provide us with some answers - not a chance. I found it bemusing when HSBC recently stated that Emaar one of the world most misunderstood $20bn plus companies (Dubai Share Talk has an extract here).

With reference to my experience, I’m pretty sure that no one at Emaar understands the company either.

As the March deadline approached, a fresh letter was issued to us stating that the handover had to be pushed back to June 2008, again citing reasons of quality. Absolutely incredible.

By this time I had enough, I contacted lawyers (some who seemed afraid to look into the case, mentioning no names), emailed their directors, contacted director’s personal assistants to set up meetings and got just about no where. I finally managed to get a couple of members of their commercial team to sit down and meet.

The irony of the whole situation is that Emaar leased parts of the project on a half or full floor basis, those tenants have been up and running for at least three months. In the same building as al bogari’s unit. Discrimination?

During the course of my ‘investigation’, my fit out team identified ISG Asia to be the facilities manager. They have been extremely helpful in obtaining drawings, as well as telling us the real reason why the property was not being handed over.

Burj Square was constructed for either half or full floor occupation. Without considering whether the space could be easily split into smaller units, Emaar went ahead and sold off the space. When the building’s contractor was approached to make the required changes, I was told that they walked off the job saying that they had completed the job as it was initially specified.

As of today, Emaar has identified a new contractor who has started working on splitting up the space, including placing partitions and re-doing mechanical, electrical and plumbing work to split up each unit’s utilites.

My unit remains unfinished, I have been promised a date of 25th May 2008 as when I will get handover and be allowed to start fitting out the space.

Emaar announced it’s Q1 results on 16th April 2008 - net income fell 3.8 percent, year on year. Emaar’s share price has declined 24% this year.

Serves them right.

Last week, Sorouh decided that it was going to hold a pre-launch for one of it’s more unique looking projects - The Gate (who’s visuals have been floating around for a few years), located in Shams Abu Dhabi, which will make up 25% of Reem Island. On offer was one of the three residential towers, the fourth being a commercial building.

Sorouh decided to email and call it’s investors to announce that a pre-launch would take place at the International Property Show in Dubai. Their agents also indicated to investors who were interested in purchasing floors rather than units that it would be better to come directly to their sales center in Abu Dhabi in order to get priority access.

We arrived at 8 am on Sunday 17th February 2008. After being asked to fill out a few reservation forms we were informed that the pricing information and the selling itself would take place at 10 am. Not a good sign.

10 am turned to 11 am. I had a little outburst with the agent that had invited me. Politely of course.

11 am turned to 12 pm, and at 12:30 we finally decided to hit the closest McDonalds. At 1 pm one of our colleagues indicated that something was about to happen!

Sorouh decided to accept our reservation forms and accept cheques of AED 10,000 per unit booking fee.

When we inquired about the sales, we were told that at the moment they had decided to hold back selling and that the individuals who’s cheques they had taken would be called back once they were ready in order to reserve their units or floors.

Sorouh called me back on Monday 25th February that on Tuesday 26th February they would launch Sun Tower (a tower located nearby) and on Wednesday 27th February they would launch The Gate. Did I say launch, I meant re-launch, our original applications would be returned and our cheques refunded. They want to re-start the whole process again.

They called again on Tuesday 26th February to say that they had decided to cancel Wednesday’s launch. What?!

It is difficult to understand how Sorouh can expect their customers and investors to trust that they will plan, execute and deliver they calibre of project that they are proposing if they cannot even sell the thing straight in the first place.

Is the real estate sector in the UAE really that buoyant that developers expect customers to simply lap up any product regardless of the service they provide?

Not only has Sorouh messed up the sale process, they do not understand the customer segmentation. A pre-launch is meant to be a quiet affair, to provide access to your larger investors (or potentially larger investors) to your product before the rush. Some may think this is unfair, however it is prevalent in markets across they globe, across industries. It’s meant to happen on time, and with the intention to sell, rather than wait and let’s adjust the prices so that when we do decide to sell it we’ll make more profit.

The irony is that Sorouh is a publicly traded company. It makes you wonder if it’s shareholders realise that the management is running amok.

Both Emaar and Nakheel have done crazy things in the past, however they know how to sell and they know how to treat their customers. This was a fiasco of epic proportions.

Sorouh. No thank you.

Abu Dhabi’s patience or alternately lack of development has had two effects, the first has been a lack of supply which has driven rentals in both the residential and commercial sector to prices above Dubai. Rentals for prime office space crossed 300 AED per sq ft much before Sheikh Zayed Road hit its current levels. The second more positive effect has been that Abu Dhabi has watched what Dubai has done and has decided to learn from its neighbour’s mistakes - potentially, of course.

