‘White and all right’ published in OPP’s May 2010 issue

Brett Gregory-Peake

In the words of Gordon Gekko, ‘greed is good’. So, were his character associated with property instead of banking, what solutions would he be implementing in the face of such challenging times? Surely, he’d evolve, think on his feet and adopt a more efficient way of satisfying his appetite for avarice.

Strangely, unlike so many other industry sectors, property is seemingly ill at ease with the idea of change. As if evolution is guarantee of revolution, the elephant in the room is denial; fuelled by fear and summoned by doubt. However, if the system isn’t working, other solutions must be explored.

Particularly where international developments are concerned, no one wants to rock the boat. Today, preservation is being prioritised over success. Meanwhile, developers are becoming increasingly sceptical of their agents ability to deliver and secure sales, in many cases leading them to review how their sales solutions are managed and by whom. Why is it taking so long to address this issue?

Buyers today are driven by new demands from projects and those behind them. The simple application of the classic agent brand by developers to create confidence is to some extent redundant. Developers need to start investing in their own brand legacy and pursue the upmost clarity of practise. Managing doubt must become the priority.

Buyers don’t care about agents or any middlemen for that matter. The buyers care only about the person responsible for delivering the end product and yet too often, developers sit behind the scenes out of sight, when they should be upfront, connecting with buyers, championing their project and creating confidence. If you can’t be seen, how can you be trusted?

It’s time for developers to play a visible role in promoting their projects, whilst empowering others to achieve the fastest rate of sale. It’s a contentious issue for agent brands, but ‘White Label’ is a practical answer to an increasingly ominous issue for all concerned.

White Label is nothing new to global industry, where businesses sell their own product or service to clients who brand it as their own. Once again though, property has been slow on the uptake. Embedding a sales team under your own brand should only make operational sense to developers, who stand to benefit from better visibility, control and team loyalty. In addition, there are significant benefits attached for agents.

Harry Lewis, former director at Savills International and now managing director of development consultancy Lansdowne RE understands this more than most. “Too often agents aren’t incentivised enough or positioned properly by developers to achieve sales. Operating as part of an in-house team enables agents to assume greater influence over strategy and marketing spend, achieve a better understanding of the project and secure greater financial reward.”

Despite reducing their own brand exposure, established sales agencies should acknowledge the value in their experience, connections and management capability, and the merit in developers having this resource in-house. Added control over marketing expenditure also enables them to operate more efficiently. Marco Bonini, MD at Prestigious Properties pointed out that, “Developers often expect sales to simply materialise from thin air. Without a proper promotional strategy and sales collateral, agents shouldn’t be expected to simply turn on the taps. It’s like sending troops to war with no ammunition.”

Notwithstanding the importance of their input and visibility, developers need to manage their time more efficiently and focus on their project’s timely progression and finish quality, leaving others to drive sales and marketing. Crucially, adopting a white label role provides agencies with a clear mandate to win both retainer and commission fees, in turn shaping both the project concept and the sales & marketing strategy.

Developer, Anwar Harland-Khan from MHK International is an advocate of ‘White Label’, which he has adopted for his mixed-use project in Morocco. “We do work with the big agent brands, but I believe that generating sales depends on local knowledge, careful management and complete clarity. We’ve incentivised an agency team to fulfil our sales objectives under our brand, because our profit is directly linked with their rate of sale. As our exclusive, white label team, they are better able to advise us and meet expectations.”

Reliance was heavily placed on agencies in the past to reach customers loyal to their name and service, however, today’s popular property brands can often wheel more power to attract buyers. The likes of Trump, Four Seasons, Kelly Hoppen, Mandarin Oriental and YOO can all add value, but the benefits associated with these endorsements must be well managed by sales and marketing to achieve the best use and return on investment. There should be no question of one replacing the other.

“Where the resort model is concerned, international real estate is a highly competitive market for agents, given the modern application by developers of property brands linked to hospitality and design. For the buyer, in many cases these brands deliver greater confidence, exposure and market reach than international sales agents. White label compliments this tendency to brand overdose projects and empowers agents to act as the developer” says Harry. “Overseas buyers want to feel like they are going direct to someone who knows and understands both the project and the market”.

