Palm developer offers Dubai's first hotel rooms for sale

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Dubai real estate firm SKAI Holdings is offering deed ownership on hotel rooms at its new $1bn hotel and resort project on the Palm Jumeirah, becoming the first developer in the emirate to offer such a scheme.

Last month, SKAI began construction on the Viceroy Palm Jumeirah complex, which will be located on the trunk of the manmade island and will include 481 rooms and suites, 221 residences and six villas.

As part of its the sales strategy for the project, SKAI is offering hotel rooms for sale, priced from AED1.65m to AED1.8m, with 20 percent paid upfront and the remaining 80 percent on completion of the project in late 2016.

While the concept is has been offered by developers in many western cities such as London and New York, this is the first time investors in the UAE have been given the chance to own deeds to a hotel room and avail of a monthly yield in return.

“We have sold this residential component, three villas, all the townhouses and now the hotel rooms. It is the first time purchasers and investors can buy hotel rooms [in Dubai],” said SKAI Holdings CEO Kabir Mulchandani.

“The yield per square foot (sq ft) for hotel rooms is much higher than commercial, residential or retail,” he claimed. “Between a hotel apartment and hotel room on a per sq ft basis, I will give you some numbers: 500 sq ft hotel room in a particular project goes for AED1,800 ($490) a night, so about AED3.6 per sq ft per night

“A 1,100 sq ft apartment in the same project goes for AED1,100 ($299) a night, as it is a longer term lease. So that is AED1 per sq ft. So that is a three and half times kicker on the yield. The finish between a hotel room and a hotel apartment is the same and the cost of building it is the same.

Mulchandani said the difference between the SKAI proposal and other similar schemes was the fact all the rooms are put into a joint rental pool, meaning the rooms owned by the hotel owners and the operator aren’t sold first and the investors left until last, as has been the complaint in some similar setups abroad.

“This is the fairest pool as the units we have held and the units Viceroy owns and the investor units are all put in the same pool so there is no segregation,” says Aloki Batra, a financial analyst at SKAI.

“What happens is most of the time is the hotel and operators’ units get sold first, but our units get sold in the same pool. Therefore, it is a revenue share, not a profit share. We are giving 40 percent [of revenue] straight off to the investors. This is paid out monthly, so [for example] as we’ve just finished May the investors on June 20 would get a statement and payment.”

“People want title deed, it is not fractional ownership and this is not a timeshare. You own the real estate, you own it and you lease it back to us,” he explains.

SKAI said investors’ annual rate of return on the hotel rooms was estimated to be around 12 to 14 percent, in line with current market conditions. Batra said about half of the hotel rooms had so far been sold.

According to the latest HotStats figures released by TRI Hospitality Consulting ME, Dubai’s hotel sector maintained comparable levels to last year, with slightly lower performance levels. Revenue per available room (RevPAR) fell by 1.9 percent to $321.75.

However year-to-date performance levels remained strong with RevPAR growing 7.2 percent to $325.40, driven by a growth in occupancy and average room rate by 2.7 and four percent respectively.

Managing director Peter Goddard said: “Although the performance of hotel in Dubai was slightly lower in April, the Emirate continues to outperform 2012 with average occupancy reaching 88.2 percent for the first four months of the year.”

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Please post responsibly. Commenter Rules

Posted by: manish

Look, Kabir does send shivers down, but the fact that this project is backed by the prestigious zaal family (yes only in name) as kabir is married to nadia, who worked on barari and left half way to work on nurai A/D (any idea if this is complete) does add some credibility. and to add to this, he has signed viceroy (based in LA) who seem to run some good high end boutique hotels, and the location (view is in fact better than the crescent as you get some lights of the marina at night), I am finding out more info for a LONG TERM investment. RERA will never clamp down flippers, we all know it, there is always a way out!

Posted by: Mark Williams

I was burned in AD, I am still being burned, fools will be parted with their money, if they do not learn, let them fall its not your worry nor mine

Posted by: Mr.Been There Before

They say that lightning does not strike twice!!!

This payment plan is offered purely to allow flippers the ability to trade on at extremely small percentage uplifts.

How on earth can the developer complete the project with only a 20% contribution from the investor.

This payment plan is only attractive to speculators and not end users.
Kabir Mulchandani knows this only too well however i suspect he will earn more than enough money by (allowing) preferential pre sales etc!
Hold on to your seats everyone - This is the beginning of the end. Again!!

Please RERA do you job.

Don't mess up all the recent hard work that you and Dubai have tirelessly worked on.

Global investors can forgive the first Dubai bubble as the people in charge did not have any real comparable evidence to base their decision making on.
Don't make the same mistake again. Next time there may not be an Arab spring to kick start you.

Mr. Been there before

Posted by: Anonymous

Are there any laws on the books for this type of scheme??? Probably not...cart before the horse...again. Good luck investors...

Posted by: mr raj patel

you will need move than luck ,my friend is still owed 6millon aed by dynasty zarooni , and they tolled him the devolpers have his money , even the fact dz took the money banked it, then sent the funds offshore and said to my friend we are allowed to keep its our profit , warning to everyone buy emmar or dammac at least you will get what you paid for , not like dz sorry now ska1

Posted by: Anonymous

I think Bonnington Hotel in JLT did a similiar thing. Also are these not the same guys from Dynasty Zarouni real estate developers??

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