Profile of Balli Real Estate Limited for property weekly

Questions for Group Chairman Vahid Alaghband:

Q 1: You do have an extensive development portfolio. Are these primarily specific to the UK? If yes, how has the turn of events in the property market there `impacted` on your operations and plans?

A 1: Balli Real Estate Limited (BREL) is a leading multi-national real estate investment and development company operating in the UK, the Middle East and other lucrative markets and is involved in some of the most exciting and prestigious real estate projects in the world.

BREL forms part of Balli Holdings, one of the largest private, multi-national corporations in the UK, headquartered in London but with offices in Dubai and other key business hubs around the world.

Balli was established in 1982 and operates a number of affiliated companies specialising in commodity trading, real estate, industrial activities and aviation, with operations in over 20 countries.

Our real estate operations currently has a property portfolio of over $3billion, comprised of over 900,000 sqft of property under development with a Gross Development Value of some $800million, and an additional 2million sqft and a GDV of almost $2.5billion in the pipeline.

Crucially, we have the advantage of operating in a number of real estate markets in different countries and we are not simply just involved in direct development operations. Instead, we focus on four key activities: fund management, joint venture developments, direct developments and bulk purchase investment.

The property market in the UAE is extremely buoyant and we are currently expanding our operations and projects in this market. We currently have a portfolio of three major projects in Dubai and have just become involved in two further projects which will be unveiled and launched later in 2008.

The slowdown in the UK market actually works strongly to BREL`s advantage, as it enables us to acquire lucrative investments in land, buildings and developments at highly advantageous prices. In addition, UK companies which might have previously not thought of or required undertaking joint ventures or bulk purchases, have now been approaching us offering a range of lucrative deals. Our UK real estate operations have never been so busy and we are currently exploring a record number of investment opportunities.

Q 2. Some of UK`s leading developers seem to have been caught with a rather high unsold inventory. How would you intend to address this particular issue, if it pertains to you that is?

A 2. There are currently two key factors, both financial, that are currently affecting some UK developers. The first is the fact that the lack of liquidity, the so-called credit crunch, in the banking industry has meant that developers are not being provided with the finance that they need to buy land and develop sites. The second is the lack of mortgage availability. There are lots of people wanting to buy new homes in the UK, but many are not being given mortgages. It is this factor that is generating unsold stock.

Our extensive operations in the commodity trading, industrial and aviation businesses generate lucrative profits and have insulated us from the funding issues that have impacted on other real estate companies. It places BREL in a special and extremely advantageous position in the real estate market as we can operate as both a developer and a supplier of real estate funding.

This is why we have a record number of developers wanting to speak with us in order to undertake joint ventures or bulk purchases. However BREL is extremely select in who it works with and we only undertake deals after careful and rigorous market research.

In the UK, BREL is in an extremely strong position since we own a number of prime pre-let commercial real estate properties in Mayfair, many with freehold status. We are therefore not reliant on having to seek residential sales and are in an enviable position to be able to buy units and projects when the market bottoms out and to commence residential operations when the buoyancy returns to the UK market, probably in 2010.

In addition, on a key flagship site we are currently drawing up plans to transform a vacant possession building into Category A office/mixed use space in the heart of Mayfair. This project will not be launched until the market returns.

Q 3. You have just announced development plans for Dubai - was it a pre-condition that you would do so only through a joint venture?

A 3. We are actually involved in several different real estate activities in Dubai: fund management, joint venture developments, direct developments and bulk purchase investment.

Whether its in the UK or the UAE, we undertake direct developments of luxury residential, commercial and mixed-use projects under the BREL or Peacock Ventures Ltd brands.

The Peacock Ventures Ltd brand was established to manage the company`s joint ventures and real estate fund in the United Arab Emirates.

We have actually been undertaking joint venture, fund investment and bulk purchase projects in Dubai for a number of years and we have steadily built our presence in the market. We have found Dubai to be highly lucrative will continue to expand our operations in the UAE. We are open to undertaking sole direct development as and when the right opportunities arise.

Q 4. Is the alliance with the Sunland Group exclusive to the Dubai operations alone? At this stage, will you be looking to expand at a regional level? If yes, would this again be through joint ventures?

When it comes to joint ventures, we have a very clear strategy that we only work with partners who can deliver a strong brand, outstanding product and projects in prime locations, where there is a proven demand for real estate investment.

BREL is interested in an extremely wide range of projects in terms of size, location and complexity. What is essential is for the financial, construction, planning and value engineering aspects of each project to be meticulously researched and thought through.