The white label concept carries significant benefits for both sides, so what remains to be seen is whether developers and agents agree to compromise. Importantly, their response must fit inline with what’s relevant to the buyer. END

The Perfect Marriage published in OPP magazine’s October 2009 issue

Brett Gregory-Peake

Someone once said, ‘what is in a name’. To coin the same phrase, what is in a brand? Often, we are measured in life by what we achieve and the people we become. Likewise, brand longevity and success lies in, awareness, reputation and the perception of quality.

Much like the mainstream consumer goods sector, property is becoming increasingly obsessed by brands to the extent that there are few industries that haven’t been touched by the phenomenon. In today’s competitive market, however, reputation and status often drive demand in the absence of quality.

Is property simply caught up in a very predictable cycle that will be brought back down to earth by the downturn and have some property players used brands to create instant credibility in an effort to make up for a lack of experience. During a boom period, it seems that there is no end to our ability to be suckered by ‘brand’; if were making money we’re happy to spend in pursuit of a lifestyle ideal. We’ve all spent too much on sunglasses or on a burger in a fashionable restaurant. Take away financial confidence though and ‘value for money’ is top of the agenda.

In recent years many developers have created affiliations with brands associated with fashion, sport, tourism, food and even automotive sectors; it seems that no industry is immune to the trend. Importantly, have we lost sight of why we’re attaching these brands in a quest for one-upmanship and is it time to get back to basics and consider ‘why brand’ before ‘which brand’, as even some of the most conspicuous branded developments are failing to sell?

Most of these partnerships are created to deliver difference and provide a more efficient marketing platform, but developers need to consider the suitability of a branded offering to their concept, the market, their budget and the buyer, before ‘rushing in’. In some cases, the potential price uplift associated with brand investment might put off some buyers if they believe they are paying extra for the partnership without benefiting from added value.

Commenting, James Price at Knight Frank says, “Hotel & design brands can certainly add value and often attach a premium to sales prices. The potential downsides of such alliances occur when the market perceives that prices have been set at a premium in the absence of tangible added value. Provided these elements are scrutinised and balanced accordingly, such alliances can be incredibly effective.”

There is no doubt that brands can create a significant advantage, but relevance and quality need to be top of the agenda. Developers should be performing more in-depth market research in addition to a fiscal feasibility to establish the need for a brand partnership and its ability to create an advantage for both the buyer and the sales process.

“The success of these brand associations depends on buyer profile”, says John Hunter, Managing Director at Northacre PLC. “The mature market in many cases are simply driven by the need for quality. More often than not they have done the brand thing and would probably rather remove it”, he added.

At their zenith, brands will provide numerous advantages, but developers should consider what they expect the partnership to achieve. Rachelle Munsie, Marketing Director at YOO, who specialise in branded design for real estate added, “Branded real estate has only really emerged in the past 10 – 15 years, surprising really given that just about everything else has a label on it. Crucially, brands have the ability to attach expectations of reliability, risk reduction and security; conditions that we could all use a little more of in the current climate.

Aside from the more renowned design brands though, what of the growing affection for brands associated with celebrity and fashion? David Beckham and Armani respectively might create significant column inches and worldwide reach, but should they be implemented to support projects with a service component without a hospitality brand to guarantee the necessary balance between delivery and difference? Trust has never been such a sought after commodity, so understanding what package your audience expects is key. “As always, brands with a strong track record will be most attractive to buyers, especially if there is an established track record. However, buyers will largely be driven by location, amenities, service, ease of purchase and cost. Alliances must result in a natural fit, as forced partnerships will only end in tears,” added James Price.

In the case of mixed use, developers must consider the project’s long-term obligations to owners and how their partnership will sustain after sales success. In addition, if the partnership involves a premium brand, can associated service charges put off buyers and affect the sales team’s ability to complete? Assoufid, a luxury development situated in Marrakech is sensitive to concerns about mounting charges and has created an independent management company that provides owners with a cost efficient service facility where mandatory communal charges are concerned. Optional services are catered for by their management company and The Rocco Forte Collection. Paul-Eric Jarry, CEO at Assoufid commented. “If service performance is poor or too expensive, both Rocco Forte and our management company risk being replaced by an outside service provider. However, low cost solutions are often artificial and can impact negatively on asset value, so we have tried to provide a realistic cost solution for our villa owners.”

