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Sun 9 Nov 2008 04:00 AM

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Joining forces

Having recently launched in the UAE, international real estate agency Fine & Country explains why it is offering independent agencies the chance to join its ever-expanding network.


Having recently launched in the UAE, international real estate agency Fine & Country explains why it is offering independent agencies the chance to join its ever-expanding network.

Independent real estate agencies dot almost every corner of Dubai, between them showcasing row-upon-row of homes and offices for potential buyers, though with examinations being implemented by the Land Department for industry employees, how many of these will be left in the market?

Perhaps more importantly, how will those allowed to continue operating set themselves apart in times where many investors are less willing to part with their cash?

Many [agents] were freelancers, unlicensed and working from no fixed abode, and encouraged quite frankly by developers who would take a reservation form from a camel.

"The real estate market in the Middle East could best be described as the Wild West," says Phil Sheridan, Chairman of Fine & Country in the UAE. A real estate agency with increasing international reach, Fine & Country specialises in the sale of high-end properties and currently operates from over 300 offices around the world.

Having recently made its debut in the UAE, the company has brought with it an intriguing proposal for independent agencies. Fine & Country is offering a maximum of 50 agencies the chance to join its network of operations through a licensing agreement, granting access to some of the benefits enjoyed by international companies.

"Say you own a real estate brokerage company called ABC, and your market presence and brand is, quite frankly, weak. We will give you as a real estate agent an elevated position in the market, with a full suite of marketing services from this base here to support it," explains Sheridan.

Buying into the brand

Through the agreement, independent companies pay a monthly fee to Fine & Country in order to use the brand name, though each will still be registered with the Land Department under its original operating title.

"Our agreement between us and our licensees is purely licensing our trademark for them to be able to trade under our brand," says Malcolm Lindley, CEO of Fine & Country International.

After paying a one-off joining fee and a fixed monthly membership fee, licensees will have access to a range of services provided by the company, including a world-class marketing studio, ongoing website training, presence at international exhibitions and access to worldwide markets at a fraction of the normal cost.

One such example is Elite Dome, a Dubai-based real estate agency which has recently become a licensee of Fine & Country, having sought-out the company as a desirable brand, according to Naji Zeitouni, general manager of the agency.

"Since joining the real estate industry in 2007, I felt the need to be associated with a professional network to stand out from the clutter in the market," he says.

Zeitouni reveals Elite Dome will specialise in selling real estate in Jumeirah Lake Towers, in line with Fine & Country's proposal to have each of its licensees focus on a particular area.

Franchise vs licensee

Although these agreements may seem similar to franchising, Lindley puts heavy emphasis on the fact Fine & Country does not class its operations as such.

"We're not colouring-by-numbers for estate agents, we're not inviting new entrants into the market and giving them a manual and saying ‘this is how you become an estate agent.' We're a licensed organisation and we license our trademark to very select, experienced estate agents."

In the case of many franchise operations, Lindley notes each branch is usually restricted to its own territory, though he claims any licensee of Fine & Country within the UAE would be free to operate wherever they like within country.

Cecilia Reinaldo, CEO of Fine & Country in the UAE is keen to point out another difference between a franchise and a licensee,

"We don't take commission like a franchise would do, taking a piece of your action" she says. The only money to be handed over regularly, she stresses, is the monthly fee.

Though the benefits for licensees are clear, how does Fine & Country stand to gain?

"The benefit for us as a licensed business is that it's more profit for shareholders," says Lindley. Although, this is not the sole benefit for Fine & Country as an organisation,

"We are developing an international network of estate agencies working together. In terms of individual agencies, we have access to different specialisations and the use of a broad range of facilities," he explains.

Examinations

One thing Fine & Country and Elite Dome appear to agree on is the importance of the new training course and exam which must be sat by brokers.

"All agents of registered companies through the Land Department must pass a module one examination. It's a two-day course, and indeed all the sponsors of those must also attend and pass this mandatory, although simplistic, exam," explains Sheridan. Those who do not pass the exam will no longer be allowed to operate in Dubai's property business.

