By: Fadi Nwilati, CPA, CGMA


Many land owners today have made a call today to offer their plots for sale or scrapped their decision to develop their real estate projects. While in many cases these decisions are correct, there is no harm in conducting a fresh feasibility analysis and reconsidering the decision, as in some cases, land owners may be losing on a great opportunity.

Over the last 2 years, I have been leading and working with several land owners developing real estate projects and have been leading, since 2015, approximately AED 1.5 Billion in projects value all the way from feasibility study, design management, tendering, authority approvals, project financing, project & unit registrations, escrow account set up & management, tendering and construction award, and construction supervision.

While most large-scale contractors remain busy with Expo 2020 projects, and trust me, there are many in planning & execution stage, construction prices remain reasonable. Margins for real estate developers remain healthy. When conducting feasibility analysis for the projects I have been involved with, the worst-case scenarios, which are based on the absolute bottom prices of the global financial crisis, result in breakeven. So as a worst-case scenario, the capital invested by real estate developers remains “safe’ in principal.

Land owners today should seriously consider to develop their plots, or at least explore the opportunity, whether their intention is to rent or sell the properties. Banks continue to offer construction financing, even for first time developers, to projects that have been well planned and analyzed. I have assisted in arranging over AED 500 Million in bank funding in the last 18 months and can tell first hand that some banks’ appetite for the right real estate projects remains positive.

Of course, not every land passes the checklist for development today. A thorough analysis of the location, demand, sell-ability or rentability, and exit strategy must be conducted prior to making such decisions. In a project we are currently leading, the projected annual returns, which have been analyzed by multiple professional entities and banks, are 20%. This proves that despite the current market situation, there are projects that remain promising and tick all the boxes. If you happen to own a plot of land, explore the option of developing it. There are multiple scenarios for land owners to explore if they wish to limit their exposure and minimize their risks.

Dubai remains in need for specific types of properties that remain absent, with few developers exploring built to suit schemes, and certain unique, not necessarily prime, residential & commercial projects. As a real estate developer, it’s time to decide not to copy what’s already being developed, and to think differently. Unique projects, both on the prime & lower end of the market, have been in historically in demand and healthy.

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Dubai Commercial Real Estate

Dubai Commercial Real Estate:

3 factors that will influence investors property investment decision.

By: Fadi Nwilati, CPA, CGMA, CEO, Kaizen Asset Management Services

The old adage “location, location, location” is true for commercial properties just as much as it is for residential.

Buying real estate has always been and will continue to be a very big decision and needless to say it be commercial or residential investment, an extensive number of factors need to be taken into consideration before signing on the dotted line. Despite some negative sentiment around a market slowdown in 2016, real estate performance in Dubai continues to be amongst the top global cities. When looking to the future of commercial real estate investing in Dubai there are three things people should evaluate and implement to make those real estate investments pay off.

Location: A Key to Success

The old adage “location, location, location” is true for commercial properties just as much as it is for residential. The very first thing one should always remember is the place of the commercial venture. Regarding business potential and return on investment, location plays a vital role. In Dubai there are the preferred and the ‘not-so-preferred’ micro markets when it comes to commercial leasing or purchase. Location is dependent on multiple other factors such as accessibility, proximity to key hubs and proposed infrastructure. Office buildings in onshore areas and free zones with direct access to Metro stations, ample parking and unique amenities remain in high demand in Dubai.

Desire for Amenities Grows:

With a growing pool of blue-chip occupiers looking to make Dubai their regional headquarters, the demand for single- owned Grade A stock has been key denominator in supply growth for the last few years. While a certain premium could be attributed to the presence of amenities in a building, its benefits tend to override the cost. The importance of retail and other facilities and amenities for office occupiers was evident in the Dubai Commercial Real Estate market with landlord’s investing in retail improvements and carefully selecting the right tenant mix.

Sustainable Sector Investment:

A raft of international companies is expected to set up businesses in Dubai in preparation for the World Expo 2020, potentially increasing demand in the commercial property cycle. While Dubai’s economy is a vibrant, progressive and diverse enough to offer equally exciting opportunities for all industries some have definitely displayed better performance and faster growth when compared to others. Exponential growth has been recorded in the following sectors Technology, Financial Services Sector, Healthcare and Pharmaceutical followed by Construction and Engineering.

Like any profit-making proposition, purchasing a property needs apposite evaluation to be carried out prior to making the decision. While purchasing a Commercial Property may sound to be an overwhelming investment, it can attract overwhelming profits when done correctly in Dubai. Dual licensing and connectivity to transport infrastructure will prove to be the differentiators for new office schemes in Dubai and are likely to remain so for the foreseeable future.

Dubai will always be one of the world’s most appealing real estate investment destinations. Dubai’s economy is expected to sustain it’s grown momentum with Expo 2020 creating more opportunities for foreign investment, therefore buying the right commercial property can yield big returns.

