Property rental company with plenty of Middle Eastern promise

UNDER THE RADAR: Michael Burke, Arabian Escapes talks to PETER CLUSKEY

IT’S A measure of the global property downturn that not even oil-fuelled Dubai has managed to remain immune. But for Galway-born Michael Burke, the collapse of the emirate’s decade-long construction boom has come as little surprise.

“The economy has deteriorated significantly here since the middle of last year,” says Burke (28), co-owner of Arabian Escapes, a company that specialises in property rentals and management in Dubai and Abu Dhabi.

“The reality of what was happening in most of the rest of the world took time to feed through because oil prices stayed so high for a while. People believed they were insulated here and there were still quite a few cash investors.

“But since then, the market for off-plan, under-construction properties has slowed drastically. What we’re seeing now are opportunistic buyers looking for prime properties at significantly reduced prices – and they’re finding them.”

It was staying ahead of that curve that convinced Burke that the future of real estate in the United Arab Emirates (UAE) lay not in endlessly selling new properties – but in renting and managing high-end properties whose owners had invested wisely.

“I was looking for a sustainable business, and so I took the view early in 2008 that, whereas developers might continue to build property for however many more years, owners would need to rent, lease and manage that property for another 100 years.

“That was the direction Arabian Escapes took: more long-term and – unusually for this part of the world, I suppose – more conservative.”

It was a well-judged and well-timed decision.

“The properties that are still selling here in Dubai today are high-end finished properties in good locations, properties which will give their owners an immediate rental yield of 9 to 11 per cent,” says Burke.

Despite his relative youth, Burke is no novice when it comes to the UAE.

He has been travelling to the region for the past 15 years, initially as a result of links established by his father, Michael Burke snr, vet and former Entrepreneur of the Year finalist – who founded and runs the Chanelle pharmaceutical group, which employs more than 200 people in Loughrea, Co Galway.

So clearly, business is in Burke jnr’s his blood.

Having run the supply chain division of Chanelle for five years, he set out to find a business of his own, and took an 85 per cent stake in Arabian Escapes, which was set up by co-owner Sara Ingham in 2005.

They have since established a sister company, Executive Expatriate Relocations.

Growth at Arabian Estates has been steady. Turnover grew from €400,000 in 2006 to €650,000 in 2007 to €1.2 million last year, and the number of full-time staff has risen from four to 13.

Despite an uncertain global economic climate, Burke anticipates turnover of about €2 million this year, with a profit of 15 per cent to 18 per cent.

“During 2009, a large proportion of our turnover will be generated by short-term holiday and corporate rentals, so our core business won’t be affected.

“We have almost 100 properties under short-term rental management. And we’re also letting out 17 to 21 properties per month now on a long-term basis, whereas previously we were averaging from five to eight.”

Even so, Burke acknowledges that this will be a “challenging” year.

“Budgeting and forecasting, in terms of cashflow and accounts, will be crucial for every company, no matter what sector it’s in,” he says.

“We’re going to have a very topsy-turvy five or six months while people wait to see which way things go for the markets. And during that time, we’ll continue to see opportunistic investors picking up distressed assets.

“The difference will be that these will now be lower-risk, longer-term investments, which is what people should have been looking for in the first place.”

Burke concludes: “To quote Warren Buffett: ‘Be fearful when everyone else is greedy – and greedy when everyone else is fearful’.”

On The Record

Name: Michael Burke

Company: Arabian Escapes www.arabianescapes.com

Job: Managing director and co-owner

Age: 28

Background: Graduated in 2000 with an honours BSc in economics and finance from Smurfit Business School, UCD. He joined the family business, the Chanelle Group, where he spent five years running the supply chain division. Having lived part-time in Dubai from 2003, he moved there in 2006. Early in 2008, he bought an 85 per cent stake in Arabian Escapes, which he now runs with co-owner, Sara Ingham. They anticipate a turnover of about €2 million this year.

Inspired by: His father, Michael Burke snr, who founded and runs the Chanelle Group. "I've also been inspired, though, by many of our clients – they're self-made people who've worked hard and made massive sacrifices in the early stages of their businesses to be able to enjoy life later on."

Challenges: Navigating through 2009. "Budgeting and forecasting accurately will be crucial, especially through the next topsy-turvy five or six months."