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Sat 23 Aug 2014 01:47 AM

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Do celebrity branded projects ever work?

The long list of celebrity-endorsed real estate developments launched in Dubai in 2007-08 became a compilation of high-profile suspended, scrapped or failed projects. But the resurgence of the emirate’s property market has brought back the big names. Will it be second time lucky?

Do celebrity branded projects ever work?

Ladies dressed in their finest gowns and elaborately applied make-up crush against the doors of the Madinat Jumeirah, jostling with black-suited men similarly desperate to witness the man for whom they have endured the Dubai summer humidity: Shah Rukh Khan.

The Bollywood superstar — reportedly the second-richest actor in the world — is, typically, running almost two hours behind schedule. Almost a thousand men and women — many of whom belong to the elevated tiers of Dubai society and hold well-paid, respectable jobs — are practically begging for the gala dinner and Khan’s on-stage appearance to begin.

King Khan, as he is affectionately known, is in town to draw attention to the Royal Estates, a new residential development in Dubai Investment Park, launched by otherwise little-known developers Aristocrat Star Real Estate Development, Pacific Ventures and PAL Development. The three firms have hired Khan, or ‘SRK’, to endorse the $650m “affordable housing” project, that perhaps would have dissolved into the sea of master developments launched in the emirate in the past 15 months.

If attention was what they were seeking — and they won’t reveal even a rough figure of how much they forked out for SRK — it has certainly worked. Not only is the chaotic scene at the Madinat Jumeirah evidence, but the “Royal Estates” garnered more than 600 news articles across the Gulf, India and Pakistan during the two-week period after it was revealed that SRK would endorse the project and he physically attended its launch in Dubai on 6 August.

But the more important question is what impact will the actor’s endorsement have on the project’s bottom line?

Aristocrat Star Real Estate group chairman Osman Valli skirts the question when asked by Arabian Business, but says the aim is for SRK to create awareness that will ultimately lead to quicker sales.

“A lot of people don’t have to say too much, only one word can pay everything off,” he says on the sidelines of the launch.

The development was yet to sell out at the time of going to print, but analysts believe the endorsement of SRK, or any other respected celebrity, does bring some benefit — even if only initially.

“They get more mileage because of the high-profile names attached to these projects,” Deepak Jain, Jones Lang LaSalle’s head of strategic consulting for the Middle East and North Africa, says.

“Selling in the first phase is important for some developers and can determine whether or not it’ll be successful in subsequent selling phases.”

So much fanfare and yet King Khan himself conceded he had no idea about the Dubai property market and whether now was a good time to invest in it.

“As far as investment is concerned, with all due respect to the reputation I have as a businessman… I have no idea at all,” he said during the August 6 press conference. “I’ll be very honest, I will never guide anyone wrong. If today my son was to ask me, ‘is this the right time to invest?’ I’d say, ‘I’m not the guy to ask, go ask someone else. I have no idea’.”

His modesty contrasts to another celebrity endorser of a Dubai project, US billionaire Donald Trump, who is backing the Akoya by Damac development near Arabian Ranches.

However, Trump is putting his money where his mouth is, investing his own cash — although he won’t reveal how much — into the self-titled golf course at the centre of the estate. He also comes with a pedigree of successful empire of golf courses around the world.

In Dubai for the launch in May, Trump said he expected his name to add 50 percent to the value of Akoya by Damac residences based on a newspaper report in Aberdeen, Scotland, where he bought a golf course that has since seen tourist numbers skyrocket.

“You saw the Trump effect, I mean it’s over 50 percent,” the famed self-promoter told Arabian Business in an interview in May. “It’s tremendous; people just pouring in all over the world to play this course [in Aberdeen].

“I think you’re going to have a huge Trump factor here [as well]. I think it’s going to have a tremendous positive effect.”

And the Trump boost would not only affect the golf course and 100 villas in Trump Estates attached to it: “I think it’ll have a spill over beyond this development; I think it’s going to benefit other developments as well,” Trump said.

All that optimism despite his first Dubai project having been scrapped. Trump Tower was to be a 60-storey building on The Palm Jumeirah, a joint venture with Nakheel, the developer that sank into billions of dollars worth of debt when the property market crashed in 2009.

Trump later said it was a “smart move” to cancel the project following the global financial crisis.