We have been extremely pleased with our relationship with Sunland Group. We have found them to have a very clear vision, be extremely professional and highly successful. Their Palazzo Versace and Sunland brands are very strong and this is reflected in their sales success which we have shared and benefited from. We are now involved in five of their projects and our company`s ethos is to build longstanding relationships with all our joint venture partners.

Currently, we are involved in the D1 Tower, providing 529 apartments and penthouses, Palazzo Versace, providing 169 residences and Nur, providing 154 apartments and penthouses, with two other projects in the development pipeline. This is projects with a combined total of over 850 homes, a significant amount.

Sunland Group have a clear vision to continue expanding their operations in the UAE and as they do so we will liaise closely with them to see where we can work with them and capitalise on new real estate opportunities. However we remain open to opportunities provided to us by other developers, agents and landowners.

Q 5. You have started off with a super-premium residential offering.

Developers seem united in their belief that more of the very wealthy would consider a residential option in Dubai? Isn`t there just a touch of too much optimism on this score?

A 5. You are obviously referring to our involvement in the flagship D1 Tower and Palazzo Versace projects. The super-premium sector of the residential market has remained highly resilient, especially due to the buoyancy of the world’s commodity markets which has added to the wealth of high net worth businesspeople and investors around the world, but especially in the Middle East, Asia, Russia and South American.

Both D1 Tower and Palazzo Versace have been highly successful and the majority of the homes in both projects are now forward sold. We have found that buyers have originated from the Middle East, Russia and Asia: many work in the world`s commodity and financial markets.

The success of both D1 Tower and Palazzo Versace reflects the fact that they are highly exclusive and that there is nothing else like them in Dubai. The history and performance of the global luxury goods market has demonstrated time and time again that a high profile launch of a small supply of an extremely high quality well designed product always enjoys good sales. Quality always sells and is in demand.

Q 6. Any plans to venture into hospitality-specific projects?

A 6. Palazzo Versace Dubai incorporates a luxury hotel, restaurant and health spa so we have had exposure to the luxury hospitality market. If the right opportunity presents itself we will review it extremely seriously. We are currently in discussions with a number of world-class European restaurant brands about the opportunities of introducing their brands into the Middle East.

Q 7. Going back to your corporate operations, how do you see the bleak global situation impact on your real estate side of the business?

A 7. Because of our international activities and involvement in a number of different real estate investment and development activities we generate our income stream from a variety of sources and crucially a significant proportion of our real estate activities are in the buoyant UAE markets, so we are not currently affected by the overall property slowdown in the USA, UK and elsewhere. In addition, as discussed, the slowdown in some markets provides us with highly lucrative opportunities for joint ventures and bulk purchases which were previously not available when these markets were buoyant so our activities and interests are counter cyclical.

Q 8. When it comes to the steel trading line, do you see demand-and-supply changes happening because of the situation in the UK and the US? Are you looking to divert some of the supplies elsewhere to make up for the potential demand decline?

A 8. Balli trades in primary, industrial and consumer commodities including steel, non-ferrous metals, chemicals and agricultural products and our Group consolidated sales exceed $1billion. The steel, metal and agricultural markets are extremely buoyant at present and this has placed Balli in an extremely strong financial position moving forwards. The Group now has equity in excess of $50billion.

Around 35% of the steel products we trade originate from Asia, 15% is from the Middle East, 6% is from Europe, with the balance from other countries. Of our sales, 29% is from the Middle East, 52% from Europe, with the balance from Asia and other countries.

Demand will continue in the USA and Europe, despite the economic slowdown in these markets. However any slowdown is more than compensated for by the unprecedented boom in the metal industries in the UAE, wider Middle East, India and China which are going through one of their strongest demand periods since 1945.

Global steel production now exceeds 1billion tones and aluminum 24million tones. Our trading division is one of the leading providers in the metal sector and we are currently capitalizing on the strength of demand in the Middle East, Indian and Asian markets.

Q 9. How far are you on the road to expanding your Middle East exposure on the steel side? Are you considering possible exclusive arrangements to supply leading contractors/developers here?

A 9. Balli is a leading force in the Middle East steel market and we undertake trading with a wide range of businesses. This strategy has proved highly successful and will continue. In the Middle East, Balli does not simply supply services to end users such as contractors and developers. We also work with steel mills, to ensure that they have the right materials when they need them for processing. We also supply the oil and gas industry, which has highly specialized demands in the use of steel for line pipes, drilling and downstream processing.

