Deyaar faces testing times ahead as CEO Giebel goes

Deyaar Development is in turnaround mode, again, and for shareholders, it is like deja vu. In October 2008, just as the global financial crisis spread to Dubai, the property group hired a new management team. The move came seven months after the company had become embroiled in a fraud investigation that saw Zack Shahin, the then-chief executive, being detained on allegations of corruption. He is still in prison while the case continues.

With Markus Giebel installed as the new chief executive, the "turnaround" team quickly embarked on a bold strategy to reduce the default rate of homebuyers, create a distressed assets fund to buy properties from struggling buyers and consolidate projects. The plan started well, with Deyaar minimising the default rate to only about 5 per cent of its 5,000 customers. Mr Giebel and his team also had plans to take the developer into new markets such as Lebanon and Saudi Arabia, as well as build retirement homes and affordable housing.

The fresh, transparent approach inspired confidence, leading some major international investors to commit Dh200 million (US$54.4m) towards Deyaar's Dh500m distressed property fund. But the fund was put on hold at the end of last year when the investors lost confidence after the Dubai World conglomerate asked its creditors for a six-month standstill on its debts. And yesterday, less than two years since his appointment, Mr Giebel left the company. The move was part of a management shake-up that is expected to see the departure of other senior executives.

Saeed al Qatami has replaced Mr Giebel in an acting capacity - and he has his work cut out for him. "Coming up with a strategy is one thing but executing it is another," said Saud Masud, a property analyst with UBS. Nomura Securities downgraded Deyaar yesterday from "neutral" to "reduce" with a price target of Dh50, down from Dh92, citing a host of negatives including its small market capitalisation status, foreign ownership restrictions and lack of clarity on strategy.

Deyaar's shares closed yesterday at 47 fils, down 0.62 per cent. @Email:agiuffrida@thenational.ae

COMPANY PROFILE

Name: Kumulus Water

Started: 2021

Founders: Iheb Triki and Mohamed Ali Abid

Based: Tunisia

Sector: Water technology

Number of staff: 22

Investment raised: $4 million

Volvo ES90 Specs

Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)

Power: 333hp, 449hp, 680hp

Torque: 480Nm, 670Nm, 870Nm

On sale: Later in 2025 or early 2026, depending on region

Price: Exact regional pricing TBA

NO OTHER LAND

Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal

Stars: Basel Adra, Yuval Abraham

Rating: 3.5/5

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UAE currency: the story behind the money in your pockets

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”