Tuesday, June 10, 2008
A Lure to Dubai: Celebrity Endorsers
DUBAI, United Arab Emirates -- Property developers in this Persian Gulf sheikdom, famous for its grandiose projects, are increasingly turning to American and European celebrities to help sell the properties to wealthy consumers.
Getty Images Tiger Woods, in Dubai in December 2006, to unveil his first signature golf course.The latest luminary to lend his name to a development here is Hollywood star Brad Pitt, who will design a five-star hotel and resort for Zabeel Properties, a relatively new company in the lodging industry. The 800-room hotel will feature "environmentally friendly architecture," Mr. Pitt said in a prepared statement. The actor will work with Graft LLC, an architecture firm based in Los Angeles.
Mr. Pitt joins Wimbledon champion Boris Becker, fashion designer Giorgio Armani and golfers Greg Norman and Tiger Woods, among others, who have staked their reputations on helping Dubai property agents lure wealthy foreigners.
Mr. Armani's development, which includes condos and a hotel being built by Emaar Properties, will compete with Palazzo Versace, a hotel that will feature furniture and fittings selected by rival designer Donatella Versace.
"Real-estate branding involving global celebrities is here on a scale that doesn't happen in markets anywhere else," Blair Hagkull, managing director of Jones Lang LaSalle's Middle East unit, told Zawya Dow Jones. "Developers are going to huge extents to attract investors" as competition rises, he says.
Glitzy marketing that uses celebrities to sell homes and fill hotel rooms and office space is no guarantee that the developments will be successful -- and in some cases can even hint of problems ahead. A few years ago in Las Vegas, several splashy condominium projects associated with celebrities -- including Hall of Fame baseball slugger Reggie Jackson and actor George Clooney -- were canceled when it became clear that the market was overbuilt. These days, Las Vegas is one of the worst housing markets in the U.S.
Dubai's market has recently been rocked by a series of scandals involving some of the emirate's biggest real-estate players. Zack Shahin, the former chief executive of Deyaar Development, Dubai's third-largest traded home developer, is being held by police on allegations of financial wrongdoing. An embarrassing dispute between investors and Damac Properties, the Middle East's largest private property developer, made international headlines after it threatened to cancel one of its projects.
That said, there are few signs that investors are shying away from the region's real-estate market. According to Dubai-based research firm Proleads, about $2.4 trillion in real-estate projects are currently under construction in the oil-rich Gulf Cooperation Council region, which includes Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman. Dubai alone, the second-largest emirate in the U.A.E., after Abu Dhabi, expects $50 billion in real-estate investment by 2010.
Sales, so far, remain brisk. Villas attached to a golf course designed and endorsed by Mr. Norman sold out within a week, according to the project's developer. Prices ranged from $4 million to $8 million.
The obsession with celebrity in Dubai's real-estate industry is such that even B-list stars are in demand. The face of Niki Lauda, made famous by a near-fatal racing-car accident in 1976 on the Nurburgring in Germany, will be emblazoned across one of three office towers in Dubai planned by ACI Real Estate.
According to ACI's blurb, the Niki Lauda Twin Towers will cover 16,000 square feet of space and stand alongside similar offices named after Boris Becker and retired racing driver Michael Schumacher in Dubai's latest swanky property project called Business Bay.
"Celebrity endorsements make sense where they clearly add value to a project and there's a direct correlation between the celebrity and the development," said LaSalle's Mr. Hagkull.
Write to Stefania Bianchi at stefania.bianchi@dowjones.com
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