< Previous20 Vol. 21/09, April – May 2020 C OVER S T O RY / REAL E STAT E - six years have left little room for elasticity, but he expects a quick rental recovery post Covid-19. “There’s a lot of pent up demand for rentals at the moment. People have been sat in their apartments for five weeks and are wanting to get out and get more space. We’re taking on more inquir- ies from people looking at villas, so rentals will recover quite quickly,” he says. We could all use some of his optimism. Waind even predicts an economic boost “like never before” once the lockdown is lifted. “I suspect that there will be a human desire to get out there and live again and spend money again and see our friends again and get the economy moving again like we’ve never seen before, off the back of an economic shock like this,” he says. While a slight recovery in Asian markets where Covid-19 has nearly subsided has given some hope, today brokers can barely afford advertising space in online property portals. “I used to get 50 calls a week on my phone, and now I’m barely getting one a day,” Marwan Yasin tells me. He’s a financial specialist at Abu Dhabi-based Miramar Property Management, one of nearly 100 brokerages that has pulled its listings from the UAE’s largest real estate website Property where will I want to live with my family if this happens again? And Dubai sits very strongly,” he says. Cummings even boasts of selling an AED20m ($5.44m) villa in Jumeirah Golf Estates and an AED7m ($1.9m) plot of land at La Mer as recent as last week, and says areas like the Palm Jumeirah have seen a surge in interest. People have been crammed in apartments for so long, he says, they’re shifting their interest to bigger spaces like villas with gardens they can enjoy in case they’re faced with another pandemic and forced into quarantine. “Even with penthouses and apartments, people are asking, what’s the size of the balcony? What’s the size of the terrace?” he says, laughing. Better Homes’ group managing director Richard Waind doesn’t predict a drop in prices either, as the past five “Sometimes the brokers don’t understand and perceive us as a big company that is very wealthy... but like any business, who can afford to go a month without revenue?” u Brokers predict a quick recovery for the rental market as people look to bigger spaces “There’s a lot of pent up demand for rentals at the moment”arabianbusiness.com 21 / REAL E STAT E Finder in March. Brokers must pay large sums to portals like Property Finder, Bayut and Dubizzle to be featured on the platforms, with some paying nearly AED1m ($272,000) in yearly fees. Last month 260 brokerages in the UAE came together to form a united front in a bid to pressure the portals to provide three-six months’ worth of advertising fee relief as Covid- 19 lockdown measures hit the sector. Property Finder initially offered brokers one month free on their platform Data Finder, followed by a 33 percent discount for the next two months. After pressure from brokers – and 9,000 list- ings pulled from the website – it came back with an offer of two free months. In our hour long conver- sation, Property Finder CEO Michael Lahyani tells me brokerages are being “emotional” and panicking too early on, when the UAE has only been in lockdown for less than three weeks. “Some of them are panick- ing. We’ve been in a lock- down for two weeks, and it’s being extended for another week, but to come out and ask for three months [free]? Of course it’s going to take time until the market picks up again but who says there’s not going to be any business for three months?” The Dubai Land Depart- ment (DLD) was still regis- tering transactions last week, “It’s not like you cannot technically close a transaction,” he says. “These are small busi- nesses that are afraid of the future and uncertainty in the market and they don’t have banks that would help them with a loan in this market so they’re turning to us, as in, who’s going to help us? Let’s turn to Property Finder… “We believe we’ve been forward thinking with this. But you know, people are emotional during these times and I understand it. There’s so much uncertainty around how long it will last and there’s a little bit of a panic,” Lahyani says. Life or death But Better Homes’ Waind disagrees and says discounts are a matter of ‘life or death’ for smaller brokerages. “It’s a little disingenuous calling anybody emotional in this period,” he says. “People are trying to navigate and keep their companies afloat in what is a challenging time. For some of the smaller broker- ages in particular, those costs will be life or death if they’re not getting any income in.” Property Finder wasn’t the u Azizi insists its projects are on schedule despite Covid-19 Developer Azizi says projects ‘in full swing’ despite coronavirus challenges Most industries may be suffering due to the coronavirus, but Dubai- based Azizi Developments claims its projects are “in full swing” since construc- tion is exempt from the 24-hour government mandated lockdown. The private developer’s projects in Mohammed Bin Rashid City (MBR), Palm Jumeirah, Dubai Healthcare City, Al Furjan, and Downtown Jebel Ali are underway and construction is progressing swiftly, it said in a statement. While construction has indeed been exempt from the 24-hour lockdown in Dubai, the city has followed in Abu Dhabi’s footsteps by limiting the movement of blue-collar workers from one Emirate to the other. But Azizi Developments insists