Site visit: Dubai Star, Jumeirah Lakes Towers
Developer Preatoni has made stalled tower project its Dubai debut
The driving force behind Egypt’s Sharm El Sheikh resort took on a stalled tower project as its first in Dubai, and is confident of its ability to deliver. Michael Fahy visits Preatoni Real Estate’s Dubai Star.
Ernesto Preatoni, founder of the real estate business which bears his name, is a man who has been known to take risks – albeit calculated.
Preatoni started his career as a financial advisor to clients but has since become a hotels and property magnate – his website bills him as the “inventor” of Egypt’s popular Sharm El Sheikh resort.
Now he has moved into Dubai, buying the stalled Dubai Star tower project in November last year and recently launching a UAE office from where his firm is expected to make other local investments.
Preatoni first began looking to develop in Dubai in 2006 according to general manager Edoardo Preatoni, one of Ernesto’s seven children who also runs its operations in the UAE.
“For many reasons – also because there are only 24 hours in a day – we decided not to come here. It seemed like a very exciting and dynamic market, but we didn’t know it very well and we thought it might have been a little bit
He added, however, that many of the Italian investors who have worked with his father are “passion-driven” buyers and that many who were keen on investing in the Emirate did so anyway.
“Maybe they were not buying from the most serious developers and a couple of things have gone wrong – it did for some of our lifelong investors who bought a few apartments here and didn’t get their unit as they expected.”
As a result, some of these began asking Preatoni to look at Dubai again to see initially whether there were any rescue or recovery projects in which they could invest.
By the time it held its second investigation into the market in late 2012, Edoardo states that things had changed. “We saw the market was much more stable,” he says.
“Rules from the Land Department seemed to have a good grip on developers. They are protecting both the developer and the end user, which is a good thing.”
The fact that it has chosen Dubai Star as its first project is interesting, though. The 45-storey tower at Jumeirah Lakes Towers wasn’t the simplest it could have taken on.
For a start, the project is a mixed-use building, with three levels of basement parking, 25 ground floor retail units, 25 floors of offices and 19 floors of apartments.
The contractor, Al Rashad Contracting Co, is fitting out the office space to shell and core, while floor 26 is being used as a mechanical floor and floors 27-45 contain 226 apartments. These range in size from studios and one-beds up to a number of four-bed penthouses on the top two floors.
Alongside the complexity of the building, another challenging issue is the building’s history. The project was initially launched by German property fund Alternative Capital Invest, which was planning a series of ambitious schemes including commercial tower projects that were branded under deals with German and Austrian sports stars including Michael Schumacher, Boris Becker and Niki Lauda. However, it hit problems in the wake of the financial crisis and none of these were ever built.
“The original delivery date was six years ago, so it’s been stalled for quite a long time,” Edoardo told CW.
When asked why it decided to take on such a project, he said there were a number of things that appealed to it about the project, including the location.
“JLT is still an underrated area in my opinion with a good margin for growth,” he said. He also added that the fact the project was in a reasonably advanced state – 41 of the building’s 45 structural floors were in place – meant that it felt it could turnaround the project quickly. It is working with the team already in place to complete Dubai Star by the end of 2015.
The project manager in charge of delivering the building, Eng. Hassan Sharif of Al Rashad Contracting Co (RCC), has said that it is aiming for most of the building work to complete by June 2015.
This will then allow for a six-month period during which it can complete all of the testing and commissioning, as well as ensuring the building is ready within a suitable timeframe for connections to be made for utilities including electricity and for district cooling from Tabreed.
“We have to prepare for them,” said Sharif. “Then we have to complete according to their schedule.
“The authorities want to help you, but already they have a queue [of projects] and I am doing my best to make sure I can go to them early.”
RCC has been working on the project since 2011. It is working with consultancy Adnan Saffarini, which is overseeing the architectural, structural and MEP engineering design. MEP works come under the scope of Al Rashad, but has been split into three packages, with Fawaz delivering the air-conditioning systems, Nevotrex responsible for the fire fighting and pumping systems and High System delivering electrical and fire alarms.
When work restarted following Preatoni’s investment, some finishes had already been carried, but only to the 11th or 12th floor, Sharif explains.
“And it was just some small finishing work such as blockwork or plaster. All of the other works such as MEP works has been done from that period,” he says.