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By: Fadi Nwilati, CPA, CGMA, CEO, Kaizen Asset Management Services

43% of UAE residents travel outside the country during the summer vacations and residents with children travel for longer periods during summer, so while the average family takes the right precautions before travelling for example turning off water heaters, disconnecting power sockets, and keeping the AC on at the right temperature, the majority forget an important post-travelling measure, cleaning their water pipes and ensuring a healthy water quality upon their return.

Local water distribution authorities continually monitor the water supplies physical, chemical and microbiological parameters to ensure the water quality falls within government recommended limits, however these tests are conducted at specific points, and not at the apartment or villa.

Free chlorine is present in water as a sterilization agent and should range between 0.2 – 0.5ppm (parts per million) this is essential in inhibiting bacterial growth such as E.Colis and Coliforms. Water that remains still for two to three days can be classified as stagnant as the chlorine degrades and therefore the water sterility drops permitting bacterial growth.

An investigation which KAIZEN Asset Management Services was involved in, demonstrated the importance of taking the right measures by understanding the time it takes for the water to become unsafe for usage while stagnant.

In apartment buildings, the risks are reduced when compared to villas as the main water tanks will still be in use by other residents and thus are rarely stagnant, however in saying this caution should always be taken as the water in the water heaters within the apartment may remain stagnant if the resident is away.

In villas, the risks are higher as villas would ordinarily have their own water tanks, so the water here would be stagnant for the entire duration of the leave and therefore the water purity will be at risk.

As a precautionary measure, specially for families with children, conducting water tests through a professional laboratory is an affordable exercise (costing approx. AED 500), and is a worthwhile investment for the peace of mind. The laboratory technician will test the parameters such as Total Plate Count (total bacterial colony forming units – not all bacteria are harmful), Pseudomonas aeruginosa (related to respiratory complications), Escherichia Colis (E.Colis) (related to digestive complications), and Total Coliforms.

Useful Tips For Residents, Property Managers & Facility Managers

Villa residents should ensure that their water tanks are being cleaned at least twice a year by a professional company who will empty and clean the water tanks after a lengthy vacation due to water stagnation. Landlords may even consider installing additional filters within the property as an added safety measure.

Residents coming back from vacation should flush the water within their property at every point (toilets, kitchens. etc) This method of shock flushing is advised should the water be unused for more than a couple of days only.

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By: Fadi Nwilati CPA, CGMA

CEO, KAIZEN Asset Mgmt. Service

These trusts manage properties more professionally than landlords who own and manage their own properties.

Real Estate Investment Trusts will significantly contribute to shaping the landscape of real estate investments in the UAE, and soon after, in the region. Real Estate Investment Trusts’ ability to raise funds, both locally and globally, will bring in more liquidity into the UAE’s real estate market, particularly Dubai and Abu Dhabi, thus allowing the cities to reap from the benefits from reits.

Dubai and Abu Dhabi have been on the radar for many international property investors and funds, however, entry to the market meant setting up local offices to manage and run potential property investments. With access to publicly traded reits, it gives the benefit of investing in the country’s real estate market without worrying about operating properties.

Speaking of operations, generally, real estate investment trusts manage properties more professionally than landlords who own and manage their own properties. Real Estate Investment Trusts professional management teams plan and analyse long and short term strategies, focusing on maintaining a healthy cash flows, and maximizing property value.

For investors, the benefits are plenty:

  • Immediate Diversification. Instead of being exposed to one class of asset with a single property investment (residential; commercial; industrial.. etc), investing in reits allows for diversification.
  • Professionally managed investments. Professional management allow for more stable investments in a volatile market. According to a recent article, Emirates REIT’s asset value increased by 1.5% between end of October and end of February despite overall market declines.
  • Faster liquidity. For investors investing smaller amounts, in many cases, it is faster to sell shares in a reit than sell a single property.
  • Transparency: Clear and transparent information related to the performance of the assets.
  • Ability to own high quality assets: it is possible to invest in high quality assets which may have been out of budget due to their ticket size.
  • Invest in small amounts. Average property price in UAE is out of budget for many residents, particularly arranging for a down payment. People may now invest in the market at their own pace, deciding their own budgets.
  • Fees: Investing in reits allows for avoidance of property acquisition fees or stock buyers when compared with direct property purchase (which are around 6% in Dubai excluding potential additional VAT fees).

2017 will witness the announcement of additional real estate investment trusts, and perhaps the announcement of an additional reit going public. Emirates NBD

real estate investment trust launched its stocks at Nasdaq Dubai in March 2017.

Emirates REIT has been trading at Nasdaq for several years as well, and has been

doing well for investors.

According to Property Time, Fadi Nwilati is the CEO of Kaizen Asset Management Services, the property manager for several of Emirates REIT’s properties since 2012. Fadi believes in the successful example that Emirates REIT set for the market, which opened the way for other reits.

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Improve Efficiency At Your Building

Improve Efficiency At Your Building


With the VAT tax approaching on the horizon, it has become imperative to understand how tax will affect real estate investments and the overall industry. While a lot of focus is being invested towards the effects of VAT tax on the real estate development and the construction side, it is important to invest an equal amount of focus for occupied properties, particularly, residential and commercial buildings. Many real estate developers hope that residential properties will be zero-rated rather than tax exempt, as they may not be able to claim back VAT paid if residential properties were tax exempt. We are yet to see how the tax law will treat occupied and leased buildings.