it’s on schedule to deliver projects. In the fi rst three months of 2020, it said it constructed over 1,326,978 sq. ft of built-up area (BUA), with a monthly average building progress of nearly 8 percent. “These portals are totally predatory. They know they’ve got us over a barrel” u Haider Al Khan, CEO of property portal Bayut.com “People are emotional during these times and I understand it” u Andrew Cummings is the managing director of LuxuryProperty.com22 Vol. 21/09, April – May 2020 C OVER S T O RY / REAL E STAT E have a lot of marketing strat- egies... a lot of people survive by these portals. “These portals are totally predatory. They know they’ve got us over a barrel. They gave us what they gave us because they knew we didn’t have a lot of choice. And that’s going to come back to bite them at some stage because we are going to need them to start being more flexible,” he says. Inner battle Lahyani is taken aback by Cummings’ statement when I ask him what he thinks. “I’m not sure the industry recognises that we actually paved the way for these pack- age reliefs to happen. Had we stayed put in our position, our competitors would have stayed put as well,” he says. In his defence, Property Finder has had to lay off 100 staff members and close two markets – Morocco and Leba- non – to be able to provide a two month relief for brokers. “This is not Europe where the government is [paying] 80 percent of your salary. We have to figure this one out on our own… Sometimes the brokers don’t understand and perceive us as a big company that is very wealthy and can afford to navigate through this crisis without any challenges but like any business, who can afford to go a month without revenue?” he says. Cummings recognises the sacrifice. “Property Finder has actually done a lot internally to do this... They’re hurting... only one to hesitate in provid- ing relief to brokers. Its rival Bayut originally offered to defer brokers’ upcoming cheques by three months, and later decided to provide them with one free month of advertising and a 50 percent discount for the two months to follow. Since then, it has stepped up support and offered real estate brokers across the UAE with free space for 20 listings irrespective of whether they’re partners of the platform. While Dubizzle, which is owned by Netherlands-based OLX Group, also waived broker fees for the months of April and May, its primary focus “has always been on the long term and sustain- able value creation for all of our stakeholders,” Matthew Gregory, Director of Sales at Dubizzle, says in an email statement. It is for that reason that Cummings of LuxuryProperty. com believes portals would not have caved to brokers’ demands had they not been pressured. “They [portals] all need to look and see how they can make this more sustainable… The sad fact in this industry is a lot of people are reliant on these portals so they don’t 100 The number of staff members Property Finder has had to lay off to provide relief to brokers u Since the lockdown, buyers’ interest is shifting from apartments to villas with outdoor space arabianbusiness.com 23 / REAL E STAT E It’s taken a bit to do that,” he says, adding that his company LuxuryProperty.com has also had to furlough eight of its 15 operations staff. “There are challenges we’re all facing and it was important for us to see that our partners in the portals were also expe- riencing challenges. It’s not fair for us to lose 25 percent of revenue while they offer [us] a 5 percent discount. It’s not comparable,” he adds. Bayut, on the other hand, has “gotten away without feeling any pain,” accord- ing to Cummings. “Bayut haven’t done any of that. I’m not aware of them reducing salaries or doing anything. So at the moment I think Prop- erty Finder, in many ways, have felt some pain to give us that, whereas Bayut are sort of getting away with not feeling any pain. We don’t want them to feel pain but our businesses need to survive,” he says. Bayut CEO Haider Al Khan has confirmed that the company has not laid off staff, but tells me he needs “a bit more time to reassess what’s going to happen.” Here’s the deal For the brokers to survive Covid-19, the portals will need to go back to the basis of their business models: inflexible 12-month contracts that limit brokers’ abilities to adapt to market demands. “The days of 12-month contracts strictly holding us in, are gone. All the portals must move towards more flexible contracting to enable brokerages to respond to market demand... We all have hard working brokers who are commission-only who are not able to do their day jobs and not able to go out and earn money at the moment,” says Cummings. “We are partners to these portals and they’re impor- tant to us but equally, we’re important to them. They can’t survive without us and we can’t survive without them so we all need to come together to get through this crisis. Whilst the initial relief provides some respite, this is not the end and we will need to be looking at more flexibly moving forward,” he says. The 12-month contracts give portals the upper hand, and could result in small brokerages closing down. What brokers are hoping to see post Covid-19 is a “rebal- ancing” of the relationship. “Being locked in on the annual contract where they hold your cheques, in a crisis like this, they start cash- ing people’s cheques, some businesses will go bust…” Cummings says. “They need to look at contracts that aren’t handcuffing us in to long-term