Source: Estates Gazette
Hussain Sajwani wants to have a candid discussion. A chat about property, yes. But also a frank conversation about the reality of doing business transparently in the UAE, his concerns around the western “misconception” of the Middle East and his “aggressive” plans to invest millions of pounds into London over the next 12 months. The chairman of Dubai-based residential real estate giant DAMAC Properties – the man often referred to as the “Donald of Dubai” – is ready to talk about it all.
Perhaps best known for aggressive growth through high-profile, often celebrity-endorsed schemes and a seemingly bottomless marketing budget, there is nothing understated about DAMAC’s development strategy. From the Tiger Woods-designed golf course managed by the Trump Organisation on home turf in Dubai, to the Versace-branded apartments at Aykon London One at Nine Elms in Battersea, SW8 – the group’s debut £300m foray into the UK back in 2015 – it is very much a case of more is more. With figures to match.
Founded by Sajwani in 2002, DAMAC has developed just under 18,000 homes over the past 15 years and now has a market cap of around £3bn. And those figures look set to grow exponentially: “Last year we did about $1.9bn [£1.4bn] worth of sales off plan,” says Sajwani. “This year we are expecting something similar. And we have a portfolio of 44,000 units at various stages.”
The DAMAC way may have delivered the goods for the man at the top – with a 72% stake in the company and a net worth of $3.8bn, Sajwani made it into the Forbes World Billionaires List for the first time in 2015 – but is such an aggressive growth strategy sustainable? And are flats endorsed by Italian designers really what London buyers want?
“We invested £300m on our first London project,” says Sajwani, keen to address the future of DAMAC’s UK investment strategy as a priority. “Our future projects will be in the same ballpark. Between £200m and £400m – and we want to do more than one. We are ready to write a big cheque in London.
“We believe in the city and we believe in the future of the UK. We think the Brexit issue is temporary and we are focused on acquiring a big parcel of land in London to do a big project.”
Unlike some other Middle Eastern investors who are eyeing the UK real estate market for a set window of opportunity to make the most of the weaker pound (see interview on page 58), Sajwani says that DAMAC’s interest in London will be long-term. He considers the Nine Elms project a success – “we have sold nearly 50%” – and is ready to build off the back of his initial investment.
“I am looking at London as a very long-term investment,” he says. “We look at a number of markets globally and London still offers things other can’t. It is a very challenging and very competitive market. But there are three reasons it’s the right place for us. First, the taxes are reasonable compared with some other countries – 20%, compared with 35% in the US and even higher in France. Second, we find the courts, laws and regulations in the UK very clear and transparent. And finally, we feel like we are in our second home – we understand the culture, there is no language barrier.”
But is the feeling mutual? A Versace-themed apartment concept might fly in Dubai, but is it compatible with the more traditional London market?
Sajwani on global political unrest
“I see change in some of the political landscape in Western Europe from watching Macron’s success – a young guy, 39 years old, an investment banker. And the amazing part is that he doesn’t have the support of a big political party – or any party, as a matter of fact. It’s a major change, and I think this will lead to more changes in Europe. My view is that people are sick and tired of the old politicians, and they get tired of getting promises and more taxes and more deficits and unemployment and all that. It’s new blood and, in my view, more open-minded leaders. Hopefully they don’t come with a lot of luggage, where the party tells them what to do.”
Keeping up the “candid discussion” side of the bargain, Sajwani says that the buyers on the Nine Elms scheme have been a mix: some from London but many from the Middle East, Hong King, Singapore and China.
And while he won’t be drawn on whether he would repeat the designer-branded model with his upcoming investments, he has a set idea of what he is looking to deliver next. “We will stay high-end but we are now looking at around £1,500-£2,000 per sq ft and we are looking for big projects. Our mandate is not to go into Knightsbridge or Mayfair looking for buildings with 205,000 sq ft units. The price might be good but the number of apartments is too small. So, for us, it needs to be hundreds of units – a couple of hundred at least. This means we will have to look away from deep prime areas. But we are happy to look at all of zone one and some of zone two.”
As for setting his sights further afield, beyond the UK capital? “Honestly we don’t know much about the UK outside London,” he says. “We haven’t looked and we aren’t planning to. I’m not closing the door on the idea completely, but it is not our area of focus.”
Focus on Dubai
Back on home turf, 85% of DAMAC’s Middle East projects are in Dubai: “Our focus continues to be Dubai and we will expand a bit into Qatar and Saudi Arabia,” says Sajwani. “We don’t foresee any growth or new business in the rest of the Middle East beyond the GCC, though – politically we feel the risk is just too high. In the GCC currency is pegged to the dollar and there is more political stability.”
On whether he thinks such uncertainty and the continued view of the Middle Eastern region, including GCC countries, as emerging markets is putting off overseas investors, Sajwani is frank: “The Middle East is definitely not an attractive place for people to invest,” he says. “I think Dubai is different, but the big fund managers from the US, the UK and Europe still haven’t put any big investments here. I think they still have an idea of Dubai as the Middle East and I think they are watching the television and reading the news and associating it with terrorism and political unrest. Some fund managers were looking here in 2007 and then came 2008 and everyone shied away. Dubai’s reputation was very badly hit. Since then it has recovered but people are still nervous. But if they did their homework they would see you can buy an apartment or a tower or a villa and make a 6-7% yield. The investors are sitting on the sidelines for now but I think, one day, they will come.” Any bets on when? Sajwani pauses: “I don’t know. I really don’t know.”
So does he think more needs to be done to attract western investors who might find the UAE market tough to navigate – and who might have questions over transparency and issues over corruption? Sajwani responds by pointing to what the government has already done. “I think great strides have been made on the rules and regulations of the Land Department. If you want to buy a piece of property in London or New York or Paris, it takes between six and 12 weeks between lawyers and due diligence. If you buy a billion-dollar property in Dubai, or a $100m piece of land, it takes 24 hours. You don’t even need lawyers. You just go to the Land Department,” he explains.
While there is no denying the relative ease and speed of a transaction completed in this way, a legal-less transaction over a 24-hour period is a world away from the markets western investors are used to. And it could make them nervous.
“Maybe that is the issue,” concedes Sajwani. “That lack of understanding. And maybe in Dubai we need to put more emphasis on the overall laws and court systems. They need to be more efficient and maybe sometimes the big fund managers get concerned. They want to see better laws and regulations and better execution of court judgments. I know these are more advanced in a country like the UK or the US.”
But he is quick to point out the areas where he thinks the GCC, and Dubai in particular, retain an edge.
He says: “In Dubai we have no unions, which I think is good. In New York, you try to build something and you have a nightmare with the unions. Dubai is a very free-trade city. You can import from anywhere in the world, any material you want, with no restrictions. And then there are no taxes.”
But what happens when Dubai and the GCC are no longer able to operate in a tax-free system?
“I’m not sure it’s going to last,” he says. “VAT is already coming in. But even if tax comes in at 5%, 7%, even 10%, we will still be in a very low bracket. I remember in Oman when I did business there 30 years ago there were zero-tax zones. And then they started bringing them in – but even at 12% it is still very reasonable. Taxes will be much lower than other countries.
The real problem, he concedes, is Dubai’s image. “I really do think there is a perception problem with Dubai,” he says. “Particularly among the US and European institutional investors. I hope that changes.”