Peter Riddoch on the record

Damac CEO Peter Riddoch tells his side of the story to Construction Week in an exclusive, no-holds barred interview on Damac’s new projects and why it courts controversy.

Is this a good time to launch projects?
Some people will look at a glass that is half empty. We will always look at it half full. When you do that, you’re more able to find positive ways to move forward.

And what is the new scheme?
Something that we’ve been working on pretty hard, particularly during 2009, is what we call our Recovery Programme. We’ve been very committed to the construction and delivery timetable of our projects; in fact we called last year the year of construction.

We’ve been able to speak to some investors who are nervous about the market and have offered them the chance to come out of a project that will be completed much later in the future and move into another project that will be completed, lets say this year or the early part of next year.

But how will you do this? Aren’t all your projects sold out?
Many of them are but we can cherry pick locations, plus some investors have defaulted. If someone says they’re fine with waiting till 2012 then so be it, but many want to transfer to projects that will finish earlier.

We’ve also got a number of projects that have sold well but we have not yet started on site due to the design-development process. And we’re trying to ensure that we can get as many of them [as possible] started between June and the end of the year. So in the course of this year we’ll award AED2 billion (US $544 million) worth of projects.

And where has this money come from?
There’s a list of projects that we’ve already sold, so there are already significant funds sitting in escrow accounts and we would expect people to make subsequent payments as well. They’re very well funded.

So there’s no truth in the reported sale of 40% Damac stake?
That was dreamed up out of thin air. There is no correctness in any shape or form. We are a wholly owned business. The proprietor is Hussain Sajwani.

Wouldn’t it be wiser to hold on to your money right now?
It probably pays to take advantage of the downturn and drive forward because contractors and suppliers are hungrier than before and so we get competitive prices, which allows us to get started on site. I think it is important to go forward because these projects that we’re thinking of building will take two to four years to develop.

Would you say confidence in Damac and the region has waned?
We’re making significant moves to demonstrate our commitment to Dubai and our confidence in the market. Prices have come down and everyone has now had to sharpen their pencils.

Rera’s introduction of escrow accounts has given a lot of confidence to the market. When the world begins to turn around, investors will look at Dubai and have trust in it, and as a developer we have to try and make it happen.

It seems that Damac is surrounded by controversy?
There are often negative stories in the press. I’m not going to say if they’re wrong or right but in every situation things happen. There are positives that can be talked about and on a completely unrelated matter – the challenge we face now is a lack of confidence.

Is it your business plan to build as much as possible right now?
Yes, because people have bought from us. We owe it to them to keep the process going to be able to get on site as soon as possible.

Wouldn’t you rather focus on completing ongoing and sold-out projects than announcing new ones?
Most definitely. Projects like Smart Heights for example are due to be finished this year. The two towers in Jumeirah Lake Towers (JLT) are completed – Lake Terrace was handed over in the middle of last year and Lake View at the end of last year.

The Crescent was handed over at the end of last year.

Lago Vista is well advanced and we’ve almost finished the concrete work and it’s up to the 16th or 17th floor and will be completed towards the end of this year.

The first two of our shell and core towers in Business Bay are due to finish at the end of this year and will be handed over next year.

We’re already on the 52nd floor of Ocean heights and the structure will be finished in a few months time, so again it will be finished by the end of the year.

I haven’t come across a single Damac investor who has anything good to say about the company.

For the buildings that we’re handing over at the moment – Lake Views in JLT – the customers are generally very happy with what they’re getting. We’ve delivered exactly what we promised. Yes the project was late and no one can deny that. The infrastructure in JLT, which is completely outside our control, is not as completed as it should be.

But in terms of the actual product itself, we have very small snagging lists. They get attended to immediately. In fact we have a process where our customers get the opportunity to come in about 30 days ahead of completion to view their apartment and give us any comment, and then we work on it prior to them moving in. That’s not something every developer does, so perhaps giving people those opportunities means they then comment against us.

One item that did cause a lot of confusion on the Lake View building was the entire issue of the area variations.
Now area variations are something that are provisional of our sales and purchase agreement, so we issued the invoice including the amount for the variations in compliance with the sales and purchase agreement.

Rera came along and advised that there was a law coming out, which in fact said that area variations couldn’t be passed onto customers. We’re thankful for Rera having clarified that. It’s a pity that this hadn’t come out earlier to avoid confusion, but other than that I’m not conscious of anything that has caused what I call ‘letters to the editor’.

What about the whole parking issue?
At the time of purchase of the unit, everyone was given the opportunity to buy a parking bay. But people came back saying “where is my parking bay” – they didn’t buy it! They are now being given the opportunity to buy it again.

Shouldn’t developers have to build responsibly, which includes providing the option of free parking if the investor chooses not to buy one?
We have sufficient parking spaces for people to buy in all our buildings and in the majority of cases people have bought them. We clearly can’t be responsible for what the RTA or the master developer decide to do, or not do in areas outside our jurisdiction.

Do you have any projects that are on hold or have been cancelled?
We have no projects that are on hold or cancelled but yes, we have reset all our priorities in relation to where we have customers who have bought. We are also looking at all our designs to ensure our buildings are as efficient as can be and are resetting our priorities accordingly.

Any news on the Haz Tower?
That is now called Commercial Square and is on the list of ten projects that we will be awarding.

What stage is Palm Springs at?
At the moment we haven’t seen sufficient progress on infrastructure work out there [for it] to make any sense to commence onsite. And we haven’t been offered the plot anyway.

What sort of compensation has been promised to investors of Al Jawharah tower in Jeddah, if it gets delayed?
The project is going ahead.

We’ve awarded the enabling works, which will take around nine to 10 months to complete and whatever provisions are mentioned in the contract will come into play, if it is late in delivery.

So why are your investors so unhappy most of the time?
If a customer doesn’t like an answer that doesn’t mean we’re going to change it. If he doesn’t like the answer and he goes running to the media then that’s for us to decide whether we want to discuss it or not.

Going back to the issue of area variations – at the time, when some of our customers created that, they weren’t creating it because they were aware of a law that we were unaware of – they were creating it because they, in fact, wanted us not to enforce what was in the contract. That’s not something that is open to debate – the contract was quite clear. Subsequently, Rera said that this is what the law is going to be and we said fine. Now, whether we’re happy with that or not, we accepted it.

It looks like you have a special team dedicated to scrutinising contracts and coming up with loop holes to take advantage of?
That’s not the case. The contract is a two-way thing. Both parties to the sales and purchase agreement have rights and both have obligations. And just as we can’t say all we want is our rights and want to ignore our obligations, similarly the other party to that contract, who is the customer, can’t say I want all my rights but I should be able to walk away from my obligations.

If it turns out with the passage of time, that a new law says that the aspects of either parties rights or obligations have to be modified, changed, added to, deducted from or removed, then so be it. Once that’s done we will respect that and we expect the other party of the contract to respect that too.

Do you think it’s fair to charge a 5% land fee on the already agreed sales price?
I don’t know who’s doing that. It’s certainly not us.