inflexible contracts secured by post- dated cheques. That needs to be over. “Without us they won’t survive and have crazy hundreds of millions of dollars valuations. But ultimately, sadly, because the market is reliant on them, it gives them a lot of power.” Lahyani argues that all year round subscription models are crucial to the survival of portals, which would other- wise be limited to seasonal clients. Yet considering Covid-19 has left nearly all of us settling for less, maybe the portals should too. Maybe if everyone took only what they needed, there would be enough for everyone, and maybe then, we would not have to wave goodbye to the brokers after all. *Recent media reports falsely stated that brokers had removed 20,000 listings from Property Finder. The real number, according to both the portal and brokers, is around the 9,000 figure. AED1m The yearly amount of advertising fees that some portals charge brokers u Michael Lahyani started Property Finder in 2005 u Matthew Gregory, director of sales, Dubizzle Property S H L m Barabianbusiness.com 25 SAUDI’S READY TO PLAY BALL How a multi-million dollar takeover of English Premier League outfit Newcastle United can help forge a mutually beneficial relationship BY GAVIN GIBBON26 Vol. 21/09, April – May 2020 FEATURE / C O-LIVING SPAC E S and there is nothing to cheer about from the stands, this at least provides some interest for general football fans, and is a potential powder keg of excitement for United fans. The Newcastle support have been here before though, albeit not quite as far forward if reports are to be believed. It was only a matter of months ago that fans had their appetite whetted by talk of another “imminent” takeover, at that time by the might of the Bin Zayed Group in Dubai. In July last year, a statement from the company, released on social media via a T ’S HARD T O IMA GINE members of the Saudi Arabian royal family strolling down Gallowgate, amid a sea of black and white stripes, shoulder to shoulder with a fanatic Geordie support on a freez- ing cold Saturday afternoon in November. But then it was only a short while ago that it would have been difficult to picture a world heavyweight boxing title bout played out in the kingdom. And who would have thought Saudi Arabia would host the super- stars from the WWE? Real Madrid v Atletico Madrid in Riyadh anyone? The next step on that sporting journey appears to be the imminent takeover of Newcastle United Football Club, a $377m deal that is said to be in the hands of Premier League authorities before being officially rubber stamped. During a time when the sporting calen- dar has been decimated by coronavirus Dubai journalist, said: “Both parties have worked diligently in finalising a deal, none more so than ourselves. We have completed every aspect required in a takeover process. “Press claims of no bids or Premier League approval processes are simply untrue. “The current owners have cooperated amicably throughout this process and if a deal is not forthcoming it will not be due to lack of effort from both parties.” Amicably maybe, but no deal was forth- coming or concluded. It proved to be one of many false dawns as they desperately seek to break free from the shackles of owner Mike Ashley. The controversial British businessman, who also has Sports Direct and House of Fraser in his extensive portfolio, has been at the helm of the club during arguably its most tumultuous period, 13 years that has seen u Even a passionate support like Newcastle United has its limits as fans have grown increasingly frustrated with the reign of current owner Mike Ashley $377m The size of an imminent takover of Newscastle United Football Club by Premier League I “I think it would be fair to say, to the average fan, they couldn’t give two hoots who buys the club”arabianbusiness.com 27 / SPOR T the North East giants suffer two separate relegations before bouncing back both times to reach the promised land of the Premier League. It would be fair to say, there will be few tears shed in the Tyne when Ashley does eventually call time on his tenure at the helm of a club, which was rated as having the 19th highest revenue of any football team in the world in the Deloitte Football Money League 2020. Newcastle United Supporters’ Trust director, Peter Maughan, a lifelong Newcastle fan, reveals he hasn’t set foot in the 52,354-seater stadium this season, a common thread among even the most ardent supporters, long disillusioned by the current regime. In terms of future ownership, he tells Arabian Business: “I think it would be fair to say, to the average fan, they couldn’t give two hoots who buys the club.” Deep pockets British brothers Simon and David Reuben – billionaire property developers with North-East links – are said to be taking a 10 percent stake in the club – but the big money is arriving from Saudi Arabia and the kingdom’s Public Investment Fund (PIF), which is said to control assets worth $400bn. The consortium, which includes PCP Capital Partners, headed by Yorkshire native Amanda Staveley (branded a “time- waster by Ashley in 2017), has reportedly sent a 350-page document to the Premier League detailing their financial plans for the club. The document outlines ambitious plans to plough hundreds of millions into Newcastle, to create a club capable of dominating the game in England and across Europe. An understandably excited Maughan u The Geordie faithful have had many heroes to revere over the years, could the next