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

More on Ras Al Hamra & Burhan Heights development

Just a quick post about the development at Burhan Heights, previously mis-reported as PDO Heights by Times of Oman (among others).

Here's a sat map from google of what is now a part of the heart of the capital area. The change in housing density going from Muscat to the area of the oil company is quite clear, and you can see why the Ministry of Tourism and others would be keen to send in the bulldozers and slap down a few 1000 condominiums and a few hotels.


Satellite view of Ras Al Hamra, Muscat.

'Omani in US' had commented previously on not knowing where Marjan beach was, so I highlighted it. The actual area being redeveloped by OHI is also shown. The yellow dotted line is the boundary of the oil company area used for the refinery and staff housing. In the 70s, when it was built, it really was totally undeveloped and in the middle of know-where. Now, thanks to the success of the oil company in finding and producing oil, which pretty much paid for the development of the whole country, its one PRIME piece of land. Note that Marjan beach, and in fact most of the PDO housing area, is still public access.

Due to the low housing density, few through roads and existence of sidewalks, its a common area for joggers and cyclists who don't want to get run over, and learner drivers. Its predominantly expat community means its also a popular spot for young Omani couples who want to make out in a place where they are unlikely to be stumbled upon by Uncle Abdullah.

It will one day be redeveloped. I hope they do a good job and don't cram too much in.

I'd like to be given a large plot on the hill next to PDO Club please. Must tell my boss at annual bonus time.... Muscati - you can be my neighbour!!

Don't Panic!!! Sky not falling on PDO Camp

I've been pestered lately by some of my acquaintances who work for the big oil and gas company Petroleum Development Oman, aka PDO, about the news article on OHI, saying how they are about to go ahead with a hotel/condo/retail redevelopment at 'PDO Heights'. You would have thought the sky was falling. Even the maids are fretting.

However, they should - temporarily perhaps - be reassured. The glorious Times of Oman got it wrong, by saying the redevelopment was PDO Heights (see below), home of various run down bungalows and semis that house many of the expats and senior Omanis who work for PDO, and possibly the best piece of real estate in Oman. OHI will actually be redeveloping the small hill known as Burhan Heights, just opposite the Shell Petrol Station, demolishing the old flats, doing some major 'flattening' of the hill, and building said massive development. (Interesting how the Muscat Municipality coincidentally decided to dual the road leading to it. How convenient for OHI!).

Before it was called Burhan Heights, it was called Shanfari villas I think, and was owned by the previous Oil Minister, who subsequently sold it to OHI.

The reason the article caused such panic, of course, is that it is common knowledge that the Ministry of Tourism and others have been salivating for years over the idea of getting their hands on the large chunk of prime real estate that is PDO Camp. It contains possibly the best private beach in Oman, lots of hills, great views, and is (now) in the heart of Muscat. Talk was of 3 hotels (at least), golf course, plus the usual mass of condo and villas. Think of the rivers of cash that baby would enable. Contracts left, right and centre, and perhaps some nice plots of land for those who have been extra good. The area has even been put into the official portfolio of properties the Government holds in their redevelopment department. Although some in the Government were expecting development to begin in 2010, that doesn't look too likely IMHO. The land isn't going anywhere, the Government have their hands rather full with other projects, and neither the oil company nor the Ministry of Oil and Gas are very keen. The camp is a huge part of the reason PDO can attract the skilled expats it needs for the money the offer, and at current oil prices there is still a huge problem getting the right people to come to Oman.

But, eventually, yep, it will happen. Just not right now, despite what crack reporter Mrudu Naik of the Times says.

For the original source of the panic at PDO, thank The Times of Oman

OHI, UAE realtor ETA Star announce luxury township
by Mrudu Naik
Saturday, September 06, 2008 8:30:50 PM Oman Time
MUSCAT — Dubai-based developer ETA Star Properties and Oman’s OHI Group have signed an agreement to launch a premium luxury township in the heart of Oman on the PDO heights.

