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Dark days ahead
Peter Walichnowski, CEO of Omniyat Properties, on the challenges Dubai’s real estate sector faces in 2009.
“We are really looking at the darkest days of the storm this quarter,” says Peter Walichnowski, before assuring: “Obviously, we have to be careful not to believe that what’s happening now is going to be the future because we all lived through recession and we do know it does eventually lift out.”
Like many property company bosses these days, the Omniyat Properties CEO has to retain every ounce of optimism he has. And Walichnowski is particularly good at it. Even after trimming the company’s workforce by 69 people, holding off six new projects, and coping with a slumping Dubai property market, Walichnowski seems to think he is in a much better position than others.
Omniyat is known for launching iconic buildings designed by world famous architects such as Zaha Hadid. The largest chunk of its portfolio is taken up by commercial projects and a few residential, including The Pad, The Opus, Octavian and The Gemini.
On current turbulent market conditions, Walichnowski says: “Of course we are worried about the market in a general sense, but most of our product is commercial office buildings in Business Bay so we’re not exposed to a lot of residential projects.”
As the property market in the once-booming emirate of Dubai feels the slump, developers postpone payments to contractors, resulting in delayed projects and idle labourers at construction sites. Local banks refusal to grant mortgages, following the financial crisis, is also driving demand downwards, resulting in sharp price drops.
Despite the downturn, Omniyat Holdings, the parent company of Dubai-based Omniyat Properties, has seized the current market conditions and launched a new business unit. Last month, a service management company offering facilities management, property services and strata management was launched. Omniyat Asset Management (OAM) was founded with the aim to offer investors better value on their property investments.
The new division will provide customers with “an integrated range of services, which otherwise they would find difficult to get from a single service provider,” according to a company statement.
When asked at a press event whether there were plans to slash the company’s workforce further, Walichnowski said the company was actually hiring rather than firing with the opening of its new operation.
Omniyat Properties is a privately held real estate investment and development firm, which was founded in 1995 by entrepreneur Mehdi Amjad, along with a Kuwait-based partner. After serving as the chief executive of Omniyat for a number of years, Amjad now chairs the company, while Walichnowski maintains his position as CEO.
Today, Omniyat has launched a total of nine projects in Dubai worth approximately US$3.68billion, and has plans to deliver three projects a year over the next three years. The first of 2009’s three projects is scheduled for completion in the second quarter.
“We had 15 projects in the system. We launched nine before the crash, which meant that we got six that are being held off till a future date. Our strategy obviously has changed to focus on the first nine and not to focus on the next six for the time being.
“In accordance with that we down-sized the company, as we lay off 69 people mainly in marketing and sales because we weren’t launching projects. We have also been gearing up for the launch of Omniyat Asset Management, which has always been part of the strategy — to introduce services into the company,” says Walichnowski, adding he is confident the nine projects will be completed on time.
Recent reports suggest that Dubai residential property prices have gone down by at least a quarter of their value, after peaking at the end of last year. A Colliers International report showed that sales volume dropped 45% over the last quarter. But Walichnowski is not concerned about the value of Omniyat’s properties declining. “We have very unique offerings like The Pad, which is a residential project in Business Bay. Most of that is sold. We think buildings like that are always going to have a point of difference and will always be popular.
“The buildings that will suffer are going to be the sort of ordinary vanilla buildings that have got no point of difference and we don’t have buildings like that,” he says.
Price drops don’t distress Walichnowski either. They do not have a great impact on the company, as most units in all nine buildings have been sold, he explains. “Prices falling on our remaining stock is not a big issue for us. We have enough to complete the buildings on what we’ve sold.”
The sharp decline in property value is bound to mainly affect the launch of new projects, given the drop in value of existing units, points out Walichnowski. “That’s what the impact is going to be. But we figured that in the worst case, if we don’t launch anything for three years and we just finish our nine buildings over that period, we are still in pretty good shape.”
“Now, if this recession goes on for longer than three years then we’ll have something to worry about, but I don’t think it’ll go on for that long,” asserts Walichnowski.
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Posted by aarkey, dubai, UAE on 3 May 2009 at 11:48 UAE time
Mr Walichnowski talks as if the commercial sector (office spaces) has not been affected. Isn't it true that t he commercial sector is worst hit? That the valuations were so high that even a slightly more optimistic pricing, say 12 months down the road will mean that most investors who want to sell will lose money?