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Sat 28 Feb 2009 04:00 AM

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On track and on time

Construction of Bahrain’s Marina West residential development is going full steam ahead despite a sharp drop in apartment sales as Bahrain Editor Benjamin Millington discovers on a tour of the site.

Construction of Bahrain’s Marina West residential development is going full steam ahead despite a sharp drop in apartment sales as Bahrain Editor Benjamin Millington discovers on a tour of the site.

When the property market is at a standstill and your construction project is rumoured to be in strife there is one remedy worth trying; invite the media on a press tour to spur investor confidence.

Last month the developers behind the US $700 million (BHD264 million) Marina West residential development did just that, inviting numerous publications down to the site so journalists could bear witness to the busy pace of construction.

Treated to a lavish lunch on the 6th floor of one of the uncompleted towers, journalists were given spectacular views of Bahrain's palm-fringed northwest coastline and across the shallow waters to Saudi Arabia.

They left with full bellies, great pictures and the knowledge that Marina West is forging ahead despite the financial crisis.

When finished the 75,000m2 residential community will be home to 3000 people and include amenities such as private beaches, a 70-berth marina, a health club, retail outlets, restaurants, pools, tennis courts and of course, a five-star hotel.

The hotel will be the tallest of the structures, standing at 32 storeys, and will be surrounded  by 10 residential blocks, each between 20 and 26 storeys, that fan out towards the sea.

As the press wandered around the concrete shell of tower six they were told by representatives that the development is pretty much on track and on time.

"We are on schedule, except for the hotel tower, which is slightly behind due to complications when coordinating with the hotel operator," says Marina West's project director, Mohammed Jalees of Ahmed Janahi Architects.

"(The hotel operator) is in place now, but you have to take his input and views into consideration for the design and that is taking a little more time.

"All the other towers are on programme and targeted to finish on time in April 2010."

Twenty-five percent of the project has now been completed overall and Jalees says they are pleased with their progress after facing a few delays in the beginning.

Main construction began in September, which was around the same time that Saudi Arabia halved its cement exports to Bahrain and caused a severe shortage of concrete in the Kingdom.

Jalees says progress on Marina West was stunted by untimely deliveries of concrete, but they have since tried to insulate themselves from the problem.

"Because we've got 11 towers on this project we're able to have four different concrete companies supplying us, so we're not just depending on one," he says. "That's the biggest advantage that we've got here, there is always one supplier who'll have the cement stocks available."

Initial progress was also hampered by the development's proximity to the sea and the difficulty of dewatering the excavations, says Jalees.

"We are just a metre or so above the sea level, so when we excavate and have deep piling going in and foundations coming up, it is a natural phenomenon for a lot of water to come in," he says.

"As the rate of water increased then dewatering became a challenge, which set us back, but these things are part and parcel of the whole game - we're making up for it now."

The pace of construction took off in December, says Jalees, with a total of 85 slabs having been laid at a rate of 25 slabs a month, which will soon increase to 30-35 slabs a month.

The contractor, Al Hamad Construction, is also simultaneously working on approximately 30 floors of block work and has just started plastering at a rate of 20-30 floors a month.

The current workforce on site numbers 1,400, but this is expected to increase to 2,000 in the coming months and up to 6,000 when they start finishing activities.

Jalees says that the construction and design process of the project from now on should all be quite straight forward.

"It's standard construction, all of the slabs are post tensioned slabs, we have some huge spans without intermediate columns and that's about the as unique as it gets, otherwise it's just standard slip-form concrete, nothing out of the ordinary."

The sales slump

While construction may be buzzing along, the sales side of the equation has been dragging its feet since the financial crisis shattered investor confidence in the property market late last year.

Only six of Marina West's residential blocks have been released to the public for sale, and of those, 75% of the units have been sold says Eric Tromans, the managing director of Reemoon Real Estate Development, Marina West's development consultants.

This equates to around 55% of the total development being sold if you include the four unreleased blocks, he says.The concern for Marina West is that the current standstill in the property market will continue, the remaining units will be slow to sell and this will begin to impact on the development's cash flow.

"We have several investors that are part funding the project but like most of these developments, it is also funded by pre-sales," says Tromans.

"So when sales drop off you have to look at your cash flow very carefully because we still have to keep paying the contractor. That's why we have to juggle things."

One of these juggling acts is deciding when to release the remaining four blocks and whether or not to sell an entire block to keen investors.

"We've already sold one block as a whole block to assist cash flow and we're considering selling another," says Tromans.

"The disadvantage is that you don't maximise profit because you sell at a discount; someone who's buying 120 apartments won't pay the list price.

"But if sales don't pick up in the next two or three months and someone is driving us crazy to sell them a block then we might have to think about it."

The prediction from Tromans is that sales will in fact pick up in the next two or three months and it's just a matter of weathering the storm.

"The money is there to buy, people want to buy, sales have fallen off because people are just sitting tight to see if there's a good bargain around the corner," he says.

"Once they realise that we're on programme and our price is still very competitive then I think they will come back, it will just take a few months."

What gives Tromans hope is that they are offering a unique product. Bahrain may be an island, but there are surprisingly few areas of coastline that are accessible to the public or available for development.

There is also still a shortage of residential housing in the Kingdom, and so far the majority of sales have been to end users -- an equal mix of Bahrainis, Saudis and Western expats.

This is the key difference between the perceived collapse of Dubai's property market and stalling of the Bahrain property market says Tromans.

"Our market is totally different to a place like Dubai where there's been a massive amount of development and sales to speculators or buy-to-rent operators," he says.

"That doesn't happen here, it's very infrequent, so our market is totally different.

"If an end user wants to buy an apartment in Marina West then we have arrangements with several of the banks to provide mortgages and they are still doing so.

"That's one of the problems in Dubai at the moment, mortgages are drying up and there are going to be a lot of apartments I perceive that are going to be left unsold.

"Bahrain is a much smaller market and a much more solid and comfortable market."

Within Bahrain itself, Tromans says Marina West is well positioned in the middle range of the price bracket after negotiating a good price with the contractor when material costs were reasonable.

Since then, he says other contracts for similar residential developments have been agreed at vastly increased prices.

"I know exactly how much we need to recover per square metre of sellable area just to pay the contractor and I can tell you that some other very well known developments, have to earn twice as much as that before they cover all the on-costs and start to make a profit," he says.

"So I know that we will always be very competitive and we have a unique offering, so everything is going for us really."

Mohammed Jalees CV

Mohammed Jalees has more than 26 years experience in the construction industry after obtaining a bachelor of civil engineering in India and an MBA in the US.

Jalees has spent the last 16 years in the Gulf region and has worked on projects in Bahrain, UAE, Oman and Saudi Arabia.

He presently works for AJA (a division of Ahmed Janahi Holdings) as project director handling the Marina West development in Bahrain as well as being involved in several others including Uptown Bahrain (US $2.65 billion) and Madinath Al Zarqa (Blue City development) in Oman ($1.8 billion).

Also with AJA, Jalees worked as project manager on the $1.8 billion Bahrain Financial Harbour Sea Front Development since 2004.

Other positions held include senior project manager for Havelock Ahi in Bahrain for four years and site manager for Al Naboodah Laing O'Rourke in the UAE for four years.

Some of the projects executed include: Holiday Inn Al Khobar, Saudi Arabia - $4.5 million; Holiday Inn Half Moon Beach Resort Saudi Arabia - $2.75 million; Movenpick Hotel Bahrain - $4 million; Noon Tower Hotel Bahrain - $3.5 million; Sheikh's Palace in Awali, Bahrain - $3.75 million.

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