Celebrity endorsements have been used in Dubai almost since the property market was opened up to foreigners in 2002.

Brad Pitt announced in mid-2008 he would help design an 800-room, five-star hotel in an unconfirmed location in Dubai. The project was to be built by the development company then-owned by Dubai Crown Prince Sheikh Hamdan Bin Mohammed Bin Rashid Al Maktoum, Zabeel Investments, which owed about $1.5bn following the property crash.

A spokesperson for Graft, the German-headquartered architecture firm collaborating with Pitt on the project, which it is still promoting on its website, has denied the hotel has been axed, telling Arabian Business the project remains on hold, with an “undisclosed” timeframe.

Dubai Holding, however, has confirmed its planned Tiger Woods golf course has been canned. The developer said in July, last year, the resort, for which the former number one golfer was paid $55.4m to design and promote, had been terminated at the ninth hole. It had been scheduled to open in September 2009.

F1 drivers Niki Lauda and Michael Schumacher and tennis legend Boris Becker also received significant sums to endorse Dubai real estate projects that never came to light. Michael Schumacher Business Avenue, Boris Becker Business Tower and Niki Lauda Twin Towers were to be built in the emirate’s Business Bay district and include residential, retail and office space.

They were all the mastermind of German investment company Alternative Capital Invest (ACI). ACI never made the returns it had promised and is still facing ongoing court action in Germany, amid claims it owes hundreds of investors for these and other projects.

Lauda and Becker have since distanced themselves from the company, with the latter telling Arabian Business in 2011 he wasn’t sure whether the fact that his name attached to the project meant he was still legally involved.

Lauda said he hadn’t heard from Robin Lohmann, CEO of ACI, since the project’s launch in December 2007.

“Who is he? No, I only met him once, when I was there in the beginning and I haven’t heard from him since then,” he told Arabian Business in 2010.

American actress Hilary Swank also launched an unsuccessful $1.49bn development on The World islands, lending her name to developer Aquitainia.

Even SRK himself has been caught up in a failed UAE development. Shah Rukh Khan Boulevard, a proposed $2.2bn residential development on Dana Island, off the coast of Ras Al Khaimah (RAK), barely made it onto the drawing board when the idea was suspended. Having said that, SRK said he has raised the possibility of bringing it back to life with the ruler of RAK, and the project’s investor, Sheikh Saud Bin Saqr Al Qasimi.

With so many celebrity-endorsed ventures going so terribly wrong does celebrity marketing simply not work in real estate? Is it Dubai? Is it the celebs themselves?

Jain says it is likely this list of Dubai celebrity projects failed due to the general financial situation, despite dozens of other developments frozen in 2009 since having been revived, with many now completed.

Perhaps it is the pre-construction endorsement that puts a project so at risk. There are a string of successful hotels around the world now owned by celebrities, including Robert De Niro’s The Greenwich Hotel in New York City, Richard Gere’s Bedford Post Inn in New York State and U2 singer Bono’s The Clarence Hotel in Dublin.

The chief executive of Dubai real estate firm Better Homes, Ryan Mahoney, agrees the global credit crunch probably had the greater impact on Pitt, Swank, Schumacher and company not making it to the key-cutting process.

But he says the resurgence in building will likely see celebrities make a comeback in the real estate sector; they help to “cut through the noise” and in a crowded market such as Dubai their endorsement can add a premium to the value of residences, at between 5-10 percent.

But, Mahoney says, eventually a developer’s reputation for quality will be paramount in a project’s long-term success.

“A lot of people say to me ‘I’m cautious of developers using celebrities or gimmicks because it may be covering up something missing from the product’,” Mahoney says.

“Developers should remember to focus on the quality of the project in terms of design, functionality and so on, to build a track record of well-built and well-maintained properties. A good track record is far more valuable and you can see that companies that have a history of delivering good-quality property do not need to bring on the celebs.

“If a developer is intent on getting an endorsement then I think it’s far more meaningful to have a famous architect or a famous design house, or even hotel brand, which will actually add value to the quality of the development by either designing it, furnishing it or managing it.”

There are existing examples of this in Dubai.

While none of the pre-crash, celebrity-endorsed developments have been successful, Armani Hotel in Downtown Dubai, the first hotel in collaboration with Italian designer Giorgio Armani, has thrived since it opened in 2010, even winning international awards.

