Ray Watt can barely believe his ears. At 89 years of age, with hundreds of creative real estate deals under his belt, one of the greatest residential developers in the U.S. listens attentively to the story of how Emaar Properties sold out what's billed as the world's tallest building, the Burj Dubai, in just two weekends.
Robert Booth, a 39-year-old top executive of Dubai-based Emaar, explains that only 600 carefully culled international prospects were invited to preview the Burj. At 170 stories upon completion, it will feature hundreds of condominiums, offices, and 37 floors of hotel rooms designed, down to the throw rugs, by Giorgio Armani. Each prospect was sent a distinctive boxed invitation.
On the appointed day, guests pulled up in limos at a multi-million-dollar sales center in Dubai. They were escorted over a bridge, complete with running water underneath, into a room that resembles a small museum exhibit. Halogen spots light wall murals that chronicle man's attempt to build to the skies—first the pyramids, then the Empire State Building, then, of course, the Burj Dubai (Tower of Dubai). They finished in a marble-and-glass preview center, with piped-in Euro music and a 20-foot-high replica of the Burj jutting through a cut-out ceiling.
The preview center paid for itself many times over, despite becoming quickly obsolete. By the time the two weekend events were over, Emaar had sold $1.2 billion in real estate, more than enough to build what was estimated to be a $900 million building (estimates are now $1 billion). Moreover, Emaar, as is customary in Dubai, received a 25 percent down payment from buyers, who agreed to make a series of payments during construction. Watt wants to know how escrow works in Dubai.
“There is no escrow,” Booth explains, noting that Emaar can use the deposits for construction. Watt can barely believe his ears. “That's right,” says the Canadian-born Booth, with a look of wonder, smoking an after-dinner cigar. “We built the tallest building in the world without construction financing.” Watt leans back to absorb the enormity of the deal. “I know,” says Booth. “It's incredible.”
WORLDS APARTWatt, a member of the board of directors of WL Homes, traveled to Dubai earlier this year for a meeting with Emaar Properties, which in June 2006 bought WL, the largest private U.S. home builder by revenue. Thirty-two percent of Emaar Properties, a public company listed on the Dubai Financial Market, is owned by the government of Dubai, the second largest of the eight states within the United Arab Emirates. Emaar boasts that it's the world's largest developer by market cap.
Emaar signs are everywhere in Dubai, the now legendary city/state of only 1,500-square-miles with roughly 1.4 million people (about the size of San Antonio). Huge plasma displays touting Emaar communities greet visitors at airport customs. Blue-and-yellow flags and billboards carry the company's name along the highway. Emaar's name hangs from cranes on its projects throughout town, where an incredible 350 buildings of 30 stories or more are under construction.
Emaar has big—Dubai-big—plans for WL, which does business as John Laing Homes. Officials initially said they wanted to quintuple the company's U.S. subsidiary in five years, though they have since relaxed that goal given the U.S. housing downturn. Emaar paid a ton of money for Laing, $1.1 billion—almost four times book value and the most ever paid for a private home building company. And it did so at a time when the U.S. housing market was in the early throes of its slide.
“Yes, we paid a lot for the company, but we received an awful lot of value,” says Mohamed Ali Alabbar, Emaar's chairman, sitting in the sleek contemporary conference room of his nine-year-old company's new headquarters building. U.S. home builders may not believe in good will, but Alabbar clearly does. “We are a young company, and we bought a company with great people and great operations. We have a lot to learn from John Laing Homes.”
Alabbar is often referred to as the Donald Trump of the Middle East, but the comparison doesn't quite fit. Yes, he's a very large real estate developer, with operations in 14 countries, and he's very publicity oriented. But Alabbar, unlike Trump, wasn't raised in a real estate family—his father was a fisherman. Also, Alabbar's quick success is unrivaled. He intimates that what he paid to buy John Laing is almost immaterial. “We made $1.7 billion, net, last year,” he says, “in U.S. dollars.”