The “yet to be named” multi-purpose project with residential apartments, offices and retail spaces, blending luxurious living with high levels of convenience will be launched by the end of the year.
...
The cost of the project is estimated to be RO400 million. The target customers for the project are AGCC nationals. “We would be targeting middle to upper middle class income group as our clients,” said Junaid.

On being asked what the USP of the property would be, Saleh said: “The biggest attraction would be that it is right in the heart of the city unlike other projects. We expect a substantial demand because of the beautiful location. The design of the project will have a lot of Omani touch.”

Stating that the commencement of the construction would start by the end of the year, Junaid said: “It will take 30 months for the project to complete after commencement.”
Informing that the various sized 1000 residential apartments would be housed in many buildings, Saleh clarified that number of floors had not been decided yet.

“Since there is a little bit of relaxation on the number of floors which was earlier restricted to three, we will be discussing with the municipality authorities before deciding on the number of floors,” he said.

Did you already buy your land in Duqm?

Nice piece yesterday in The National about how Oman is asking for a tender for an International Airport in Duqm, a place on the coast roughly halfway between Muscat and Salalah, and previously nowhere's ville.

The Government has big, big development plans for the area - a refinery, port, dry dock, coal fired power station, etc etc etc... So, those who bought lands there recently are looking good. Funnily enough, it seems many people in the Government had been buying land down there for quite a while. How lucky are they that it later happened to be a site for massive Government investment!

If you're into speculation and have the local contacts it may not be too late even now, especially if you're willing to wait a decade or so. [Big Hint: You might also think about buying some nice beach lands around Al Ashkharah, further up the coast, Get it now kids while you can...].

Duqm is also close to the recently moved and resized Oryx Reserve, and is close to the Huqf, a generally uninhabited area of considerable natural beauty.


With all this extra cash flowing in, the whole region seems to be like a giant version of Sim City.

Oman invites bids for Duqm airport
Ivan Gale
September 02. 2008 11:00PM UAE
Oman’s efforts to diversify its economy took another step forward yesterday when it invited bids to build an international airport at the coastal city of Duqm, 600km south of Muscat, which will support a host of tourism and industrial projects in the remote coastal area.

The airport, which will be the country’s third international hub after Muscat and Salalah, has an estimated project cost of $200 million (Dh734m).

“It’s difficult to say how much the airport would cost but the government has set aside a budget of around $100 to $200 million for this project,” a tender board official said yesterday.

An earlier construction phase of the airport project, covering the initial earthworks, was put out this summer and has already received 10 bids from construction firms from Oman, India, South Korea, Greece, Iran and Turkey. The lowest bid for this phase came in at $70 million from a local contractor, according to MEED Magazine.

The Government of Oman plans to inject vast sums of money into the Duqm region. The travel and tourism sector will be boosted by new hotels, resorts and public beaches along this coastal area. Last year, the Sultanate received 650,000 tourists throughout the country, including many on chartered tours from Europe, and it has outlined broad goals to increase that number dramatically over the coming years.

Under the development plans of Oman’s Supreme Committee for Town Planning, private developers are also set to build residential projects along Duqm’s coast.

The region will also one day be home to a large industrial and free trade zone in a bid to stimulate Oman’s trade and industrial sector. A total of 21,000 hectares has been allocated for industrial development at Duqm, including a refinery, petrochemical complex and fisheries facilities. The adjoining free trade zone is envisaged as taking up more than 1,000 hectares, according to local news reports.

At Ras Duqm, located seven kilometres from the town of Duqm, a new port will connect the region’s refineries and industrial plans.

Under the plans, the port complex will cover an area of 1.2 million square metres and handle bulk cargo ships of up to 100,000 tonnes. Repair facilities such as dry docks and floating repair docks are also planned to service the oil and gas tankers that regularly ply the Oman coast en route to the Strait of Hormuz and on to the Arabian Gulf.
...