Friday, November 6, 2009

Trouble in Paradise. Bar Al Jissa resort villa purhasers unhappy with Oman's premier development.

Imagine you're in business. You have customers who are well educated, rich, mainly foreign, and who have just spent sums in the order of US$1.4 million each with you. Customers who should be providing you a steady source of solid follow-on money as you provide the services they will require to look after what they have already bought.

If you're in any business, no-one should like it when such customers are dissatisfied, complaining, sometimes looking to offload your product, and contemplating legal action.

But this is certainly what's happening in Oman's premier ITD Development to date: Barr Al Jissah Residence, run by the mega-giant Zubair family oligopoly. Several customers have joined forces and retained local legal council, forming PAG, an 'owners action group', to try and get the various property managers to deliver what they promised.

The response from those responsible for the development, e.g.:
Zubair Enterprises (the ultimate owner/promoter),
PRD International (sales),
Imagine Design Consultants (design),
Larson and Touboro (construction),
Turners (project managers),
Strata Global (property management)
Juthoor (strategic construction and real estate consultant & Furnishing)


are demonstrably unsuccessful as I write (and here I define success as satisfying customers whilst making money for the company and owners).

Aside: I'm not sure how much Sh. Zubair himself actually knows about this project and what is happening below deck, but if you're reading this and you know his email, why not send him the link. Personally, I think a lot of the problem is that the honorable Sh. Zubair is simply being kept in the dark.

The long running issue at the development, between purchasers and developers, is exposing the underlying problems Oman faces when stepping up to do business in a truly international market. It's a different ballgame, meeting the grade when not protected by soft Government contracts and regulations, your internal intra-company-family dealings, or being able to strong-arm local and powerless SME companies.

I've been told some of the works performed were unnecessary from an strictly engineering POV (like some of the vast walls built for the purposes of 'retaining' solid rock), but that these things were still done to maintain all the 'side commissions', backhanders, and various quantities of profits and contractual mark-ups being taken. Classic snouts in the trough. I'm reliably informed of a senior, experienced North American expat talent, brought in specially for the project, was summarily sent home this year after just a few months service when he kept raising such issues. They had disagreements over the provisions of his employment contract for payments due following such termination too.

I've also been told by clearly delusional sources that its all a symptom, a side-effect not normally discussed in public, of 'The Indian Mafia', whoever they are, with everything being done primarily on a mutual back scratching basis for the benefit of the middle and senior management layer, rather than for the benefit of the business or its customers. Who would have imagined? Patently Ridiculous.

The on-going management fees are rather high too, at more than double the Wave development(more snouts in the trough?). The quote people have been given to furnish a villa to make it suitable for rental is a rather shocking 40,000 rials! That's US$100k to furnish a rental apartment!

The many, many photos I've been sent of a recent inspection by a purchaser show the type of poor completion standard achieved to date (and still late). Its shocking. Especially when you remember this is for a semi-detached 'villa' that cost over $1.4 million dollars. Pools unfenced from huge cliffs. Cracked walls badly covered over. Cheap plastic doors. Minimal landscaping. Botched cupboard installations, missing skylights, mismatched and cheap tiling, ... IE, general Gulf spec built to exacting 'Indian labourer standard'.


Quote: "Landscaping to include established plantings befitting a multi-million dollar 5 star resort - not "dead twigs" and "1 dying palm tree"


You probably are living in a classic example of such standards as you read this, if you live in the GCC. Shoddy electrics and plumbing built by people with little experience of either, roofs that leak when it rains, bodges and poor quality workmanship everywhere. But then you or your landlord didn't just buy the property for huge money at promised international prestige specification and luxury finish, hmmm?


Photo: The original marketing pitch for BAJR

Ouch.

Times are hard, and these days people willing to pay for far flung 5 star developments with expensive running costs are hard to find. There are plenty of places in the world where one can spend a cool $million ++ and get a GREAT place to live and/or vacation. There is a lot of competition. As a result, developments with problems building things to standard, furniture rip offs, unprofessional management and non-communication, situated in a country in the scary Middle East where it is too f**kin hot to sit outside 4 months of the year are clearly in need of upping their game.

Not that such problems are stopping the typical PR crap being pumped out to the media by BAJR management. See Zawya press release.

