- • Real Estate Brokers
Silver Heights is a real estate company formed by Samir Munish in the year 2005 and successful in every area they invest
Samir Munshi said that rather than finding third-party buyers for such projects in a difficult market situation, we decided to take them on ourselves in conjunction with a select group of investors who were thinking along the same lines.
Dubai It was circumstance rather than anything else that prompted Silver Heights Real Estate to take a different approach for its next phase of evolution.
The Dubai-based firm had until now concentrated on real estate brokerage services and transactional activity as the twin prongs of its business.
It has now added a third — that of taking on stalled projects and then nursing them past the completion line. For Samir Munshi, managing director, it was the best possible — even the sole — solution.
"With the market situation being what it is, there was just no other alternative for survival," said Munshi. "That's when the first approaches were made to us by certain developers who wanted to exit their projects for a variety of reasons, chief among them being they no longer had the cash to build.
"It was a unique area of potential we were faced with. Rather than finding third-party buyers for such projects in a difficult market situation, we decided to take them on ourselves in conjunction with a select group of investors who were thinking along the same lines.
"While taking control of the development, we are in no hurry to sell it off either — buyers seem to have lost faith in the developer community. Our intention is to sell closer to the project's finish."
A start was made by acquiring two projects (townhouses in ground plus four-storey format) in Jumeirah Village earlier this year. As an experiment, it seems to have worked well with construction having started and Silver Heights even managed to find a buyer from overseas.
Now, the firm is moving on to larger — or should it be taller? — things. It has identified a few residential high-rise projects in Jumeirah Lakes Towers and Dubai Marina for possible acquisitions. Negotiations are on with a couple of the current projects owners.
"The cost of construction has stabilised, while land values in both JLT and Dubai Marina are now at Dh120 to Dh160 a square foot," said Munshi. "But the selling price of the property is radically different, and would be around Dh700 in JLT and Dh800 in Dubai Marina post the downturn.
"That still leaves room for healthy margins and our estimate is for an internal rate of return [IRR] of 30 per cent a year."
As a preference, Silver Heights would consider those projects announced a good year or two before the market crash. Munshi's contention is that the original prices on these are closer to what's prevailing now.
And having made a start with a project in Jumeirah Village, Munshi is open to possibilities for additional ones in that cluster. As with many observers in the marketplace, he retains a sense of optimism that Nakheel's relaunch of construction activity in October would attract renewed interest in the master-developer's existing portfolio, which includes Jumeirah Village. Land in Jumeirah Village is presently around Dh80 a square foot, according to Munshi.
The preference is for residential developments, and especially for those which can be completed within a 12 to 18 month timeframe. According to Munshi, the upfront investments to acquire a projects need not be that high — "It could be anywhere between Dh5 to Dh40 million, and at those levels it's still possible to get the returns we seek."
To ease the fund flow, Silver Heights is tapping prospective developer-partners and high networth investors from India. Moreover, some Indian banks, it is claimed, are willing to offer bridge loans to these investors against collateral in India. These funds could then be deployed into select projects in Dubai managed by Silver Heights.
Once a project elicits its interest, the company does an exhaustive due diligence and an audit on how buyer funds were used by the present owner. The legal status of the project as well as any claims against it are also looked into.
"If the current owner is open to our offer, a deal can be arranged which would involve cash or ownership of a certain built-up area in the project for him," said Munshi. "Or it could be a combination of both."