"Each of our agents is clearly going to have to be a RERA registered, authorised estate agency, well a) they won't be in business if they're not, and b) we wouldn't dream of working with them if they weren't of that standard," he says.


Elite Dome will be sending several members of its staff on the course.

"Four [employees] are in sales and two are required to sit the new RERA exams. However, we are sending admin and finance staff to do the exams in due course," says Zeitouni.

Regulation

It would seem the regulatory framework is increasingly and more effectively in place, and will perhaps eventually wipe-out the ‘cowboys' of the Middle East.

"The Land Department established RERA to basically get a hold of what on earth is going on in the market. Not just with developers and their projects, but also the advisory channel; the real estate agents," says Sheridan. Prior to its inception 12 months ago, Sheridan believes the situation was somewhat uncivilised.

He calls Dubai the Wild West, but in England, you could come out of prison in the morning and become an estate agent in the afternoon!

"Many [agents] were freelancers, unlicensed and working from no fixed abode, and encouraged quite frankly by many of the developers who would take a reservation form from a camel," he says.

Since then, RERA has implemented a number of laws, most notably those detailing escrow accounts and mortgages, which appear to have renewed investor confidence in the emirate, though only time will tell how effective the brokerage courses have been.

Headquartered in England, Fine & Country focuses on the upper-quartile of the market, competing with the likes of Savills and Cluttons.

"We've established ourselves with 269 offices in the UK and have about an 8% market share of the market we're targeting, which is the top 25%. Last year, we did over US$161m in estate agency commissions," explains Lindley. A rather handsome sum, though given the prices of the properties on the company's books - the first freehold property listed in the October issue of Fine & Country's international magazine costs US$5.6m - it is perhaps rather modest.

"The average estate agency commission is about US$3,200 or US$3,500, at Fine & Country, it's around US$29,900," says Lindley. Though with Prime Minister Gordon Brown admitting the UK is in a recession, will people keep spending in this sector?

Surviving the crunch

"The Fine & Country end of the market is the more mature end of the market, and is less dependent on mortgages. In being less dependent on mortgages for their transactions, they are more able to do what they want to do, but you couldn't say they haven't been affected," he stresses. Although this agency may be able to withstand the cyclical nature of the economy, how will independent companies bear up?

"We are seeing estate agencies fail; we are probably down 80% in the number of transactions as an industry. From 2006 to 2007, there were around 1.3 million transactions in the UK, this year we reckon there will be around 400,000 transactions," he explains. A loss of almost one million sales in just one year.

Fortunately, with an international presence, the agency can focus on other markets as opposed to being trapped in the hardest hit areas. In creating a global network, Fine & Country entered the South African market, and currently has 62 offices in the region, as well as a licensee in Nigeria.

International operations

"I don't know quite where Nigeria fits into the picture, but somebody wanted the license," says Lindley. The company as recently set up operations in the USA, Thailand, Mauritius and the Bahamas, though bills Dubai as one of its most significant steps.

"Dubai is very important to us as we try to grow the brand in global sense. I think Dubai is going to be very important now, and in the future of all commercial activity. It could be the centre of the world's financial and commercial business, and tourism hub," says Lindley. Despite his colleague's earlier description of the Middle East property market as the "Wild West", Lindley believes it is in some ways ahead of other markets.

"He calls Dubai the Wild West, but in England, you could come out of prison in the morning and become an estate agent in the afternoon!" Echoing Lindley's belief the market will see continued growth, Zeitouni believes property in the emirate is still a sound investment, despite a slowdown in sales.

"There are currently more sellers than buyers, and consequently this means sellers have to take a far greater commercial view on their capital return. This means prices have not come down, but have stabilised and any correction, if it happens, will be limited and of a temporary nature," he explains.

Perhaps boldly, Zeitouni goes as far as to say having money in Dubai's property market could currently be considered, "a safer haven than cash."

Although there is still far to go, Zeitouni for one believes the organisation will continue to introduce new policies and procedures to strengthen the market.

Should its workforce pass the brokerage course, Elite Dome could be looking towards a bright future with the muscle of an international brand behind it, while Fine & Country will perhaps become an integral part of the UAE's penchant for branding.