Sorouh ups sales pitch ahead of Sun and Sky Towers handover

Off-plan sales are considered anathema today, both by end-users and institutional investors looking for income-generating assets.

In this respect, the tangible projects in Abu Dhabi's first investment zone, Al Reem Island, are being observed with keen interest.

Sorouh's Sun and Sky Towers is one development that has generated a great deal of buzz ever since it broke ground. Now bracing for a handover in a few months, the developer has launched the last round of sales, spicing it up with attractive mortgage rates to counter the challenging credit environment.

"This is the best mortgage rate in the market for both existing and new owners. The response has been very strong. Offers like Sorouh's and Abu Dhabi Finance's will help stimulate the market and provide customers with attractive solutions for buying," says Gurjit Singh, chief operating officer, Sorouh.

The Sun and Sky Towers are part of Shams Abu Dhabi, which also comprises the Gate Towers, the Shams Park — spanning one million square feet — and a marina, among other components. According to the developer, the construction of Gate Towers is on schedule for completion in 2012.

With Shams being a phased master development, officials at Sorouh believe sub-developers will see the benefit of building on plots adjacent to the Sun and Sky Towers. "They are already seeing the value of being located near the towers and are planning to commence their developments in due course," says Singh.

The investment zone status of Al Reem Island has attracted regional and international developers, who are keen on buying land parcels from sub-developers. However, according to Sorouh, there are only a few plots leftfor sale and the developer rules out selling land below its value.

Assistance for sub-developers

Sorouh has created a working groupto assist cash-strapped sub-developers that stopped construction once property sales dried up. "Many of the sub-developers are getting on with their projects and we are seeing a lot of enabling work already under way. In order to help them, we have been working to assist them with licensing and planning issues, providing data and helping them get in touch with banks with special financing offers," says Singh.

Construction of Tameer Towers, a central component of Shams Abu Dhabi, was earlier put on hold for a brief spell after the developer, Tameer Holding, chose to renegotiate construction costs with the contractor. "We understand that construction is now progressing at Tameer Towers," says a Sorouh spokesperson.

In order to generate a regular income stream, Sorouh has leased out almost 900 units at its developments Sas Al Nakhl and Khalidiya Village in Abu Dhabi and Al Oyoun Village in Al Ain. Its investment portfolio in the Sun and Sky Towers will see Sorouh earning rental income from the retail podium on Shams Abu Dhabi. Pre-leased at over 60 per cent, the retail podium will be operational in the fourth quarter of 2010 when the towers achieve a critical mass of occupants. Despite sluggish unit sales, Sorouh claims to have not increased the number of units it plansto retain for leasing.

Another source of revenue generation is the stream of facilities management, where Sorouh has already made inroads by opening a property management subsidiary, Khidmah. "The first year of facilities management at the Sun and Sky Towers will be handled by Khidmah. The services charges are being evaluated at the moment and we expect them to be in line with similar accommodation in the region," says Singh.

While units in the two towers were mostly sold to end-users and market rate investors, the developer does not eschew bulk sales. "We will study the credentials of an investor before we consider bulk sales." As the towers approach completion, there have been secondary market stirrings for its units.

Leveraging the decline in building materials costs, Sorouh claims it has been renegotiating with contractors and passing on savings to its buyers. For instance, in 2009 it reduced the sales price of units and revised payment plans for units in the Alghadeer project while investors in multiple units were offered the opportunity to consolidate their ownership. Alghadeer remains on track for delivery in 2012, according to Sorouh.

Among its purchases on Al Reem Island, the Tala Tower was in the spotlight when a blaze broke out in the tower last year. Being developed by Tamouh Investments, the toweris, however, on track for handoveron June 30.

"The fire in Tala Tower affected only non-critical structures. Consultants were flown in from the UK and Australia to verify if the building was structurally affected. We've secured approvals from all the relevant authorities to rebuild the damaged structures. Construction recommenced in early March," assures Joe Ong, managing director, Tamouh.

Abu Dhabi remains a focal area for Sorouh in the medium term with extensive projects awaiting completion. "In the long term, we are looking at projects in Morocco and Egypt. We are taking advantage of the current economic slowdown to continue with our master planning and assessing our position," says Gurjit Singh, chief operating officer of Sorouh.