26 October 2009
MUSCAT -- The prestigious Barr Al Jissah luxury residential development project is nearly complete and soon 71 luxury townhouses and villas will be handed over to their new owners. This marks the successful launch of Oman's first integrated tourism complex (ITC) project. This was revealed here yesterday at press conference addressed by Ziyad al Zubair, Director, The Zubair CorporationThe Zubair Corporation, Jose Lora, CEO, Juthoor Real Estate, and Arbind K Shrestha, General Manager, Shangri-La Hotel, Resort.

Speaking to the Oman Observer, Ziyad al Zubair said foreigners own about 50 per cent of the 71 houses while the remaining 50 per cent belong to citizens and residents of Oman. Arbind K Shrestha said the project has been completed in spite of difficult economic climate. The Barr Al Jissah Residence, comprising 71 luxury town houses and villas in a unique luxury real estate development, is one of the first ITC developments in Oman that offered real estate for sale to expatriates as well as Omani nationals. The development has three areas the Dusk Townhouse, Dawn Townhouse and Pearl Villa areas within the Shangri-La Hotel Resort and Spa offering breathtaking views of the Omani horizon.
...



And don't forget those breath taking views of electrical substations and air conditioning plants...

Or the fact that so far not a single villa has been handed over, despite being more than a year late. The reason the development has gone as far as it has is that the buildings all sold out well before the peak of the real estate bubble. Everyone got in way too deep to pull out by the time the crash happened - owners, Zubair, Shangri La.

For your entertainment, here's the latest email I was sent from the Owners group PAG to the developers. Talk about problems with customer satisfaction...

I suspect there's more to come on this story!


---------- Forwarded message ----------
From: DH
Date: Thu, Oct 29, 2009 at 2:16 PM
Subject: Fwd: Solution to Complete BAJ
To: "HAL" , "WD"
Cc: RO , RB


Gents,
Below are my thoughts, as a purchaser, PAG rep and Developer in how to potentially address things going forward.

As discussed with H last night at length, I am happy to focus on the solutions and put the past nonsense behind us but this requires real engagement, solutions and action on longstanding, critical issues.

My thoughts:
1. The Developer needs to appoint a decision maker(s) who can address issues, make decisions, instruct owners & consultants in order to get things moving. Could be up to a $$$ limit before referral to a Director or Board. Each decision seems to take forever, by which time things escalate and compound making the decision redundant. The decision maker(s) need to understand the issues, be a good communicator, not have vested interests, and able to act fair and reasonably for both the developer and the owners. This could be task shared with clear delineation and coordination between the 2 decision makers.

a. Construction/Building Completion – XX is a prime candidate to coordinate the re-inspections with owners, instruct Juthoor/Turner/L&T/Atkins/etc on what needs to be done. He is also the best person to navigate the Ministries for approvals and coordinate the “Settlement Checklist” being an Omani, Property Experience and knowing the project history.

b. Documentation, Services Agreements, Titles, Management Agreements – XX - has shown to be fair & reasonable, knowledgeable and diligent. With authority from BAJRC he could quite quickly and professionally collate, check, change & instruct other consultants to do what is required to get this project finished.

2. Focus on the issues and not on the people raising the issues. Attack the problems not the people. Buyers who have invested such large amounts of money in these homes are naturally going to be concerned for the outcome. Each person will act differently – some will coast along and accept anything in good faith, while others due to personal, professional, experience and cultural reasons – expect 5 star service along with 5 star prices. Each customer is different and will need to be handled individually, however, the level of service/finish/completion/etc will need to be consistent across the project to avoid further conflict down the road. This is part of having Customers and is the burden of the Developer to get right – that’s why they make a profit – or not. It is a very universal concept and one to get right when dealing with an international clientele such as BAJ Owners.


3. Address the MAJOR issue and communicate directly – answers the questions, provide the solutions. Avoiding issues will not solve them, it just makes them worse. Selectively answering the “easy questions” doesn’t work either. With focused attention, decisions, clear instruction, agreed timeframes and effective communication – most of the major concerns at BAJ could be resolved quite quickly.

a. Defects & rectification – If lists have been submitted – address the list. Agree what is or is not going to be rectified and advise owners. Then go fix it. Then arrange for a re-inspection where expectations can be met or exceeded- not disappointed due to mismatched expectations. Agree alternatives, solutions, concessions with buyers as required. Document and communicate so both parties are on the same page.