Palazzo Versace Hotel — the second in the world to be developed with the designer — is due to open by the end of 2014, about five years behind schedule. The developer Enshaa has claimed the delay was due to infrastructure not being available, while reports have suggested there were funding difficulties.

Mahoney says using well-known architects and designers also has been successful in cities such as London.

“I’d want everyone to stay focused on the end product,” he says. “Now in Dubai we’re starting to see properties that have been in the market for five to six years… now they have been here for a while you can weigh up the quality of a building. That makes all the difference for the tenant or final user.

“To a certain extent, it surprises me sometimes that there seems to be quite a lot of people not so concerned by the track record.

“But clearly, whatever we think, [celebrity endorsement] works because so many are using them.”

Jain says it is a certain type of developer that is more likely to splash a famous face in front of its project.

“Typically, you’ll not have Tier 1 developers going down this road,” he says. “You typically have Tier 2 and 3 developers, who don’t have a successful track record or who are relatively new in a particular market or trying to develop a project not in a prime location, use celebrities to get that attention — marketing coverage to get some kind of initial pace with respect to sales.

“Typically, a lot of projects’ success is based on sales in phases one and two and, in some cases, to get a premium compared to competitors it pays to have a celebrity involved.”

But any impact on the value of homes at Royal Estates also must take into account SRK’s endorsement fee — which if his previous work is anything to go by, was likely to be seven figures. (Pepsi reportedly paid $10m for the actor to appear in a series of ads throughout India — five times what it paid Michael Jackson).

“I don’t ask girls their age and I don’t expect them to ask me my salary,” he replied when asked by Arabian Business to reveal his endorsement fee.

SRK also refused to comment on what value, if any, he will bring to Royal Estates, suggesting he also believed the quality of the developer will ultimately determine the project’s success.

“I don’t know if I’m going to add value,” he said. “I think the product by itself is more important than the endorser. At the end of it all if I was to sit down and say the other products I have endorsed were because of me, I think I’m taking away from the important and the goodness of the product. I have never made that claim, I would never make that claim.

“I think this product is going to be wonderful. I believe it, I think everyone involved believes it, and you cannot have a product — or a film — where the hero is better than the film; the film has to be better than the hero. The product has to be better than the endorser.

“The value will be brought by the product. Yes, I bring in the eyeballs, I bring in the interest, I bring in the people wanting to come and take a look at it, and after they assess it, understand it, feel it, I hope it would be value for money for them, and that would be the value added.”

“Whenever you take a brand ambassador you take him for the values that he or she stands for. I stand for… a certain modicum of success; I stand for certain kind of values; I stand for a certain kind of cinema director. I’ve been working for 25 years … as an Indian actor and in the hearts of lots of people in the subcontinent and many other places. I have made a place and people look up to whatever I do and stand for. So when that happens, slowly that gets transferred onto a project.

“People like to believe that if I have said ‘yes’ to a project as a brand ambassador, I must have sussed all this — and we do. So I hope the qualities that I stand for fall short of the quality that Royal Estates will bring to the table. I think it’s a great quality product and the product will speak for itself.”

Perhaps, as Mahoney suggests, the answer will come five years from now, when the hype of a Bollywood star has dimmed and the cracks, if any, in the project and its marketing stunt begin to reveal themselves.

In the case of Trump’s golf course, he’s set a clear goal to attract the rich and famous and an international tournament. The pressure is on.

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Really?!Again?! 6 years ago

WELCOME ALL to what almost certainly will be another dark Dubai real estate chapter and financial disaster for the small investor."Aristocrat STAR". ALARM BELLS ARE (or should be) RINGING! The "PALISADES" project (http://the-royal-estates.blogspot.ae/2009/01/dubai-palisades-project-investors.html) This time round they are 3 "little known" wannabe developers buying billboards continuing ACI's legacy. OH HAPPY DAYS I SAY. FANTASTIC INVESTMENT.NOT!DLD, RERA and whatever committee allegedly deals with projects, approval and cancellations thereof and investor protection will most likely have a lot of explaining to do; or, more likely, just not. I recommend to do some proper research into the PEOPLE BEHIND a project / company before considering so much as to spend half a fils on them. PS: A famous face and watching Bollywood movies rarely qualifies as due diligence of a real estate project - just as entertainment; which sometimes is really bad; ask the people who invested 7 years ago...