Commenting on brand’s ability to sustain long term value, Paul-Eric says. Where service is involved, under no circumstances should a buyer expect any asset value protection from a brand made famous through another context. It may facilitate exposure, but it often hides the absence of true or long term value.”

Marrakech is a particular example of where brands have been used to create consumer confidence about an emerging market where historically, service quality has often been at odds with the city’s enchanting hospitality offer. Developer EHC Maroc met with this challenge through a joint venture agreement with the Four Seasons. As one of the first mixed use residential projects to emerge in the city, the developer has benefited from their operator’s reputation for service excellence and the international reach of the Four Season’s brand. Commenting on the project, James at Knight Frank said. “Their success was based on meticulous planning to ensure the right marriage of location, target audience, design and operator brand. Timing of course was also a key factor and that they were the first to market.”

Obviously, for some buyers the corporate brand works against the idea of being at home. “There is definitely a demand for better service and for the level of service provided by a hotel. In most cases where residential is concerned the service component needs to achieve a lived in feel and its clear that this is more often achieved by the boutique operator. With the bigger operator brands there is always a danger that home feels like a hotel,” added John Hunter.

Marrakech is now a highly competitive environment, where the branded hotel solution has been seen as the most efficient way to create demand and meet with the government’s ambitious tourism agenda; which offers advantageous planning consent to residential projects that include a hotel. However, with so many international brands to choose from, has the city over indulged high end residential and are brands alone enough to guarantee stand out, sales and a return on investment? Potentially, this is where brands should be complemented by a compelling concept to deliver difference.

Developers must commit to breaking the mould, identify what gaps exist in their market and establish what people want. “Where saturated markets are concerned and in addition to the provision of a defined product, brands can enable developers and hoteliers to target potential customers more carefully, by creating living environments designed with their desires, needs and expectations in mind,” says Rachelle at YOO. “Our project in the Cotswold, The Lakes by yoo has benefited from its association with design partners Jade Jagger and Kelly Hoppen, but, it is not dependent on brands alone. Our brands are complemented by an original, tangible concept.”

More often than not, brands will affect the bottom line, so it is essential to establish how and where the strategic partnership adds value. In many cases, developers are recruiting brands to fill the holes in their own experience, often relinquishing an element of control, entering into protracted negotiations and creating another mouth to feed. Recently, hotel groups in particular have been pursuing management agreements instead of ownership in an effort to reduce the financial impact and create new revenue streams, whilst expanding their brand portfolio and its visibility.

Given the lack of risk exposure, some brands are often happy to engage at the earliest stage even in the presence of cynicism or doubt over the project’s ability to succeed. Likewise, brands can also be left highly exposed and must therefore perform their own due diligence to avoid damage to their image and reputation.

Subject to the right reasoning, brand partnerships can clearly provide significant advantages for developers. Transparency is key though and brand shouldn’t be engaged to create a diversion. Like any marriage, the partnership is best served when the subjects complement each other and different value assets to create a balanced and compelling package.

A project will always benefit more when all parties are involved from the very beginning, as this will facilitate a more harmonious route to market. Initially, marketing is always going to be the biggest beneficiary of the branded solution, so it is important that inefficient marketing tactics so often seen in property don’t betray the brand investment. Strategy is key to delivering an approach that complements the project, fits with the target audience and achieves sales objectives. Crucially, brands must share the responsibility for the success of marketing and not just ‘hand over the baton’. The sustainability of the ‘marriage’ depends on it. END

Strong Foundations published in OPP magazine’s June 2009 issue

Brett Gregory-Peake

Opportunity awaits well-financed projects despite the downturn but property buyers are looking for substance.

The economic crisis has halted progress on a number of international real estate projects as they struggle to find survival solutions. In New York City, almost $5bn worth of property projects have been delayed or cancelled and the $400m Trump International Hotel & Tower in New Orleans is on hold until the real estate markets recover from the recession. Major property projects in Costa Rica put on hold as credit crunch bites.