b. Settlement – address the checklist, what needs to be done, by who, how long will it take. When do you think it will all be complete. Will rentals be able to commence -if not, how can this be resolved? Advise the owners so they can get themselves and their money organized. Do a practice run with the lawyers/banks/ministries/developers/agents/whoever to make sure it is all possible. Avoid the disappointment of further screwing people about.

c. Service Charges- this is unacceptable in the current form. It is not going to go away. Strata Global either need to re-price ASAP or be replaced. There are alternatives if required. The Owners will not be railroaded into excessive fees as it impacts the value of their properties – this is a fact. It needs to be recognized and resolved as no-one in the PAG will be paying these fees at settlement to avoid SG disappearing with the money upon termination. O/A formation also affects insurances.

d. Documentation – This needs to be wrapped up - Title plans, Easements/Right-of-way, Services Scope of works from Body Corp manager (S.G or replacement), Rules & regs, Hotel Access Fee issue, Hotel Management Agreement, Hotel revenue forecasts, Marina berths, etc

e. Furniture package- This proposal is unacceptably overpriced. This is a view shared by all interested members of the PAG and therefore makes the Shangri-la Management unattractive. The Furniture package will be a flop in its current form and this issue needs to be addressed. It is not going away either. Like the service charge fees, the only people who are arguing for the furniture package are not buying it! This hasn’t worked, will not work and Juthoor/Shangri-la need to revise the offer to meet the customers’ expectations. The alternative is for both the furniture and the Hotel scheme both to be a flop.

f. Visas, Import – Thankfully this appears to be gaining tractions and support from Juthoor and the Developer in doing what is necessary to assist the owners.

g. Agency for Re-Sales – Absolutely nothing has been done on this by Juthoor/Developer/external agents since the arrival of Juthoor 6 months ago. There are owners who want to sell. There are commissions to be made. Why isn’t something being done to allow agents onsite, a display villa even, a photo shoot, some marketing onsite. Again - help your customers - make money from it even. Do something or invite other agents to sell/lease if Juthoor is not interested/able.

h. Communicate –What happened to the newsletter? 1 issue then gone. What about a bi-weekly email update-"we are doing this, that, and a photo" . All general info to reassure owners that it is all still happening. Most are not in Muscat as you know and lack of information breeds concern and discontent.

I am happy to assist with issues and advice if required to get this wrapped up. I am also happy to endorse initiatives outwards to the PAG members and advise them that they need to engage with the Developer to resolve their individual purchases.
Many are probably sitting on the sidelines and observing the carnage that has occurred quite publicly and want to stay out of harms way. If we have some good news and quick wins that can be broadcast from the PAG it will help to turn the mood and assist the re-engagement with customers.
D.H
+971 XX XXXXXX

9 comments:

  1. Oman is trying to position itself as a 5star travel destination (though not only Barr al Jissah, but also Blue City, The Wave, Saraya Bandar Jissah, Castle Yenkit, Jebel Sifah, As Sodah Island (Hallayniat Islands , City Walk, Muscat, , Salalah Beach –alongside very established European Destinations (Italy etc) , cheap East Asian destinations (Thailand etc) , up and coming Central and South American destinations (Brazil etc) , similar but less expensive Arab destinations (Morocco etc) and the monster on the doorstep – Dubai.
    A rush is on to compete against other countries strengths - and at a remarkable premium (Two villas at Barr Al Jissah Residences sold out for RO5.4m (says the Times of Oman) even before auction http://www.newsbriefsoman.info/item/2007/05/may-27th---june-2nd-2007 ) .
    The chosen agent - Al Juthoor’s own web site http://www.juthoor-gcc.com/ is ‘ under construction’ check back soon ! and presumably has been like that since they registered it in January 2009 till today .(though in their down loadable PDF they claim 70years of experience – a very well established company by Oman’s standards)
    The instigators of these projects must be expecting extraordinary demand and (if the quality of construction and service is as reported) , extraordinarily un-sophisticated and naive purchasers

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  2. I don't know about anybody else, and all the serious legal/business issues aside - what frightens me most is the idea of what kind of atrocities of furniture one might end up with with 40,000 RO of the stuff bought on the local/regional market. And the curtains - somehow I can't get that appalling Sedar/Marco Polo commercial out of my mind...