It had been back on site for seven months when CW visited in August, during which time it had carried out substantial blockwork, plastering, MEP, ceramics and finishing works.
Aluminium cladding works have been started on three of the site’s four elevations and are being completed in two phases. The first will see cladding installed up to the 25th floor. The second, which will start once internal lifts are installed and external hoists removed, will see work on the fourth elevation begin, and all elevations will be clad up to the 44th floor.
The remainder of the works has been broken into three milestones. Phase one covers the structure and the first 25 office floors being completed to shell and core. At the time of CW’s visit, 95% of this had been done and Sharif was confident it would be finished by the end of September.
There are 12 offices on a commercial floor, and 13 apartments on a typical residential floor, although floor 44 contains four of the building’s six four-bed penthouses. Two more penthouses take up half of the 45th floor, with a health club occupying the rest of the space.
Some 60% of works on the second milestone, which includes external works and detailed completion of the first 10 floors of apartments had also been done, while around 30% of the third and final milestone for overall building completion had been carried out. There were 400 people on site, with Sharif expecting worker numbers to peak in November.
Edoardo Preatoni says the fact that the building is so well advanced was a key reason for it deciding to invest in finishing off the scheme.
Its Pro Kapital business, which develops properties in the capital cities of the Baltic States, has recently broken ground on a major project in Riga which Edoardo says will make much more money, but he adds that he feels Dubai Star could be equally as important to Preatoni’s future as a developer.
“When we got here, we knew this project was going to be profitable, but we also know that it is not going to change our lives in terms of financials.
“But it’s going to change our lives in terms of the fact that it is a 600-unit building and managing to deliver in a professional and timely way a building as complicated as this – with a history as complicated as this – will be really nice for us and will do much more for us than buying billboards around town and saying that Preatoni has arrived.
“We are not going to spend a bunch of money on advertising as many people have done previously and then not doing anything at all for end users.”
Preatoni Real Estate is planning other projects around the city, but Edoardo remained tight-lipped on where or when the next scheme will get underway.
“We’re definitely here to stay.”
“Dubai Star is a profitable and nice project, but for us the most important thing is the visibility. If we don’t do any other projects, we haven’t taken the potential out of this. It’s good experience, but it is also good marketing.”
Ernesto Preatoni started life by advising clients on financial investments and worked for many years at a firm named IOS. However, he later set up on his own and worked with a group of investors leading raids on some of Italy’s oldest private banks.
“This was already quite a common operation in some countries such as the United States, but nobody had ever done it in Italy,” explains his son, Edoardo, stating that Ernesto and his cadre of investors wrested control of these institutions by buying majority stakes.
After an attempt to do the same at Italian insurance giant Generali was thwarted, he turned his attention to real estate – firstly in Egypt and secondly in the newly-independent Baltic states.
His involvement in Egypt began with what he described in his autobiography as a “disastrous” involvement with a chemical company, who then took him out to Hurghada with a view to developing a resort there.
Although many things appealed to him about building a resort in Egypt – friendly authorities, low labour costs and a climate offering year-round tourism opportunities – he decided the location wasn’t right and kept looking until he found Sharm El Sheikh.
Since the first phase of the project began in 1994, it has been built into a resort that can hold 5,000 people at a time and where it has also achieved sales of 16,000 residential units – many of which it manages for buyers.
Although political turmoil and disagreements with authorities that had close links to former leader Hosni Mubarak has meant that his ambitions for further growth in the region had cooled, Edoardo Preatoni insists that the company will continue to invest in the area.
“The past couple of years have been quite slow due to the political situation but we are still there and we plan on being there for a long time because we actually love Sharm.”
The value of its portfolio in the MENA region is more than $3bn. Preatoni also has substantial property holdings in former Eastern European states including within the capital cities of Estonia, Latvia and Lithuania – Tallin, Riga and Vilnius. These are held through a business known as Pro Kapital, whose portfolio is valued at over $300mn, with a further $450mn of schemes under development.
The bulk of its assets were bought in the early 1990s after the three countries gained independence from the former Soviet Union.
“We managed to get very good deals on plots of land in premium locations because the international market was still very sceptical,” says Edoardo.
“I don’t know, they thought the Red Army was going to come back in or something. But we are entrepreneurs and we like to take calculated risks.”
- 2005 Project launched
- 2015 Completion date
- 45 No. of storeys
- 400 Workers on site