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

ne

r

Engi

ne

er,

D

esi

gne

r

Ow

ne

r &

Faci

litie

s M

anag

er

Engi

ne

er,

De

sign

er

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

Customer Outcome Secured

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

Industry Structure

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

Strategy

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

Methodology and Process

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,

Customer & Income Targets

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

Services

• 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

Hema Luqmanhttp://sa.linkedin.com/in/hemaluqman

@hml1924

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

Additional

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