The result has been three natural islands - Reem Island, Yas Island and Saadiyat Island all being turned into individual mega projects. The key difference that everyone is quick to point out is that the aim here is to provide better quality of life (than Dubai), which means better planning, more greenery and heaps of parking space.Reem Island is being codeveloped by three master developers - Sorouh, Tamouh and Reem Developers. I am sure there is a lot of material out there with all the details, so I won’t get into individual projects within this email. Reem Island is very closely located to the existing island that the city of Abu Dhabi sits on. Construction is underway for multiple access points onto the island. When Abu Dhabi’s train or metro system is finished, it is expected that Reem Island will be a 30 minute commute from Dubai.

The other two island are located alongside Reem Island and are to be individual developments in their own right. Yas Island’s centerpiece will its Formula One track, scheduled to hold its first race at the end of the 2009 season, while Saadiyat Island (motto: Island of Happiness) features a cultural district with attractions such as the Louvre, the Guggenheim as well as a variety of other attractions such as the Performing Arts Theater designed by Zaha Hadid. An in-depth exhibition with all the details is currently on at the Emirates Palace Hotel in Abu Dhabi.Abu Dhabi largely remains a 99 year leasehold area. However, with the Al Raha Beach development recently being converted to freehold, it is expected that the majority of the new projects will be converted to freehold status in the upcoming six to twelve months.

Prices in Abu Dhabi remain on par with Dubai. However, this is expected due to the high price of construction. Technically, it is more expensive to construct in Abu Dhabi than in Dubai due to a lack of availability of inputs locally. Material, equipment and labour will probably be brought in from Dubai - adding abut 50 AED per sq ft to construction costs.Visas still remain an issue, developers are not guaranteeing the availability of a visa to an end user. However, it is likely that the master developers will create a workaround much like Emaar has done, before a federal solution comes into place.

I personally feel that the Abu Dhabi market is almost six years behind Dubai in terms of development. I would say that the smart money should move there fairly soon, and that much like Dubai, the pieces will eventually fall into place. The biggest advantage that Abu Dhabi has over Dubai is sheer wealth.

Abu Dhabi’s economy is described as consisting of two halves - the Oil and Gas sector, and ADIA. Abu Dhabi Investments Authority is estimated to control anywhere between USD 0.5 trillion to USD 3 trillion in assets. ADIA is veiled in secrecy and has never published any numbers in it’s 30 year existence. However, it’s pulling power is enormous. A 2006 article in Euromoney cites an HSBC banker who says that it is one of the few organizations that Stephen Green, or his predecessor as Chairman of HSBC, John Bond, will drop everything to go and see.

ADIA gives me confidence that any government backed initiative in Abu Dhabi will be seen through to the end, simple because they have the money to do so.The other big worry for investors is that they wonder where the people will come from. It’s the same question that many asked of Dubai - and Dubai is yet to answer, but continues to build, while valuations continue to rise. Abu Dhabi will attract individuals who are looking for a quieter lifestyle to that which is offered by Dubai. It will continue to attract individuals who are working within the Oil and Gas sector as well as those who will work in Dubai and play in Abu Dhabi. Aside from individuals moving to live in Abu Dhabi, a large floating population will come into play due to the array of attractions coming to Abu Dhabi.

The last piece of the puzzle is brand Abu Dhabi. Abu Dhabi has recognised this as a problem and is taking a number of measures to address this. The first and foremost is Etihad. As Emirates has done for Dubai, Etihad will expose the world to Abu Dhabi, and with oil wealth backing it the hilt, no one can discount their ambitions. The second is the Abu Dhabi Tourism Authority who are promoting Abu Dhabi through their offices in Europe. Again, the key factor here is wealth. I am sure we will see Abu DhabiEvery investment requires an entry and exit strategy. I strongly feel that now is the time to enter Abu Dhabi and to gradually start divesting from non rental income assets in Dubai.

However, I think the property is a great buy! Here’s why:

1. The lack of availability of commercial space within the city. Forget Sheikh Zayed Road, it is very difficult to find commercial space anywhere in the city. A number of agents said to me that they were not really expecting anything significant to hit the market until the end of this year.

2. Rentals on Sheikh Zayed Road are crossing 250 AED per sq ft. Recently, I was quoted 350 AED per sq ft for space in Al Attar Business Tower. The almost completed Park Place started leasing at 290 AED per sq ft and is rumoured to have hit 370 AED per sq ft on the last few remaining units.

3. Burj Dubai Square is expected to be completed in the the next three to four months. Fit-outs are expected to start in July, with the property being handed over for use by October. The key factor is that the property is hitting the market at a time of extremely high demand, the timing is very good.

4. 250 AED per sq ft is equivalent to a 10% rental yield, with further upside expected in the short term.

5. Long term propspects look bright. With close proximity to Burj Dubai, Dubai International Financial Center and the metro station, the property should turn into prime commercial real estate.

Disclaimer: I think the property is definetly an interesting proposition, however, the above analysis does not constitute advice to buy or rent space in the property.

Have a look around, feel free to get in touch.