    Driving away from the hotels last month, all I could think was, "who is spending all that money so that my headlines can be shining directly into their living room windows?" - the houses, besides being crammed in and pretty unattractive, seem to have designed purposely for the worst possible sightlines...

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  3. Since I will never buy a house in that price range, what bothers me the most is the image of "Brand Oman" in the world market. We can't keep our airspace safe, we can't build a high-end housing development of acceptable quality, and we kill ourselves on the highways at alarming rates, so we will continue our image being the 'poor cousins' in the Gulf.

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  4. Dear Dragon,

    Many thanks for raising this issue in the public arena. Most owners just want what was contractually agreed in the SPA many years ago, from a top tier Omani Company, in a 5 Star international resort - TO BE DELIVERED.

    The levels of "customer service" experienced from the assortment of "management" have ranged from non-existent to abusive and the attitude that the owners are "the ones with the problem" prevails to this day.

    I urge anyone who is an unhappy owner/investor or knows of one in this Development to contact us at:
    pag.baj@gmail.com

    Together we are respectfully requesting that the Developer addresses our legitimate concerns.


    Thanks again
    Purchaser Action Group (PAG)
    Barr Al Jissah Residences (BAJR)
    Investors in Muscat, Oman

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  5. I am constantly perplexed as to why these developments and other so-called high-end establishments in Oman are so shabby. Why are the Al Fair supermarkets in Sarooj and MQ, situated to cater to diplomats and other rich expats, so decrepit, dirty, and poorly stocked? Don't get me started on the mishmash of crumbling plaster, broken, filthy pavements, etc. that is our elite Qurum shopping district. And God forbid that I even think about using most public toilets in town or - shudder! - on the road! Is this just a usual stage in economic development, or are so many Omanis (except Abdullah) truly oblivious or resigned to the shabbiness? Will a collective sense of civic pride ever develop, or a collective sense of shame at the apparent deliberate exploitation of wealthy investors in these horrible, embarrassing, expensive developments? Maybe the average Omani already has enough on his or her plate with job and family obligations to shed any tears for naive, rich foreigners (may as well be from the moon!) who should have sussed out these slick developers before they signed contracts and sent them so much money. Those foreigners and the big-wasta'd conmen who fleeced them inhabit another world, out of reach of the average powerless Ahmed or Aisha, so what's the use of caring? Abdullah's right - brand Oman is looking pretty bad now - but can it improve? (And troubled Yemen is still the poorest cousin.)

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  6. Jexxi

    First of all....when it comes to bigged-up high-level property developments for living and rental purposes......there is no smart investment money in Oman.

    Smart investors do not funnel cash into off-plan pie-in-the-sky greed filler projects like The Wave, BAJR or Blue City.

    My heart goes out to the PAG for the above, but you have to accept that you simply did not do your homework on this one, or worse still, you simply chose to ignore the advice that a lot of you were given by seasoned investors who knew a far better than you.

    Property investment for a quick profit is always going to be a mug's game in the long haul.
    Sure, some made a "killing" on the Wave but that's always going to happen on the first freehold property development in a new town like Muscat - however, to think that it can be done repetitively, is simply naive and financially dumb.

    When it comes to big ideas and no ability to get the job done right then, sad to say, Oman is right at the top of the list.
    I'm going to get a lot of flak for the above but it's the truth.
    The build quality in the Wave is better than any I have seen in Oman but still falls way below the mark for anywhere else in the world.
    And while I fully understand the desire to be great, this is not going to happen until the corruption, back-handers and most importantly, the "short-changing" from the top, all the way to the bottom is irradicated or subsidised in some way.

    Lesson learned. Sell. Cut your losses and buy in Europe - waiting patiently for your investment to grow.
    If it's a retirement or holiday home you are after then I feel sorry for you....you either have to feel sad for years, or roll over and realise that you will have to furnish and landscape your property to your own liking and pay out the difference.

    If it walks like a duck and quacks like a duck.....

    JD

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  7. From Wikipedia- 'Duck Typing'

    "In essence, the problem is that, "if it walks like a duck and quacks like a duck", it could be a dragon doing a duck impersonation. ..."

    No joke, this was in the Wikipedia article. Google the phrase 'If it walks.....duck'.

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  8. Al Juthoor have been appointed the manager of a shopping development "Al Mazaar souk " at the Shangri-la http://www.ameinfo.com/219471.html

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  9. This comment has been removed by a blog administrator.

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