By Holly Sands
Michael Horrigan of IGY Middle East and Europe explains why it's plain sailing for marina developments.
With Palm Jumeirah's Anchor Marina set to open in December 2008, Michael Horrigan, CEO of IGY for the Middle East and Europe explains why it's plain sailing for marina developments.
Over the next five years, international marina developer Island Global Yachting (IGY) anticipates Dubai will become home to a further 20,000 berths - a figure for the Palm island developments alone, which will amount to a 200% increase on those available in the emirate's existing marinas.
So far, IGY has announced plans for 665 berths from that figure; 590 will come from the soon-to-be-operational Anchor Marina, while the remaining 75 will be constructed as part of its recently unveiled mega yacht marina, adjacent to the Trump International Hotel & Tower.
Both will be open solely to the residents of Palm Jumeirah.
To get window and concrete supply is a huge challenge in the market, and it’s one of the things that penalizes the building industry so strongly here.
"I think there is an absolute abysmal lack of good quality berths for the market at the moment," says Michael Horrigan, CEO of IGY for the Middle East and Europe.
"The reason Ferretti and a lot of boat brokers and builders are coming in is the fact they know demand is huge, but it won't be manifest until the berths are available. There's still a three year waiting list at Dubai International Marine Club," he explains.
Horrigan describes how many Dubai-based boat owners are forced to keep their vessels as far away from their homes as Sharjah, while they wait for space in local marinas or for new developments to open.
Founded in 2005, IGY opened its Dubai office in 2006 and currently has 24 marinas under management and development around the world.
Its Dubai branch is currently working exclusively for Nakheel, having been contracted for all the developer's marinas. Prior to this partnership, IGY worked on the marina at Al Futtaim's Dubai Festival City and the Al Seef Marina on the Dubai Creek.
At this year's Cityscape Dubai, Abu Dhabi-based developer Aldar revealed plans to build 14 marinas across the emirate, with a combined total of 3,500 berths.
"State-of-the-art operations will exceed customers' expectations at every level and integrated land side facilities will enhance destination boating," says Ronald Barrott, former CEO, and now advisor to the chairman of Aldar.
One of the most prominent marinas developed will be Yas Marina, constructed as part of the Yas Island project. It will be surrounded by the Formula One rack track and provide berthing for yachts up to 100m long.
Though he holds mixed opinions of the marinas currently in operation, Horrigan believes the majority of new developments will be of a superior quality and hopes they will set a precedent for the future.
The Dubai industry is going to be very much a self-regulating industry. It will only ever be as strong and as forthcoming as the amenities that are there for people who want to buy boats," he says.
Although Horrigan declines to disclose the average lease rate for one of their berths at Anchor Marina, he reveals marinas developed by IGY are setting a benchmark,
"Our prices are higher than anything else that has been achieved in the market. That's because of the quality of our berths, the clubhouse amenities and because it's adjacent to people's villas and homes." The location of these berths is perhaps an example of the "anything-is-possible" culture that brought three man-made palm tree shaped islands to the world.
"This is one of the few areas where you could own a villa or a house with berthing immediately in front of you. Most of the other global markets have been priced-out of that possibility," Horrigan explains.
But what should happen if the boat- and home- buyers become diluted in a sea of over-supply? Horrigan is confident it would not affect his company's immediate future.
"I think what you're talking about could potentially impact what new developments will come online, but we have a five year backlog from the developments that are already in place and existing. A five year backlog is an unusually strong pipeline for a company," he claims.
"If there is an impact on the residential market, it would mean that maybe five years from now there will be a different demand for the amount of berths. So it could affect the five to ten year projection, rather than zero to five."
Perhaps in its favour, IGY also operates in Abu Dhabi and other areas of the Middle East, which could insulate it against a stall in the Dubai market.
From the point of view of a developer in Abu Dhabi, Barrott believes Aldar has allowed for any change in demand on his turf,
"Aldar's marina projects are designed to accommodate phased development, in order to adjust to market fluctuation." Construction challenges
According to Horrigan, the marina development sector is fortunate enough not to encounter the same difficulties as those faced by the construction industry. Having come from a construction background, Horrigan admits he is extremely relieved.
"Dubai is such a tough market. Construction costs are so unpredictable, getting contractors to bid your work for an apartment building or a hotel is one of the biggest challenges in the building industry here," he explains. With the scale of work undertaken in the emirate, it is perhaps easy to imagine the extent to which resources are stretched,
It’s gotten so busy in Europe we just couldn’t continue to service it from dubai, so some of my executives broke away to set up the European office.
"To get window and concrete supply is a huge challenge in the market, and it's one of the things that penalizes the building industry so strongly here."
Thankfully, a number of international pontoon manufacturers have begun to realize the scale of work in the Middle East, and have arrived to bid for various contracts.
"They're all coming in wanting to get a share of the market, so we have competition for the bigger marinas that are coming online. Whereas the hotels, the apartments and the office buildings struggle to get companies who can and will bid their work, and who will give them a competitive price," he says.
Horrigan acknowledges IGY's contract for all Nakheel's marina developments is probably one of the reasons why pontoon suppliers and manufacturers are eager to tie-up with the company, admitting:
"There are a lot of people who are interested to show what they can do for us and for Nakheel."
Despite the current strain on resources in the construction field and weakening demand from foreign investors, Horrigan believes Dubai's property market will generally continue along the same successful route,
"Dubai's pull is that it's larger than life, if it drops anything short of celestial, you're seeing some impact. I don't think there's going to be a drop-back, but I think there's going to be a shift in the market," he says. Even with this shift in the market, Horrigan doesn't expect business to falter, as he sees demand for office buildings increasing,
"We've got a lot of hotels coming online, a lot of apartments online and coming online. I think there's going to be a big demand for office buildings in the future, but even office buildings are a user group for us. The businessmen, the CEOs and the highly placed movers and groovers equally want to see their boat berthed near their office building."
It would seem business has never been better for IGY in Dubai. Though, with the global financial crisis wreaking havoc, one would imagine marina development contracts are scarce in traditional yachting grounds like Europe. Quite on the contrary, if Horrigan is to be believed,
"Europe is becoming a very strong market for us," he says. A statement that could perhaps cause a number of market observers to fall clean out of their seats.
"It's gotten so busy in Europe we just couldn't continue to service it from Dubai, so some of my executives broke away to set up the European office," explains Horrigan.
And it would seem business is unfaltering for a number of boat builders.
"It's largely recession-proof. Looking at orders for mega-yachts in the boatyards, not only has there not been a pulling of orders, new orders have been placed," he says.
It is perhaps not so surprising to see the marina development industry withstanding the downturn in construction and real estate sectors, given many boat owners likely fit into the highest earning income bracket.
However, Horrigan also is keen to emphasize how valuable an investment yachts can be in an unstable global economy,
"I think some of the people who are buying boats are looking to place money in something different to all the fragile parts of the market. There have been so many real scares in traditional parts of the market. I think people who have got the money are thinking, "I'm going to put that US$25m into a boat so I can get some pleasure and joy out of it, rather than put it into X market where I might lose it.
Substantial fluctuations in the value of UAE developers' shares suggest it may not be as immune to the financial crisis as once thought. Shares in Emaar Properties have fallen 65% in the last year, though it rose 15% last week. Perhaps maritime investment will be the safest bet for wary investors.
It has been a lucrative move for Michael Horrigan. Having tied-up with government-owned Nakheel, it is more than likely IGY will be laughing all the way to the bank.