In Romania, real estate projects worth €10bn vanished in three months as ten real estate companies announced the postponement or cancellation of 120 projects. Meanwhile, a $2bn dollar luxury beachfront development close to the Bahrain Formula One racetrack is the latest high profile project in the Middle East to be cancelled.

Many highly leveraged developments whose success has been tied to achieving off plan sales are failing to secure sufficient buyers to maintain their debt position. Consequently, many new projects are on hold as developers look to reduce their exposure to risk by waiting for better market conditions.

Dubai, which benefited hugely from the opportunistic ‘bear market’ is now one of its victims, and the future of many ambitious projects now hangs in the balance, as more than 60% of developments in the Gulf Co-operational Council region (GCC) have been either postponed or abandoned. Countries in the Middle East have collectively loss $2.5tn in the past 4 months and a recent survey by MEED revealed that 87% of construction companies in the GCC have had one or more contracts cancelled or postponed in the last 3 months alone.

The good news
However, current market conditions, whilst challenging, do offer advantages for those who aren’t so debt reliant. Much like the mortgage market, where cash rich buyers can benefit from the low interest rates on offer, there are numerous advantages for cash rich projects.

There is no need to rush into the market, so developers should be focusing on preparation. Buyers are still out there, but they are looking for credible investments that are low risk. Developers that can afford to finance construction with no obligation to delivering pre-sales will find a less competitive market, where the right approach and high quality materials will help them to stand out. Buyers are looking for projects with substance, not smoke and mirrors.

What is the right approach?

Marketing is now the key ingredient to all residential projects. Before realising plans and starting construction, developers must invest in ‘buyer profiling’ and ‘audience segmentation’ studies to achieve sales objectives. Having an idea, project finance and a renowned brand attachment isn’t enough to guarantee success in today’s fragile market economy.

The ‘build and they will come’ philosophy is redundant, and marketing due diligence should now be seen as a mandatory step towards a projects evolution. In-depth research that considers the competitive set, planning constraints, target audience and the demands of the location should be seen as a crucial undertaking before a relevant concept is considered. This will also deliver confidence to financial partners, provide architects and other consultants with added focus and help in identifying suitable brand partners.

When evolving the marketing and campaign strategy, importantly, what experiences are involved in the buying process? Buyers want to see activity and indulge their senses, so the construction of a ‘show property’ is essential to winning early sales. Browsing some drawings whilst standing on a dusty plot isn’t going to win hearts and minds.

If developers don’t invest properly in marketing, they won’t create difference and they won’t add value.

Projects with substance and evidence of impact on sales

We are currently working on behalf of Mauritius based developer Ramphul Ltd, for whom we have produced an in-depth study to identify the most relevant route to market and deliver difference. Mauritius is a relatively new yet competitive second home buyer market, so stand out values are essential to the delivery of a successful, targeted sales and marketing strategy. In contrast to the majority of projects in Mauritius, our campaign will focus on the island’s little known natural qualities and give greater emphasis towards local culture, relying less on the messages that buyers expect or might take for granted.

Further ratifying the effect of due-diligence, Caribbean specialists, Prestigious Properties have cited their dedication to ‘market analysis’ as the reason behind early sales success on their Sugar Beach project. Surveying return travellers to St Lucia and the databases of their brand partners, they were able to establish the stimulus required to attract buyers, which has enabled them to deliver a relevant residential offering. In particular, they discovered that potential buyers weren’t interested in having substantial kitchens, given their preference for hotel services and island facilities, allowing the developer greater flexibility and focus for bedrooms and living spaces. They have started construction with 10% off plan sales and expect to sell their full inventory for opening in 2011.

Knight Frank have reported that Porto Montenegro, the ambitious marina village being developed by Peter Munk is targeting affluent yacht owners following extensive research undertaken in advance of the project definition. Construction is currently underway with a clear plan to build out Phase 1 in advance of sales. Key properties are currently being offered privately to the market with numerous early reservation successes.
More than anything else, it is the investment in time that’s important, as the process itself creates added value. END