one be from KSA? u Newcastle’s billionaire owner Mike Ashley has come in for fi erce criticism from supporters28 Vol. 21/09, April – May 2020 FEATURE / SPOR T says: “They’re (Saudis) not short of a pound or two, although that doesn’t mean they’ll be investing it all in Newcastle United. They’re the right sort of people in terms of financial status and they’re keen.” Maughan and his ilk only need to cast their eyes just over 140 miles south west to see what a difference a cash injection from the Middle East can make. Since arriving to replace former Thai Prime Minister Thaksin Shinawatra – ironi- cally Stavely helped broker the deal – Abu Dhabi’s Sheikh Mansour Bin Zayed Bin Sultan Bin Zayed Bin Khalifa Al Nahyan has poured in billions to help Manchester City win four English Premier League titles, four League Cups and two FA Cups. Such success has caused City Foot- ball Group’s value to skyrocket to £4.8bn ($5.95bn) – making them one of the most valuable sporting franchises in the world. While the benefits of multi-billion dollar owners is clear to football club supporters, with dreams of Messi and Co being lined up to take their place on Tyneside, it is less clear exactly what their potential Saudi owners may reap from the investment. In the past month, the kingdom’s sover- eign wealth fund has bought or been linked to plans to buy an 8.2 percent stake in cruise operator Carnival Corp; and hold- ings in Royal Dutch Shell Plc, Total SA, Eni SpA and Equinor ASA. According to a report from Bloomberg, Carnival shares are already down by about a third since the kingdom’s Public Invest- ment Fund (PIF) completed its acquisition of stock in the business last month. Even the PIF’s more prudent attempts to diversify its exposures into businesses distant from oil demand haven’t panned out so well. A pre-listing investment of $3.5bn in Uber Technologies Inc is worth less than $2bn now. Its 38 percent stake in South Korea’s Posco Engineering & Construction Co. has lost more than two- thirds of its value since it was bought in 2015. And the kingdom managed to sell out of Tesla Inc. before its extraordinary rally at the start of the year. Simon Chadwick, director of Eurasian Sport at Emlyon Business School, tells Arabian Business: “It remains to be seen what the precise nature of Saudi Arabian involvement is in Newcastle United. Until such times as we have signed and confirmed agreement, we should be u The kingdom’s sovereign wealth fund has been increasingly active over the last month u Fans will be hoping any new investment will see their side challenging in England and across Europearabianbusiness.com 29 / SPOR T cautious about characterising the deal as being one thing or another. “However, if a deal is confirmed then one suspects that Saudi involvement is being driven not simply by the desire to acquire a football club but by the network of opportunities it opens up to the investors. Such acquisitions are often connected to infrastructural, real estate or trade opportunities, and this case is unlikely to be any different. “Should the deal be confirmed, much will inevitably be made of the PR and repu- tational advantages of it for the govern- ment in Saudi Arabia.” Royal connections The Premier League is no stranger to Saudi royalty. Sheffield United is one of the oldest clubs in the world and is owned by Prince Abdullah Bin Musa’ad bin Abdulaziz Al Saud, who also serves as chairman of the club. While there continues to be strong ties between the UK and Saudi, with more than £600m ($744.49m) worth of arms sold to the kingdom between October 2018 and March 2019. Chadwick says: “At one level, one is unsurprised by Saudi Arabia’s inter- est in football. Indeed, the country has long been trying to privatise its own elite professional clubs. “However, moves to invest in over- seas football assets are something of a surprise as there has been little evidence in Saudi Arabian policy thus far to suggest a shift in focus towards external invest- ments. The attractions are multiple and obvious; for example, owning a football club can often be used to leverage other business relationships. “However, what happens in the future is a moot point. With the pandemic show- ing no sign of abating, with oil prices tumbling and fiscal stringency likely to be an outcome, one wonders about the extent to which we should expect further such investments.” There is only one investment Newcastle United fans are keen to see and Maughan has assured the potential new owners of a warm welcome, no matter what time of year they arrive on Tyneside. He says: “If you’re part of this consor- tium and we believe the Saudi Arabians are putting the vast amount of money in, first of all I can tell you, that they will walk into St James’ Park and they will be heroes; they will be heroes immediately, because they have ousted Mike Ashley, as far as the supporters and city is concerned. “They’ve got rid of him. They’ve done what we’ve been trying to do as fans for 13 years.” $744m The total worth of arms sold by the UK to Saudi Arabia from October 2018 to March 2019 “Should the deal be confi rmed, much will inevitably be made of the PR and reputational advantages of it for the government in Saudi Arabia” u Simon Chadwick is director of Eurasian Sport “If you’re part of this consortium, and we believe the Saudi Arabians are putting the vast amount of money in, fi rst of all I can tell you, that they will walk into St James’ Park and they will be heroes”Next >