We have the ability to provide steel to companies that specialize in both the manufacture of upstream products (exploration, production and transport to the refinery) as well as downstream products (refining and transport to the end user). We supply our customers with API grades of steel for various oil and gas projects.

Q 10. In the medium-term, what`s your prognosis on the pricing of steel?

A 10. The future of the steel industry will remain one of growth, with production forecast to reach 1.2billion by 2020 and prices will remain buoyant. The key changes we believe will happen in the industry is that there will be further consolidation.

BACKGROUND INFORMATION

Balli
Founded:		1982
Group Chairman:		Vahid Alaghband
Staff:		Over 2,000 worldwide
Offices:		Headquarters in London, regional offices around the world
Operations:		In 22 countries around the world
Interests:		Commodity trading, industrial, real estate, aviation
Property activities:		Property investment and development in the UK, Dubai and the wider United Arab Emirates (UAE).
Real estate
Partners:		Sunland Group plc, Taylor Wimpey, Forsters LLP, Bank of Scotland, Farbro Group, CB Richard Ellis

VAHID ALAGHBAND

Vahid Alaghband, founder and Chairman of Balli Group plc, was educated in Switzerland and the United States, where he received his BS and MS degrees in Industrial Engineering and Operations Research at Cornell University.

He is a member of the Clinton Global Initiative, a trustee of Asia House London, an International Council Member of Asia Society New York, and an Advisory Board Member of Cornell University and of Sharif University.

BREL - Property Portfolio

BRELs multi billion dollar property portfolio is highly diversified with investments in the residential, commercial and mixed-use markets both in the UK and the UAE. The unifying characteristic of all the properties within its portfolio is their quality in terms of location, product design, construction programme and deliver schedule.

4 Stanhope Gate, London W1
BREL purchased this property in 2007 and own the freehold. The company is currently drawing up plans to transform this vacant possession building into Category A office space in the heart of Mayfair.

5/6 Stanhope Gate, London W1
5/6 Stanhope Gate is the headquarters for BREL, situated in the heart of Mayfair, opposite Park Lane and Hyde Park. This property is an example of BRELs strong asset management capability, as it manages and maximises this piece of exclusive real estate. It is currently a working commercial building, let to various tenants including HSBC Premier.

Latitude, Birmingham
Latitude is a BREL and Taylor Wimpey plc joint venture in the West Midlands. This scheme comprises of 189 contemporary apartments in the heart of vibrant Birmingham. The ground and some of the first floor will house commercial units, whilst the apartments will occupy floors one to seven. Highlights include a coveted city centre location, a high internal specification and a contemporary architectural style that will have enduring appeal.

D1 Tower, Dubai
The D1 skyscraper is a landmark residential development delivered by Sunland Group/Emirates International Holdings. This £90 million tower is located in the heart of Dubai`s Culture Village, soaring 80-storeys high and standing 284 metres tall. D1 Tower provides 529 apartments and penthouses, together with a skyrise lounge, a private cinema, an indoor swimming pool, a gymnasium and a concierge. D1 Tower is the sister project to Q1 on Australia`s Gold Coast – the world`s tallest residential skyscraper.

Palazzo Versace, Dubai
Palazzo Versace Dubai, a joint venture between the House of Versace and Emirates Sunland Group, is a fashion branded lifestyle resort providing 169 luxury residences and 213 hotel suites, leisure facilities and a marina, designed by the House of Versace and forming an international icon of quality and elegance. The resort offers a Vanitas fine dining room, a day spa, ballroom and convention facilities, and a Versace boutique. Palazzo Versace is already one of Dubai’s most high profile and sought-after addresses.

Nur, Dubai
Nur is a joint venture between Peacock Ventures and Sunland Group. Nur is a 27 storey fully furnished boutique residential tower providing 191 one and two bedroom apartments, with two luxurious, five-bedroom duplex penthouses. Nur’s leisure facilities include an outdoor 20 metre long private swimming pool, landscaped outdoor terrace, gymnasium, and residents lounge.

Waterfront, Dubai
Peacock Ventures is undertaking two joint venture projects with Sunland Group at Dubai Waterfront, comprising a striking highly contemporary property overlooking gardens and the waterfront to be launched in October 2008, and the other, a beachfront property, to be launched later in the year. The Waterfront precinct is a major master planned community developed by Nakheel and will be recognised as the new Dubai.

« Back