Real Estate Advisory Services
Investment flexibility, Compliance assured, Due Diligence improvements, Capital cost
efficiencies, Asset allocation and selection perfected
Transactions managed, Returns Optimized and Enhanced
Hema LuqmanBA Hons, MBA, CMIhttp://sa.linkedin.com/in/hemaluqman
Contents• A Picture Tells A Story
• Executive Summary
• Customer Outcome Secured• Owner’s Pain – New Entrant Dilemma• Why need an advisory service?
• Industry Structure• Real Estate Advisory Services Industry• Current Leaders
• Strategy• Critical Success Factors • Strategy, Objectives & Solutions
• Methodology and Process• Meeting Customer’s Outcomes• Process
• Customer & Income Targets• Income and returns• Customers, Partners and Asset Opportunities• Team size
• Services
• Hema Luqman
Co
ntr
acto
r, C
on
sult
antDesign, Build & Operate
Build
Design and Build
Requirements & Design
Inception, Feasibility & Engineering Strategy
Preconstruction
Construction
Facility Start and Management
Property Life Cycle
Ow
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Engi
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D
esi
gne
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Ow
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Faci
litie
s M
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Engi
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De
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Commission & OperateOpportunity & Obj.
Project Construction & Contract Management
Advisory – Investment – Transaction - Management
Opportunity
Executive Summary
• Growth industry, with global real estate transaction topping $1 trillion per annum.
• Niche market aligned with key strength for region =>> Shari’a Compliant.
• Increasing infrastructure and housing requirements in GCC (local knowledge and distribution strength).
• Enhanced attractiveness of grass roots development potential of region.
• Lack of focus and management led to failures (delivery, returns, opportunities lost…)
Market size and scale requirements are clear, with only 21 funds set up in the GCC with an asset value of US$3.2bn.
• Ambition• Build and define the Shari’a Compliant Property Advisory market• Establish a $2bn business over ten years across the property life-cycle.
• Strategic choice to • Start small (product and solutions only HNWI and Retail), • Scale fast with developers (logistics/housing) and government (infrastructure/pensions),• Collaborate to gain with key international names to provide access to international
market opportunities for Shari’a Compliant investment products.
• Income enhancement• Gross Returns on investment in Direct Developments for sale (35%-45% 18 months)• Gross Returns in lease/BOT for Government infrastructure 12-18%.
• Identify and Build it• Achieve Returns• Ensure Sustainability• Redevelopment opportunities• Exit
Owner’s Pain – New Entrant Dilemma
• Who is responsible? - Client’s representative.
• Who is managing the construction and contract process? - Deliver the client’s idea from requirements to commissioning and handover.
• What is my risk of scope failure, time delay and budget over run? – Mitigation and compliance.
• Why are requirements not met? - Manage the stakeholders and ensure the project is fit for purpose.
• How sustainable is this project? - Define the engineering strategy (construction method, material choice, procurement and sustainability)
Fit for Purpose?
Scope Delivery?
Budget Over-run?
Control?
Quality Performance?
Time?
Prioritization?
Why this project?
Why need an advisory service?
• The real estate and property market is witnessing:-
• Battle for assets led by sovereign and institutional funds with sales surpassing $trillion in 2013 (E&Y).
• Growth in specialized niche, secondary city and mixed use developments.
• Increasing capital intensity due to mega nature of infrastructure and housing needs brought about by massive urbanization
• Growing number of cross border joint ventures and collaborations leading to a 55% increase in global stock of investment property to $45.3 trillion by 2020 (PWC)
• Real Estate and property stakeholders are:-• Wrestling with government shift towards personalized retirement plans• Facing tightening regulations and insolvency requirements• Combating increased commercial risks and construction complexity
leading to more insolvency and delays.• Cross border legal and risk challenges.
• Stakeholders are seeking integrated solutions that will :-• Provide Safe, Secure and Transparent transactions• Add flexibility and lower transaction costs• Enable them to meet sustainability and regulatory requirements• Allow them to deliver developments that integrate life, work, and play. • Manage portfolio risks and enhance its returns
Real Estate Advisory Services Industry
• The industry permeates the very fabric of every state, city, town and village across the globe (politically, bureaucratically, socially and financially).
