Marina Promenade Information on 2012 Community Service Fee Budget

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1 Marina Promenade Information on 2012 Community Service Fee Budget This document is intended for the homeowners of Marina Promenade only. If you are not a homeowner in Marina Promenade, kindly delete this file and do not duplicate the content of this file in any form or method; doing so may lead to legal proceedings and criminal investigations. You are requested to contact the sender of this on communities@emaar.ae to advise of your receipt of this and removal of your address from the distribution list.

2 Contents 1.0 Executive Summary 2.0 Review of 2011 Community Service Fee expenditures 3.0 Summary 2012 Community Service Fee Main Components 4.0 Detailed information on the 2012 CSF Budget items 5.0 Community Financial Health and Service Fee Rates 6.0 Formation and Registration of Owners Association Appendix 1. RERA Approval Letter 2012 CSF Budget and Allocation

3 1.0 Executive Summary The purpose of this document is to provide the owners of Marina Promenade information on the Budget for the 2012 Community Service Fees (CSF) and other general information on ongoing plans to ensure the financial health, longevity and high quality of the community. In 2011 the actual expenditures 1 on the Community were approximately AED 24.7 million and 2% higher than budget In 2011, the overall expenditures were some 2% over the budget and amounted to AED 24,723,477 or AED per square foot of each residential unit. The primary contributing factor was the DEWA charges which were at AED 11,074,441 almost 9% or close to AED 1 million higher than expected. This is due to a DEWA tariff increase which occurred during the year. Only as a result of securing savings on the Facility Services budget line items were we able to contain the total expenditure to only 2.2% over budget. The CSF budget for 2012 is practically the same as the actual expenditures over 2011 The RERA approved 2012 CSF Budget is approximately AED 24.5 million or some AED 2 million less than the actual expenditures over The approved CSF charge per square foot is for With a major contract rebidding exercise in 2012, it is hoped that new contracts can be closed at lower pricing thereby reducing in particular the Facilities Services cost (part of Operating Expenses below) in the coming years. Measures are also being discussed with the Interim Board to lower the energy consumption in the community. The initiatives under discussion range from awareness campaigns to the installation of chilled water metering system that measures the usage of chilled water and equitability distributes the charges within the community and the procurement & installation of high efficiency internal LED lights. In particular the implementation of chilled water meters and the direct billing on actual air conditioning consumption to owners/residents including retail would lead to a substantial net reduction in community annual expenditure. More information about all these initiatives will be released during the latter half of Item Budget Component Budget 2012 Rate Actual 2011 Rate Budget 2011 (AED) (AED) Rate (AED) 1 Operating Expenses Administrative Expenses Capital Reserve Fund Allocation Master Community Levy Community Service Fee Budget Prior year Surplus/(Deficit) Adjustment - N/A 0.75 Invoiced Service Fee N/A For further explanation of the line items, please refer the section titled Summary of 2012 Community Service Fee Main Components. Non-payment of Service Fees remains a challenge and may require additional measures Timely payment of Community Service Fees is an obligation of every homeowner, and absolutely necessary to ensure that the Community has adequate funds to carry out the required services and pay the utility bills. Without the necessary funds, residents face risks of service disruptions, financial stress and possible borrowing (if at all possible) leading to increased costs and overheads. This may result in overall increases of the CSF and hence additional charges to owners. Moving ahead in 2012, there are several steps being reviewed and discussed with RERA to support collection without further delay. Next to penalty fees, owners who do not pay their CSF on time may be subject to a number of measures amongst which denial of services, which may include (but are not limited to), denial of access to common facilities/amenities (swimming pools, gymnasium), restrictions on property sales and leases, legal action as applicable under local statutes and other measures that may be available from time to time, as may be advised. Status of collections as per end July 2012: Years Overall Collections (%) 92% 98% 99% 1 The financial audit for 2011 is being conducted and the report will be made available to all interested owners.

