PNC Menon charts 'aggressive' expansion of the UAE's Sobha Group
Real estate company's India-born founder reveals his tower ambitions, succession plan, and timeline for Sobha Group's IPO
When PNC Menon, the 70-year-old India-born founder and chairman of Sobha Group, retires he wants to leave behind a lasting legacy for a region he has spent years helping to shape. In true Dubai fashion, he plans to do this by building a skyscraper.
Menon says he plans to create "something special" that will stand the test of time and cement Sobha’s position as a high-end real estate developer. With projects and investments in Bahrain, Brunei, India, and the UAE, Menon will plans to build his flagship tower – the tallest in Sobha’s history – in Dubai, because “there is no city equal to it”, he tells Construction Week.
The 60-storey skyscraper on Sheikh Zayed Road will become the company’s new headquarters upon its completion. With a development value of $190m (AED700m), it will have more than 6,500m² of office space and 1,850m² of retail space, in addition to 140 residential units that Menon says will be of the highest quality.
“I want this building to be extraordinary and iconic in terms of its architecture,” he says. “I will only do a signature project once in my life, and this is going to be it. For a man in the last part of his life, it is very emotional. Everything has to be super-perfect.”
It is not that I am going to die tomorrow, but we have a lot of clarity about this situation and I have been planning it for at least three years.
Construction will be carried out by Sobha’s in-house contracting arm and is due to begin by August 2019. Menon says the project could take up to four years to complete, adding that all 140 apartments – comprising approximately 50 four-bedroom units and 90 three-bed units – will be sold, not rented.
The prominent plot of land on Sheikh Zayed Road was acquired by Sobha Group more than a decade ago. Until recently, however, Menon says was not sure how to best use the space. “I do not want to talk too much about it, but it will be a signature project,” he says, adding that the skyscraper is to be a celebration of his 50-year career in construction.
Menon’s journey started in Oman in 1976. He set up the Services and Trade Company in Muscat, which eventually evolved into an interior design business. By 1984, he had established a reputation that led to work on several high-profile projects in the sultanate. Menon says he was given the moniker “Palace Maker”, thanks to a “glittering phase of his career”, developing palatial works for royalty in countries such as Bahrain and Oman.
The Sultan Qaboos Grand Mosque in Muscat is one such project, and his contribution was rewarded in 1995 when he and his family received Omani citizenship.
In 2003, Menon expanded his company into a new Middle Eastern market: the UAE. Since that time, Menon has grown the company, using his GCC construction expertise to carve out a slice of the market, with the firm now employing 3,793 people in Dubai. Menon says he has “aggressive” plans to increase revenue and expand the business in the UAE.
The company aims to generate up to $408.4m (AED1.5bn) in turnover by the end of this year, but the eventual goal is to increase this by two-thirds, to $680.7 (AED2.5bn). Once Sobha maintains this level of revenue for a couple of years, Menon says he might look to fulfil his long-held ambition of floating an initial public offering (IPO) on London Stock Exchange or Dubai Financial Market.
“Unless we achieve revenue [of $680.7m] for at least one or two years, we may not go public. That is the benchmark for me to think about taking the business public,” he says.
To take the business public and increase revenues, Sobha wants to more than double its current share of the market to up to 5% by 2021. Organic expansion, propped up by the emirate’s population growth, will play an important role in this, as Menon explains.
I will only do a signature project once in my life, and [the tower] is going to be it. For a man in the last part of his life, it is very emotional. Everything has to be super-perfect.
The total primary residential market was worth approximately $9.2bn (AED34bn) in 2018, and with population growth of up to 7% projected, the underlying shift in urbanisation will help Dubai maintain a robust real estate environment, he says.
“A lot of people from the Indian subcontinent, the Middle East, and Africa would like to settle here in Dubai, so there will be population growth. Currently, there are 500,000 homes in Dubai, and if there is a 7% growth [in the population], the potential is 35,000 units, which is around AED35bn ($9.5bn) on average. To get between 2.5% and 5% of that will not be a big challenge for Sobha because of our capability for delivering.”
The company, which is named after Menon’ wife, is “the only property developer in the world that operates a vertical integration model”, he claims, explaining that Sobha operates subsidiaries specialised in disciplines such as architecture and planning, construction, electromechanical engineering, interior design, bedding, and horticulture and landscaping.
“We do everything in-house, from architecture to contracting and manufacturing, so we have total control over the product,” he says. “We work as one team; we have the ability to produce consistently.”
In addition to the skyscraper that Menon hopes to start building in the next six months, the Sobha team is also making progress on its Sobha Hartland development, which will cost $2.5bn (AED9.1) to build. Located in Mohammed Bin Rashid Al Maktoum City, near Downtown Dubai, the mixed-use development covers a 1km² piece of land adjacent to the Dubai Creek extension. Landscaped green space comprises up to 30% of the development, and it will include 5,000 apartments and 353 villas.
Several phases of Sobha Hartland have been completed to date, including Phase 1 of Greens, a 161-unit development comprising seven shops; and sub-developer Gemini’s 134-unit residential building, Splendor. The main substation within Sobha Hartland has been completed and energised, a primary telecommunications room has been completed and commissioned, and two international schools have been finished.
Unless we achieve revenue [of $680.7m] for at least one or two years, we may not go public. That is the benchmark for me to think about taking the business public.
The megaproject is currently on schedule, with main infrastructure works – being carried out by Sobha Hartland Contracting’s infrastructure division – 83% complete. PNC Architects, another in-house firm, is the masterplan consultant, working alongside the Canada-headquartered infrastructure consultant, WSP.
Trafquest, Poyry, and Shanklin and Cox have each carried out a transportation impact study, substation consultancy, and landscaping advisory work, respectively. Infrastructure works for the entire project will be completed by the end of 2019, and the ongoing developments within Sobha Hartland’s masterplan are expected to be completed by 2024. However, there are other plots on which development has yet to commence.
With the project making good progress, Menon has had time to turn his attention the task of succession planning. “I will continue in my capacity as long as I am healthy,” he says.
“So long as my health permits, I will continue to lead the company. But I have made arrangements to make sure that there are people who will take over the management of the business when I am no longer capable of running it, or die.”
Jyotsna Hegde has been named president of Sobha Group, and Francis Alfred is the new managing director and chief executive officer. Ultimately, Menon says, his wife will take over from him as chairman of the group. His son is already the co-chairman of the company and manages the firm’s business in India.
“It is not that I am going to die tomorrow, but we have a lot of clarity about this situation and I have been planning it for at least three years,” Menon remarks.
Menon certainly has no plans at present to take a step back from the enterprise he has spent decades building. Indeed, he is ready to lead the charge on a number of different fronts: he wants to increase Sobha’s revenue by two-thirds, secure a larger share of the property market, and says his flagship skyscraper – still unnamed – will help the business generate more than a billion dirhams. But, perhaps more importantly, it will also safeguard the Palace Maker’s legacy in Dubai.