The FINANCIAL -- King David, incorporating residential space and a business centre in two towers, will open to the public in December 2016. With USD 70 million the company is introducing a new class-A residential and business centre that meets international standards. Offering all services in one place was the main goal of King David. Just two months after starting sale of its property, the company has already sold over 25% of its residential space.
As the second highest building in Tbilisi, King David is a multifunctional complex consisting of two towers. The higher tower, named King David Residence, is a residential space. The shorter tower, King David Business Centre, incorporates class-A office space. The last three storeys of the Business Centre will be hotel rooms. These will mostly accommodate guests of the office space. It will not be a hotel operator. Over 40% of the project is made up by infrastructure. A spa centre; fitness centre; swimming pool; beauty centre; wine cellar; restaurant; and Garden on terrace will all be located within the complex. A recreation zone spread over 1,400 square metres will be located on the terrace. A space for children as well as a health-food cafe will be dotted with evergreen shrubbery. Residents will also be able to enjoy a children’s development centre. King David is a project where the time of its residents and workers is valued greatly. In this regard, the company created a project where people can get everything they need in one space - the ability to live, work, entertain themselves, and enjoy rest. King David is the first condominium-type complex in Tbilisi.
The investment portfolio of the complex is USD 70 million. It will open for use in December of the current year. As for the construction process, the company is currently completing repair works of the façade as well as inside the buildings. The complex is nearing completion.
King David is a rare example of a development company that started sale only after almost completing its project. Just two months since starting the sale of residential apartments, over 25% have already been purchased.
“Fortunately, during the peak of the devaluation our complex was not available to the public for sale. The beginning of our sale coincided with the relative stability of the exchange rate. In addition, despite the persisting difficult environment, interest towards our project started from November-December, when we had created just the very first stage of activity and created our Facebook page in order to respond to any questions. It is hard to say with certainty whether sales would have been successful if they had started at that time. Regardless, it seems that the devaluation did not have a huge impact on the high-end segment,” Nini Mariamidze, Head of the Marketing Department at King David, told The FINANCIAL.
In her exclusive interview with The FINANCIAL, Mariamidze discussed the outstanding advantages of the King David complex, which has allowed the company to maintain a high volume of sales despite the recent currency shock. With over ten years of experience in the real estate market, Mariamidze provided her outlook on the sector and its main challenges.
Q. The Georgian real estate market continues the practice of selling properties that are still under construction - so-called “air”. It was quite remarkable to find that King David decided to start selling only after the completion of building works. What was behind this decision?
A. King David is targeted at the high-end segment. In this case it is important to show your customers what they will be purchasing. Every nuance should be concretely shown in order to highlight its advantages. The second issue is that fortunately, the company had the option to not just sell air. We could afford to complete the construction processes and only after then offer property for sale. Having such an opportunity is always a big advantage for any company.
Q. What is the general attitude of Georgians towards purchasing “air” at the moment?
A. Since 2008 people have not only been averse to purchasing air, but most often have also avoided buying apartments that were not yet in operation. Fortunately, this trend has changed recently. People are again prepared to buy air. I cannot say how secure this is. However, from the example of our project, I can say that ever since the first two storeys were constructed, we started witnessing big interest in the project. It means that if we had offered it up for sale, people would have purchased. The lesson to be learnt by companies from 2008’s post-war crisis was that starting construction was sensible only in cases where it was possible to complete it. The risks that existed before 2008 have been taken into account by the development companies. Accordingly, the attitude of consumers towards this issue is now more relaxed.
Q. As you have mentioned, interest from potential customers was quite high during the construction process. What is the sales statistic for now?
A. Demand is higher for the King David Residence. Actually we have not yet offered space in the business centre for sale. We are currently completing the concept of the business centre. As soon as it was stated that the small tower would be a business centre, many international organizations, including companies that have been established on the Georgian market for quite a long time, expressed willingness to move to the business centre. Tbilisi is actually lacking class-A business centres. Many of them do not meet the demands of international and Georgian organizations. Accordingly, during the last month we have been witnessing big activity from this segment. However, we have not yet offered it up for sale.
In just the first two months of selling residential apartments, over 25% have already been purchased. Our sales are distributed over a four year period as it is for the very high-end segment. We do not expect to sell the whole complex by the time construction is completed. We are quite satisfied with the results of the first two months of sales.
Unfortunately, the construction business is expecting quite a difficult year ahead due to the upcoming elections. This market is always fairly sensitive towards elections. Interest as well as purchasing can almost interrupt that time. Accordingly, it is hard to foresee how the market will develop further. Meanwhile, I expect that the sector will still be active in December. The approximate projected share of our sales is 40% by the end of the year.