4 Registration of the Owners Association Since at the beginning of 2011 an Interim Board was elected at the first Marina Promenade General Assembly (GA) of Community Owners, Emaar Community Management (ECM) has been in dialogue and exchanged information on the Community operations with the Interim Board to allow the registration of the Owners Association (OA) with RERA. Only after the registration of the OA and election/re-election of Board Members at a GA of Owners will the Board has formal powers to run the Community and manage its finances. The registration process is now in its final stages with all required documents undergoing final work before submission to RERA in Q3/Q4 of Further updates will be provided in the course of the year. 2.0 Review of 2011 CSF Budget and Actual Expenditures Expenditures in 2011 were approximately AED higher than the 2011 CSF budget In 2011, the overall actual expenditures (in RED below) were approximately 2% over the budget and amounted to AED 24,723,477. The excess spending was funded from prior years surplus and late payment fees. As a result no surplus from 2011 is available to transfer into CSF Budget Items 2011 Budget amount (AED) Rate per sq.ft Actual (AED) as per 31 December Rate per sq.ft Operating Budget 20,221, ,671, Facilities Services 10,049, ,564, Contingency / Community Improvement , DEWA (Water and Electricity) 10,172, ,074, Administrative Budget 1,785, ,817, Statutory Fees & Permits 24, Common Area Insurance 267, , Audit Fee 19, , Consultancy Fee , Communication Charges (Courier, Printing, SMS etc.) 6, , Community Events & Programs 19, Legal Fees 28, Management Fees 1,260, ,260, Bank Charges 159, , Master Community Levy 1,229, ,229, Capital Reserve Fund 1,004, ,004, Total Expenses 24,240, ,723, Allocation of 2011 CSF Funds In 2011, following a request from the Real Estate Regulatory Agency (RERA) the allocation method of the CSF Budget was initially changed from that practiced in 2008, 2009 and 2010, to include balcony/terrace areas in the chargeable area for each unit, however a number of units in the community have large outdoor areas, with some almost the same size or larger than the internal unit area. For such units the allocation of the CSF Budget was therefore considerably higher and in some cases doubles that of prior years. Considering that almost half of the CSF budget is spent on internal cooling of common areas AND of all Units (electricity charges for the Community s chillers), Owners supported by the Interim Board appealed for reverting to the original allocation of the CSF Budget as in 2008, 2009 and This matter was escalated to RERA, following which the CSF Budget was reapportioned based on the internal saleable area of the units, as done in previous years, with corresponding debits and credits being provided to all units/owners accounts. Also in 2012 the allocation of the CSF budget is based on the internal surface area of each unit as approved by RERA. See Appendix 1. 2 The financial audit for 2011 is being conducted and the report will be made available to all interested owners.

5 3.0 Summary of 2012 Community Service Fee Main Components After a thorough review of the 2011 expenditures and projected works for 2012, the CSF budget for Marina Promenade has been determined and approved by RERA at some AED 24.5 million or AED per sq.ft. of internal surface area of the residences. The CSF budget is made up of the following 4 Main Components: 1. Operating Expenses (approximately AED million or AED per sq.ft.) This is the largest component of the CSF budget and covers day to day operations which include amongst others cleaning, security, mechanical, electrical, plumbing, landscaping, waste collection, pest control, health and safety, assets and equipment, high level facade cleaning, elevators etc. The total of this part of the Operating Budget amounts to AED 9.3 million or AED 8.71 per sq.ft. The Operating Budget also includes utilities such as electricity, water and utility costs for generation of chilled water required for the cooling of your residence and your community s common areas. The total of this part of the Operating Budget amounts to AED 11.2 million or AED per sq.ft. 2. Administrative Expenses (approximately AED 3.9 million or AED 1.82 per sq.ft.) This fund covers the general administration costs and facility management fees that allow the delivery of community services to the required standards. The Administrative Fund also includes components such as insurances, statutory fees that may be required for any government related transactions, communication and postage charges etc. 3. Capital Reserve Fund allocation (AED 0.93 million or AED 0.87 per sq.ft.) The Capital Reserve fund has been established in line with prevailing property laws to fund extraordinary maintenance works that may occur from time to time in replacing or restoring major assets of the Community such as elevators, swimming pool components, air conditioning chillers, etc. 4. Master Community Levy (AED 1.05 million or AED 0.99 per sq.ft.) The MCL is budgeted annually for the upkeep and maintenance of the overall Dubai Marina Master Community, of which Marina Promenade is a part. All entities (units) making up the Dubai Marina Master Community contribute towards the Master Community Levy; similar to a unit owner contributing towards the overall upkeep and maintenance of their individual community. The 2012 has MCL has seen overall reductions by 14.19% compared to 2011 and has been approved by RERA. 4.0 Detailed information on 2012 CSF Budget Items Total Internal Sellable Area of Residential Units = 1,068,773 sq.ft. Total Number of Residential Units = 846 Budget Items Budget Rate per sq.ft. Percentage of (AED) (AED) Total Budget 1. Operating Budget 20,580, % Facilities Services (*for breakdown see table below) 9,308, % Community Improvement 48, % DEWA (Water and Electricity) 11,224, % 2. Administrative Budget 1,947, % Statutory Fees & Permits 24, % Common Area Insurance 337, % Audit Fee 19, % Communication Charges 19, % Community Events & Programs 20, % Legal Fees 96, % Management Fees 1,126, % Bank Charges (Quick Pay) 220, % Financial Software Fees 84, % 3. Master Community Levy 1,054, % 4. Capital Reserve Fund Allocation 930, % TOTAL 24,514, %