• Current industry landscape has several entry points and gate keepers that can be summed up as REIMs, Asset Managers, REITs, Global Banks and Big 4 Consultancy.
• These players provide a complex web of capabilities, expertise, solutions and services that extend through the life-cycle of a property/real estate life-cycle.
• Services scope revolves around structuring, transactions and compliance.
• Growth (global and local) in integrated or “one-stop-shop” service providers, or regional local knowledge.
Shari’a Compliant and Sukuk provide a major niche to be exploited
Current Leaders
Globally• Commercial real estate services and investment
management• CB Richard Ellis, Colliers International, Jones Lang
LaSalle, Newmark Grubb Knight Frank, Cushman & Wakefield, DTZ, Cassidy Turley
• Big 4• PWC – 350 UK based
• E&Y – 350 UK and NY based
• Asset and Fund Managers• Standard Life – 120 UK based
• Aviva – 220, 8 locations
• Regional• GCC Banks (fund products)
• National Commercial Bank• QNB• Bank Muscat
• UAE Banks (fund products)• ADCB – traditional investment banking products• Emirates NBD – UAE Real Estate fund
• Recruiting for Head of Advisory
• Large Family concerns (investment opportunities)• SEDCO• ……
• Investment Management• Abraaj Capital• Shuaa Capital• Markaz• Sidra Capital• Jadwa Investments
Critical Success Factors
1. Understanding the economic, financial and demographic shifts.
2. Establishing unique capability and industry leadership.
3. Access to a global platform with local knowledge and technology enabled.
4. Innovative culture that integrates experts, deal makers and product innovators.
5. Financial scale and efficient cost management structure.
Culture
Customer Experience Excellence
Agility & Change
Strategy, Objectives & Solutions
Built on Heritage
Inspired by the Brand
Defined by the Mission & Vision
• Customer’s trust
• Islamic Banking
• Simplicity
• Mutual Benefit
• Safe, Secure and Transparent
• As easy as possible
• High quality solutions and services
• Global expertise
• Shari’a Compliant
Mission: Integrated real estate and property advisory service and product line across the bank’s platform with one methodology
Vision: To be the leading provider of shari’a compliant real estate advisory services and solutions.
Strategythink Big, start Small and scale FAST
• Shari’a compliant services and solutions.• Initiate shari’a compliant funds to meet investor
diversity challenges• Add value at key investment process points
• Base on fundamental and technical analysis• Process multiple scenarios for stock selection and
asset allocation/management• Identify best fit returns/risk profile
• Embed risk evaluation to minimize volatility
• Collaborate to compete and innovate.• Establish a network of specialists.
• Build an ecosystem of service and solution providers share our vision for the benefit of our customer’s and stakeholders.
• Seamless and efficient mobilization of all our assets (people, services, risk management…)• Access Bank’s client base.
• Build track record through existing deal funnel.
• Seek superior risk-adjusted returns for our clients by targeting all formats• Direct asset holdings• Listed RE companies• Hybrid Portfolio / SPVs• Derivatives
• Create broadly diversified and actively managed portfolios (growth, income, risk and Liquidity). • Private Portfolio• Pool Portfolio• Private sales
• Manage investments across the real estate investment spectrum• Low risk core diversified products• Higher risk value added solutions• Opportunity sales / developments
• Benchmark against the best• Accuracy of forecast• Returns attained
Shari’a Compliant Real Estate Advisory – Investment – Transaction - Management
Planning and Structuring
CapitalProd InnovationTransaction
Public Sector &
Govt.
