By Jamie Stewart
Under-performing partners, green regulations, and cash-strapped investors are among the factors that have caused serious delays to Al Attar Properties' Vue De Lac development in Jumeirah Lake Towers. Project manager Bipin Balakrishnan spoke exclusively to Construction Week about the trouble-plagued towers.
Under-performing partners, green regulations, and cash-strapped investors are among the factors that have caused serious delays to Al Attar Properties' Vue De Lac development in Jumeirah Lake Towers. Project manager Bipin Balakrishnan spoke exclusively to Construction Week about the trouble-plagued towers.Al Attar Properties is in danger of redefining the word delay in its quest to build three towers in Dubai's Jumeirah Lake Towers (JLT) development.
The Vue De Lac towers, in plots K1, K2 and K3, were due for final handover in September 2007, almost two years ago. Today, foundation work is complete, but main construction is yet to begin, much to the chagrin of the project's investors.
But project manager Bipin Balakrishnan said last week that a new contractor - Goldline Contracting - had just been appointed, and insisted Al Attar was putting its troubles behind it.
"We terminated our contract with the original contractor because they were not performing," he said. "We saw they were not professional in their approach and lacked the experience in constructing such buildings."
The termination procedure took three months and the project was retendered. "We should be able to finalise the bank guarantee within a month," Balakrishnan said, "and then we will start construction."
The value of the new contract with Goldline was not revealed, but Balakrishnan said it had increased to accommodate green regulations.
But the lack of progress made by the original contractor begged the question: how did Al Attar know that the original contractor was not up to the task if it had not yet begun main construction, and why were they awarded the contract in the first place?
"We saw the preliminary drawings that had been submitted and knew they were not up to the task," Balakrishnan said. "They were awarded the contract because we had an old consultant in place at the time, and sometimes, the consultant has a binding agreement [with a contractor]," Balakrishnan added. "Sometimes that happens."
A new consultant, National Engineering Bureau (NEB), has since been appointed to the project.
So the big question: Could Balakrishnan guarantee that construction will begin this month? "By the end of this month maximum, the mobilisation will start," he said, but maintained that this was conditional on obtaining a bank guarantee.
Goldline Contracting chairman Dr Navjit Anand backed Balakrishnan when contacted by Construction Week saying, unprompted, that "this month we will begin construction."
So after battling with partners that were "not performing" and imposed green design changes, Al Attar must have thought the worst was over - when along came the global financial crisis.
"The bank guarantee has delayed us because nobody wants to put their fingers into the fire," Balakrishnan said. "The bank takes time to study the company and decide whether it is able to [provide a guarantee]."
Balakrishnan confirmed that the money that has been collected to date from investors was held in an Escrow account, though when asked if all of it was there, he replied, "As per the rules and regulations, whatever has to be done has been done and will be done. That is the scenario."Whether Vue De Lac's investors will be appeased by news that construction is to begin will depend on the individual in question. It would not be the first time they have heard such news, and they have been waiting a long time to see construction progress on site.
"I've heard the same promises over the last two years," one Vue De Lac investor, who has sunk $63,000 (AED230,000) into the project, told Construction Week. "Whether this project goes ahead this month or not, I'd rather have my money back. At least I can invest my cash elsewhere."
Cash is indeed king in the current climate. The financial crisis has hit all links in the chain of construction hard, to the extent that, in some cases, the chain has broken.
Many investors, who have seen property prices tumble by up to 40% in some places, have been unable to make required payments to developers due to the bank's unwillingness to lend.
In turn, cash-strapped developers have been unable to pay contractors, and projects have stalled or, in cases such as Vue De Lac, barely broken ground.
Balakrishnan said communication is vital to maintain the chain. "If a customer comes and explains his problems, and the unavailability of funds is beyond his control, a refund is sometimes given," he said.
But, he added, "refunds and cancellations are not being encouraged" because, if 10% of investors in a tower cancel, Balakrishnan said, "that tower will not get built."
Investors in Vue De Lac have paid around 20% of their total to date. Balakrishnan said no instalments have been collected for months, and that Al Attar had enough cash to cover "initial" construction costs, and that once the next payment had been collected there should be enough cash to build "much higher."
But Balakrishnan also added that Al Attar will not know the number of defaulters until the next instalment is requested from its investors.
Under the law 13 amendment issued this year by the Dubai government, if a purchaser defaults before main construction has begun, the developer is entitled to keep 30% of money paid by the purchaser, but only if construction has not commenced for reasons beyond the developer's control.
Whether Al Attar could lawfully claim that the Vue De Lac project delay has been beyond its control, or not, is an interesting, and potentially costly question. Trust
Infrastructure wise, Balakrishnan said JLT master-developer Dubai Multi Commodities Centre Authority (DMCCA) is looking at a 2011 completion date, which will coincide with Al Attar's own rescheduled completion date for Vue De Lac. "Our towers will be ready by around mid-2011," Balakrishnan confirmed.
Al Attar has maintained its relationship with DMCCA and Dubai's Real Estate Regulatory Agency (Rera) despite the lack of progress. "We update DMCCA and Rera on a monthly basis," Balakrishnan said. "These people know the reasons for the problems we have faced. Hopefully, when we come through this, we should be able to take a moment."
Taking a "moment" will be the least that all parties in the Vue De Lac deserve. The ongoing problems have gone some way to changing mindsets.
"The reason we went with Vue De Lac is because we saw that it was an Al Attar Properties project," the investor, who requested not to be named, said. "We didn't expect a well known brand name in Dubai to renege on its promise."
But Al Attar Properties is determined to repay this trust. "We have not come here to develop one or two projects," Balakrishnan said. "Our chairman is local, and he has a commitment to do whatever is best for the customers."
When cash was flowing through the construction chain, champagne was flowing at property launches, concrete was flowing on site, and everybody was happy. But when the global recession struck in the west, a dam was built upriver that cut much of the cash flow to the region's developers.
"Maybe it was bad luck, bad timing, or bad choice of partners, but we got stuck," Balakrishnan said. "It's like getting caught in quicksand. The more you struggle, the longer it takes to get out of the sand."
In the case of Vue De Lac, where, by all accounts, construction is finally set to begin at the end of this month, simply getting out of the sand is what all concerned will be hoping for.
Please could you ask Bipin when they will refund our money we paid for Global Point in 2004. It is 5 years and they have not even started the project. We borrowed from bank to pay for the project and are still paying the loan. I will appreciate your help Thank you
This is not the first project that Al Attar have shown bad faith in. I invested in Global Point in 2004 - completion was due in October 2007. No work ever commenced despite numerous promises. In January we were promised full refunds in 6 months. The latest is maybe in 12 months time - and in installments. They have consistently gone back on their word and should be held to account. Please ask Bipin to comment on this!
a single developer in the UAE that has been free from this sort of circumstances, i.e. project delivered on time at the cost promised, or else paid back the investors money in full. Not surprising that Dubai reputation with foreign investors is what it is now. Solution is straightforward and easy to implement,as it had been suggested here several times on AB. Why is no one listening, or acting upon it.
I endorse the comment made by mohammed ashraf.I have invested in Toronto Project in 2004 which is next to Global Point.Handing over date was october 2007.since then once in 4 to 5 months an Project update appears stating"Approval received from Nakheel,Enabling works contract handed over"this statement being repeated since last 15-18months with only dates changing as update.I have seen around this Project no. of Projects coming up.it seems they don't have a will to Develop this Project.I request all the Investers in this Projects to comment & come forward to voice our concern. Thank you.