To defer the risks of the potential impact on taxes on the operational costs, building owners should consult with their property managers and legal counselors to consider a separate base rent and service charge allocation towards the lease agreements, in order to maintain the current net income generated at the property. This has proved successful in several buildings managed under KAIZEN AMS in the last 4 years since KAIZEN AMS initiated this concept. For freehold buildings managed under the JOPD and Strata law, managers need to assess how VAT will affect building budgets when the VAT Tax law is published. As an added measure, in case recouping VAT tax will not be possible from building occupants, whether tenants or owners, then building managers must seek alternative approaches to generate additional savings on operating budgets to match the potential VAT amounts to be paid. Professional property and asset managers are continuously diving deeper into the properties’ operating budgets to try and generate additional savings, while maintaining the same level of quality. Generally, in the UAE, approximately half of a building’s budget goes towards resources related to maintenance, cleaning and security, among others, while the other half goes towards utilities, mainly electricity and cooling. The goal is not to minimise expenses, the goal is to manage the target level of quality at the right level of expenses. The cost of managing a property should reflect the vision of the owners.

In order to generate savings on maintenance, security, cleaning and other resource-driven services, the managers should try and renegotiate contracts with service providers to try and achieve better rates, or alternatively, better contract terms and threshold amounts. They should also review KPI’s to reflect important aspects of the community and encourage a repair-first mindset for equipment.

On another note, generating savings on energy and cooling is generally more straightforward. From experience, we know that reducing energy costs by 10 percent is relatively easy without having to spend large capital amounts. It’s critical to understand where the most energy is being used and where energy is being lost. Being a member with the US Green Building Council, we are always up to date on the recent technologies and methods to reduce energy and cooling bills, and have historically generated excellent savings from small measures. If the building manager has squeezed the costs to an absolute optimum level, again, without affecting on quality, then perhaps it’s time to look into adding revenues into the community. This can be generated by straightforward approaches such as decreasing vacancies, increase rents strategically and minimizing turnover. Additional revenue can also be generated from other services such as creating and managing a visitor parking management, car cleaning services for residents, vending machines and magazine stands, among others.

In summary, it is important for building managers and financial managers of building owners to review the budgets and analyze areas to generate additional revenues and areas of generating additional savings. It is important to begin this exercise immediately and implement the necessary plans, in order to be ready for a potential negative tax impact on net income.

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Compiled by Mary Grace Antonio


CEO, Kaizen Asset Management Services

So what’s in it for us here in Dubai during this Fire Rooster year? Just like a rooster walks with his head straight looking forward, we won’t look back. The year 2017 is a new beginning that will bring in more stability and should end with a better year on year results. Although the global situation remains still, and perhaps not very positive, our region should begin to flourish. For those considering to make property investments in Dubai in 2017, it’s time to close whatever analysis you have been conducting and to go ahead with your real estate plans. Frankly speaking, real estate will be the most sound well as supply and demand. It is our expectations that oil prices will increase slightly with the decision to limit production and thus stabilizing the market with more buying power and liquidity from the gulf countries. Politics also play role as it affects currencies as well as customer confidence and with the inauguration of the new US president we expect a slight drop in the dollar value which will encourage foreign investors to buy in Dubai.

With regards to supply there is definitely a push for more affordable housing and thus directly competing with the rental market and opening up opportunities for tenants to become home owners. And finally, as expo 2020 nears closer it will also push developers to launch more projects at the expo site and investors would like to buy into projects that will be handing over within 2 years. This will also increase jobs at all levels of income. Dubai is also creating major attractions and tourism is increasing year on year, with more people discovering Dubai we believe more interest from investors will follow a parallel line. So as we are finalizing our strategy for 2017 we are certainly planning expanding our own operations with the belief that it will be a good year for us and predictable investment to make in 2017 and the few years to come, especially when compared with alternative investments such as gold or stocks.

Can you predict a 7% Yield on gold or stock in 2017? The short answer is no.

But surely you can predict a 7% yield from rental income in a property in Dubai, can’t you? Just like any real estate investment, you must first decide why you are buying (your purpose) and what your exit strategy is (your goal). Then you must do your homework, and do it yourself. Take it from someone who has been in the real estate industry in Dubai for over 10 years, not every property purchase is a winner. Even in boom years, I have witnessed investors make much lower returns than their peer investors, because of not being clear on their purpose and exit strategy. Unless you know something unique, I do not know of any investments that you can make in 2017 in the EMEA region that will produce better results than buying property in Dubai. Having said this, one must also consider that having a single market prediction for Dubai’s real estate market would be a prediction in-error. Dubai’s market is now split into different segments and thus, each segment should be analyzed independently from the other. It would be misleading to have a single outlook that applies to residential, commercial, retail, industrial, and hospitality properties, or to have a single indication of market movement that applies to both off plan and ready properties, and prime, mid-segment and affordable properties.


January 29, 2017

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