REITs, Dev Cos, Land Owners
HNWI
Pension Funds &
Insurance Cos
Retail, Personal
Retirement Plans
Opportunity Due Diligence
Entertainment – Hospitality – Logistics – Infrastructure – Medical & Health – Parking – Self Storage – Housing – Education – Commercial – Retail - Retirement
Opportunity
Customers
Know Your Customer – Understand Objectives and Needs – Assess and Align
Capability and Infrastructure
Direct asset holdings - Listed RE companies - Hybrid Portfolio / SPVs - Derivatives
Process
IdentifyDue
DiligencePlan
Structure and Analyze
TransactIntegrate &
Review
Strategic Decisions
acquisition, restructuring, disposals, M&A, redevelopment, joint development, resumption and regeneration strategy assessment
Creating Investment Value
Leverage assessment, IPOs, PE, capital restructuring, development scenarios, securitization
Shari’a Compliant
Leadership and Ownership - product and solution innovation and development
Research
Fundamental and technical analysis, research, analysis and opinion
Safe, transparent and secure investment
due diligence [buyer, vendor and asset], commercial reviews, risk assessment and M&A benefit analysisKnow your client
Understand the client’s priorities, investment objectives, income v value
Ecosystem services
tax, legal, construction cost management, facilities management, sustainability, dispute management
Cost of Capital
funding costs and investment return assessment,
Income and returns
• Four sources of income• Advisory fees
• Joint investment and shared returns
• Cross selling opportunities with ecosystem partners (assurance, compliance, tax etc…)
• Management of GCC Family real estate
• Due to nature of GCC – returns expected to beat the 12% target rate from a mixed fund covering development, management and advisory.• KSA witnessing 40-50% returns in property
development gains within 12-14 months
• Rental income has increased by 30% in last 2 years.
• BOT infrastructure returns showing returns 12-18%
Customers and Partners and Asset Opportunities
Target Customers?Provide real estate investment products (wealth, wholesale, corporate, retail) to:-
• Public and Government
• Real estate owners
• REITs, developers and homebuilders
• Financial Investors
• Retirement Funds
Ecosystem (Partners, Collaborators & Stakeholders)
• Auditors
• Real Estate Tax advisors
• Regulatory
• Assurance and Compliance
• Asset Managers
• Entertainment and Hospitality• Logistics• Infrastructure• Medical & Health• Parking• Housing• Education• Commercial• Retail• Retirement
Sector Opportunities
Team Size
• Year 1 & 2 - Staff size 12• Engineers / PM
• Transaction / Credit
• Financial modelling
• Analysts / Admin
• Research
• Year 3 & 4 – Staff +5• SPV managers
• Capital restructuring
• Research International
• Structuring• Tax
• Capital Allowances
• Property development and investment
• Transactions• Corporate Governance
• Transparency
• Debt advisory and Fund raising
• Accounting
• M&A, Disposals, Restructuring
• Compliance and Assurance• Regulatory demands (Basel III, AIFMD
• Sustainability
• Risk Management
• Audit
• Business recovery/Insolvency
• Transaction services include financial and tax due diligence in connection with acquisitions, private company sales and divestitures
• Mergers and acquisitions advisory services include private company sale and divestiture advisory services and acquisition advisory services
• Capital raising includes assistance in raising senior debt, subordinated debt and private equity
• Special situations include financial restructuring, interim management, capital raising, protection from creditors, and sale and purchase advisory services
• Valuations include business valuations for financial reporting and regulatory requirements, intangible assets and IP, litigation support and dispute resolution, transaction advisory and tax purposes
Track record and capabilities
Track Record – 324,000 sqm in 8 years
• Capabilities• Project and Structured Finance – HSBC London
• North Sea Oil
• London Property
• Property Development – MMLC • Jeddah Tower – 45% ROI 18 months
• Basateen Suburb Villas – 81 villa construction management on behalf of developer
• 183 apartment redevelopment for owner for rental - 22% ROI rental
• 26 villa compound – 21% ROI rental
• Shopping Mall – 35.7% ROI rental
• Skills & Experience• 24 years of business leadership, transformation
and commercial management
• 15 years covering the real estate development and construction sector
• BA Hons, MBA, CMI
References
• Real estate’s ‘battle for assets’• http://www.pwc.com/gx/en/asset-management/asset-management-insights/etre-global-outlook-
2014.jhtml
• Real Estate 2020: Building the future• http://www.pwc.com/gx/en/asset-management/publications/real-estate-2020-building-the-
future.jhtml
• Asset management’s game changers for growth• http://www.pwc.com/gx/en/asset-management/asset-management-insights/asset-managements-
game-changers-for-growth.jhtml
• Capitalizing on Recovery• EY
• Property Authorized Investment Funds• EY
• PWC One Stop Solution
• Goldman Sachs Real Estate Transactions