By Claire Ferris-Lay
John Bullough, the CEO of Abu Dhabi based-Aldar Properties, tells Claire Ferris-Lay why the real estate developer is concentrating on UAE the capital amid the downturn.
John Bullough, the CEO of Abu Dhabi based-
, tells Claire Ferris-Lay why the real estate developer is concentrating on UAE the capital amid the downturn.
John Bullough hasn’t had many sleepless nights recently but he could be forgiven for having a few. The CEO of Abu Dhabi-based
has spent the best part of the last year not just battling the UAE’s declining property sector but also overseeing the development of Yas Island, home to this month’s inaugural Grand Prix race.
“I don’t suffer from sleepless nights but when I am awake my brain is constantly running over — I keep thinking of new things that need to be addressed,” he laughs. Yas Island is one of the state-backed developer’s biggest projects. The first phase of the $40bn development, which began in 2007, occupies a total land area of 2,500 hectares, of which 1,700 hectares are claimed for development. As well as hosting the city’s F1 race in November, the island will also house three separate theme parks — Ferrari World Abu Dhabi, the Warner Bros theme park and a water park — seven hotels, a marina, a large shopping mall and a golf course.
With a television audience of millions, getting the first phase of the development ready in time for the race has been Bullough’s biggest challenge. In the lead up to the UAE’s biggest event, the CEO has spent most days on site as he prepares to hand over the project to the race organisers, Abu Dhabi Motorsports Management. “The quality of what is delivered at Yas Island is a major focus. On November 1 around 600 million people will be staring at our creation so this is a massively important showcase for Abu Dhabi, for the UAE,” he says.
Although Yas Island will be the five-year-old company’s biggest completed project to date, it is the first of three huge developments that will be finished in 2010. Next year, two phases of Al Raha Beach,
’s new headquarters, the coin-shaped building that dominates the skyline as you enter Abu Dhabi, and the Ferrari theme park, will all be completed.
All of this has been achieved during one of the region’s largest property crashes. Although Abu Dhabi’s residential market has managed to sustain the cost of the housing better than neighbouring Dubai — where the city’s residential vacancy rate currently stands at 25 percent compared to less than 5 percent in the capital — the crisis has caused a slowdown in sales across the country as banks tightened their lending. According to Proleads Group, around 400 real estate projects worth more than $300bn have been put on hold or cancelled in the UAE.
hasn’t entirely escaped the fallout. In July, the developer announced second quarter earnings that fell short of analyst’s expectations as it revealed that as much as 15 percent of customer payments were overdue. The real estate developer posted a 70 percent drop in Q2.
In August 2007, the developer announced its first project outside of its home region; a tie-up with South Johor Investment Corp (SJIC) in a deal that represents the largest foreign real estate development in Malaysia. This was followed in October 2007 with plans announced to build a mixed-use development in Kazakhstan.
In a bid to reduce the impact of the crisis, however, Bullough has halted any further international expansion plans. “Geographically our focus remains very much on Abu Dhabi. We have a very substantial pipeline of development and I am certain that will remain our focus for the foreseeable future,” he says. “I want to get this estate really established and settled [with] solid income streams established… [For the] foreseeable future we will retain our focus on Abu Dhabi.”
He adds that the firm is shifting its focus on investing and managing real estate in the wake of the slump. “The company right now is in transition from the developer through to asset manager/longer term investor. The strap line to our logo is ‘building the nation’ and that really goes to the root of why we exist. Our mission is to develop sustainable, long term communities for Abu Dhabi.
“As that (
’s) estate is developed there will be a greater focus on asset management, it’s going to be key for investor performance and for shareholder performance for us to manage that estate to the highest standards so that we maintain the quality and the best performance for our investors,” he says.
Last month, a Dubai-based analyst estimated that Dubai and Abu Dhabi need to create 150,000 additional white collar jobs to provide enough buyers for villas and apartments being completed in the next two years. The report, by Dubai-based Nomura Holdings, predicted that in the next two years Abu Dhabi will see an additional 15,000 residential units and 10 million sq ft of office space added.
Despite the decline in sales, Bullough remains confident that the capital will continue to provide
with the fundamentals it requires. “One of the things about the Abu Dhabi market is that it’s got some really basic fundamental strengths, not just its location but the fact that the development, generally in all sectors, is being pursued in line with the 2030 Plan,” he says.
“The release of development onto the market has been done in a very measured way… It’s obviously got quite significant inherent wealth so all of those factors bought together has meant that Abu Dhabi, even in the current difficulties, has fared relatively well. The whole world has suffered from the impact of the current downturn but I think in the case of Abu Dhabi we are as well placed as anyone for the longer term.”
Bullough has also further diversified the company into new sectors. In September, he introduced a home financing product in conjunction with Abu Dhabi Finance. This was followed in October by a joint venture with the National Catering Co to provide catering services to more than 56,000 workers building projects at Yas Island. In September, the firm also opened its third school through its education subsidiary, Aldar Academies. “We opened our third school, Al Muna [Primary School], at the beginning of this term and we are now working on the next schools within that portfolio. They will be coming forward in 2011 and beyond. As far as the Aldar Hotels and Hospitality is concerned we are opening, in the next couple of weeks, an incredible seven hotels, approaching 2,500 rooms on Yas Island,” he says.
He adds that he also plans to further grow its catering arm within its portfolio. “Aldar Hotels and Hospitality has a broad remit in terms of running the food and beverage outlets around the
estate so we are certainly going to be growing the food and beverage operation.”
The only thing I would say to Abu Dhabi: don't repeat the same thing Dubai has done: building real estate based economy that will become vulnerable easily to any economic downturn cycle like what did happen to Dubai.