Tactical Buyout in DIFC Achieves 35%+ IRR

The Project:

Driven Properties and a family office in Switzerland jointly formed Astoria Shuttle Ltd, an SPV to spot and deploy capital for strategic Dubai real estate investments. After significant analysis, the Driven-led team found a promising project in which to invest. Burj Daman, in the Dubai International Financial Center (DIFC) area, offered the group a chance to invest in high-upside property at-or-below replacement cost. In early 2023, Astoria Shuttle Ltd purchased 58 units from ADX-listed Eshraq investments for AED 158 million or AED 1,567 per sqft.

The Solution:

Driven’s economic modelling prior to the purchase suggested a fair market value for the units to be AED 2,200 per square foot. This projection was supported by the pending addition of anchor tenant Waldorf Astoria, a prominent luxury 5-star hotel, and expected nearby DIFC openings of luxury hotels and branded residences. Dan Mamane, CEO of Astoria Shuttle Ltd said, “Driven really knew the market and was aware of the new players entering that could have a positive impact on our investment.”

Further supporting the team’s pricing projections was the sheer size of the SPV’s investment. This was a strategic move on two fronts that made it the largest single landlord in Burj Daman. The first was that it provided negotiating leverage with the building’s owners’ committee. To extract more value from the investment and to make the property even more desirable to prospective buyers, the SPV proposed that the owners’ committee upgrade the building’s lobbies, lifts, and corridors. The committee agreed and work commenced.

The second was that the size of the investment provided the SPV a means to “reset” the market on Burj Daman unit pricing. To this end, Driven monitored daily price fluctuations of comparable units via the latest real estate tech, stayed firm on its pricing during negotiations, and then increased prices opportunistically when it felt the market would support doing so.

As sales of units commenced, the group indeed saw market pricing increase in line with its predictions.“ Following Driven's economic analysis, the SPV was convinced it could assert upward pressure on Burj Daman pricing by making strategic upgrades to the building’s interior, and staying firm on prices. There’s no crystal ball in real estate investment, but Driven nailed this,” Mamane said.

The Results:

The SPV’s tactical buyout proved successful, selling out all 58 units for an average AED 2,380 per square foot, exceeding the team’s projection of AED 2,200 per square foot. The investment’s internal rate of return (IRR) exceeded 35%, pleasing the principals and investors and adding another successful project to the Driven Properties portfolio.