6 Breakdown of Facilities Services Budget: Budget Item Budget (AED) Rate per sq. ft (In AED) Percentage of Total Facilities Services Budget Total for General Services (including below items) 5,472, % Mechanical Electrical, Plumbing and Civil Maintenance 1,538, % Housekeeping / Cleaning 2,333, % Security 1,599, % Total for Specialized Services (including below items) 3,835, % Sliding/Revolving & Exit doors 40, % CO detection system 26, % Dubai Civil Defence and CCC Monitoring 635, % BMS System 216, % BMU System 77, % Elevator 724, % Fire Fighting and Fire Alarm System 240, % Generators 19, % Emergency Central Battery System 58, % Intercom/Home Automation System 65, % Access Control System 45, % CCTV System 40, % Gate Barrier System 20, % Chiller Maintenance 97, % 3rd Party Certification for BMU & Elevator 27, % Garbage Chute system & Compactors 34, % Landscaping and Irrigation Maintenance 121, % Domestic and Chilled Water Treatment and Testing 115, % Swimming Pool Maintenance 359, % Gym Facilities 18, % General Pest Control service 24, % Waste Skip Collection 110, % Window and Façade Cleaning 243, % Variable Allowance for Incidentals 473, % Total Facilities Services Budget 9,308, % As mentioned earlier, for the above services a contract rebidding exercise is being conducted mid 2012 and it is hoped to reduce the cost for General Facilities Services. More details will be released in due course.

7 Table 1. BREAKUP OF THE COMMUNITY SERVICE FEES 2012 Legal Fees 0.43% Management Fees 5.00% Common Area Insurance 1.50% Administrative Expenses 1.72% Facilities Management 41.32% Dewa (Water and Electricity) 49.82% Community Improvement 0.21% Facilities Management Community Improvement Dewa (Water and Electricity) Legal Fees Management Fees Common Area Insurance Administrative Expenses

8 5.0 Community Financial Health and Service Fee Rates Looking from the perspective of budgeted rates versus actual expenses, there have been savings made in the day to day community operations and management. However due to many homeowners not paying their Community Fees, the community loses the potential benefits of cost savings as appropriate adjustments cannot be made in the invoices. As a result, community funds are negatively impacted with limited or no actual cash to rebate against budgeted savings; in addition to supplier payments are stressed or extended due to lack of funds (from time to time) which negatively impacts on the community s creditor status. We request all owners to avail of the payment facilities at their disposal to ensure their invoices are paid on time (please refer reverse of your CSF invoice for more details). Any shortfalls in cash are currently funded (from time to time) by the Developer. With the planned registration of the Owners Association and moving forward, there may be more limited financing options available to the community as the Developer shall no longer be liable for or party to the operations of the community. The issue of defaulting/non-paying owners is being taken seriously and the following measures may be applied, in line with local statutes and agreement by RERA: 1. Denial of Services a. Property sales and lease execution. b. No assistance from the Developer on any services related to them. c. No assistance from Interim Board on any assistance requested from them. d. No assistance from the Community Manager on any services related to them. 2. Denial of Common Area Services Access to community facilities such as gymnasium, aerobics room, swimming pools, and concierge and security assistance may be ceased. 3. Late Payment Fees Late payment fees as directed by law shall apply. 4. Legal Action Owners may be served with legal notices and/or prosecution as per law due to defaulting CSF and/or approaching local authorities for action. 6.0 Registration of the Owners Association The Interim Board was established early 2011 as a process to steer the formation of the formal Owners Association (OA) as per Directions established by RERA. However till date the Interim Board does not have the appropriate decision making mechanism due to the OA not yet being legally registered; this is the same with all communities in Dubai. The Jointly Owned Property Law (JOP Law) No. 27 of 2007, governing the formation of OA, has undergone several directional and operational improvements over the last year. Although this has delayed the overall process, the new procedures were implemented to ensure that registration is done in a proper and systematic manner. The recent information from RERA has been positive and we are gearing up for the required documents to be submitted, by end Following the formal registration of the OA, a General Assembly shall be called, keeping in line with the requirements of the law to elect or re-elect nominees to the Interim Board, which will then become the official OA Board in full control of the community s operations and finances.

9 Appendix 1: RERA Approval for 2012 CSF Budget and Allocation

Al Majara at Dubai Marina How your Community Service Fee works for you

Al Majara at Dubai Marina How your Community Service Fee works for you 2013 WELCOME Welcome NOTE 2012 was a great year for Al Majara and Emaar Community Management. During the course of the year we began