Q. What are the prices at King David?
A. Our prices vary from USD 1,700 to USD 3,500. Market research of the Georgian real estate market confirms that USD 1, 700 is not a high price. Each of these costs has its own segment. Available space starts from 54 square meters. It is one of the most popular sizes of residential space on the Tbilisi market. So, we are quite flexible in terms of prices as well as space.
Q. Please can you tell us what the specific advantages of King David are?
A. I will not go into great detail on the perfect view that can be enjoyed from our complex. Many foreigners, tourists and Georgian emigrants that have had a glance from the top floor of our complex claim that the view from King David is much better than that from even the Funicular as the whole silhouette of Tbilisi, including Mtatsminda, can be seen from here. The height of the King David Residence is 115 meters. The whole city can be seen from our complex. We are proud to state that no other complex has such a beautiful view of Tbilisi.
However, our infrastructure still remains one of our leading advantages. I, personally, regret to see that in Tbilisi separate projects are dominating over complexes. People purchase not only an apartment but an environment for living in. The concept of our complex incorporates the whole environment where people can live, enjoy and entertain themselves. Combining everything in one space is really important.
Construction security; quality of building materials; unbroken water and electricity supply - all these mean that our residents will never experience power cuts or water shortages as generators will automatically take over in such circumstances, not only in the elevators but in each apartment, which have been taken to the highest level. The whole complex is equipped with a building management system (BMS), which is a computer-based control system installed in buildings that controls and monitors the building’s mechanical and electrical equipment such as ventilation, lighting, power systems, fire systems, and security systems. The façade has been monitored in Germany, at the Schuko technical base, and can weather a 9 magnitude earthquake. So, we have lots of advantages, whether in terms of security, the environment or the view.
Q. King David is a 115 meter building resting on top of rock. How secure is it?
A. I have personally frequently heard that the building is not secure and could be risky. We can prove the security with proper documents. However, what I can prove verbally is that before starting construction geophysical and geological analysis was carried out. As a result it was stated that the rock is very solid, as hard as Metekhi, which has existed since the 13th century. The groundwork is made from reinforced concrete, almost two meters in height. So, we can confidently claim that the groundwork is one of the most solid that has been constructed in Georgia. Local and international organizations were carrying out studies at each stage of the construction. So, we can provide proper documentation to any interested person and confirm that the security really is at a very high level, in line with international standards.
Q. What is the main challenge facing the Georgian construction sector?
A. Regrettably, price still remains one of the main criteria when choosing an apartment. Consumers rarely go beyond the price. It really is a big challenge for our project. It seems that the Tbilisi market is not ready for such projects. There are individuals who appreciate the advantages we offer. These are mostly those from the segment which have lived abroad or have some international connections and therefore appreciate these advantages.
Q. Which segment of Georgian real estate is in deficit and which in surplus?
A. The low and middle segments are in real surplus. However, none of them are facing problems of realization. Flexible mortgage loans have made it affordable for people with stable incomes to purchase apartments. Even 25-30 square meter apartments are being offered for sale. Companies directly offer an apartment as an investment package. So, there is quite a surplus of residential space for the lower-end segment. However, such property still manages to find buyers. The problem with realization exists with the high-end segment of residential space. We can find some already-completed projects which are still up for sale.
There is quite a deficit of office space. The majority of business centres in Tbilisi do not meet international standards. At the very start of construction, the Business Centre was originally projected to also be a residential apartment block. However, the lack of office space encouraged us to change it.
Q. Do you see the importance of implementing quality control of construction materials and caring about the skyline of the city during construction?
A. I think it is necessary as currently it is up to individual companies’ goodwill. Most often companies are using the brand names of popular companies in order to attract customers and that is all. On their side, customers are not very aware of detailed information regarding quality in order to proclaim their demands of the companies. We have published such detailed information in our book. So, customers interested in detail can get all the information they want. Contrary to Georgians, foreign customers have many more questions regarding security. I am glad that our project provides responses to all of their questions. I cannot say whether all the companies manage to meet these standards. However, most frequently customers do not pay attention to it. I don’t appreciate that. That’s why it is important to regulate security measures by law. Otherwise it could actually lead to a very negative outcome where no one will be forced to take responsibility.
As for the view of the city, unfortunately we do not have a general plan of the development of the city. King David Residence is 31 storeys. The location was chosen properly. It does not impair the view of the city. The project is located between the old and new parts of the city. Moreover, when you look from King Tamar Bridge, our project blocks the unsightly view that had been created around the territory of the Sport Palace.