Deyaar rebuilds

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Al-Shaikh disagrees with the recent Morgan Stanley report stating that Dubai's property prices will fall 10 percent by 2010.

Deyaar chairman Nasser Al-Sheikh tells us how he is rebuilding the company's reputation after the arrest of its former CEO on corruption charges.

After the sizzling events in Dubai's real estate market this summer, Nasser Al-Shaikh, chairman of property developer Deyaar, is in need of a break.

The anti-corruption probe currently sweeping the emirate kicked off with the arrest of Deyaar's then-CEO Zack Shahin in April.

He has been detained since, and joined by a series of high-profile figures from other firms - all the while Deyaar's share price has gone into freefall.

But Al-Shaikh, who has been chairman of the UAE's fourth largest developer for six months, speaks frankly on the fraud scandal that has enveloped his company, and appears optimistic the crisis has been contained.

"I became chairman in late March after the detention of the ex-CEO. A bit of clean-up was required. The anti-corruption probes started with Deyaar; so my mandate was very clear - clean up Deyaar and take it to the next level," he explains. Two Deyaar executives were arrested as part of the probe, as were two company suppliers.

"To be honest, there isn't as much cleaning up to do as I had thought. I thought it would be more challenging than the reality. Unfortunately certain incidences have happened, and the people involved are now being investigated by the authorities in Dubai," he says.

The investigation has since evolved to include executives of Tamweel, Nakheel and Sama Dubai, while Dubai Islamic Bank, which partly owns Deyaar, is also under investigation.

"At the time of the arrest it was very important to talk to the shareholders and explain to them that what was happening would not have an impact on the financials of the company.

"Of course some were still worried but I think with our performance in Q1 and Q2 we demonstrated that whatever happened is limited to individual instances in the past. The company is operating at full thrust now," he asserts.

Indeed, the developer's net profit for Q2 of 2008 reached an impressive $67.2m, up 22 percent on Q1 of 2008, while the company's net profit in the first half of 2008 stood at $122m, an increase of 266 percent compared to the first half of 2007.

But despite these positive results, investors appear to have been spooked by the negative publicity surrounding the corruption controversy.

Its stock has declined by more than 37 percent since April 17, when it was reported that Zack Shahin had been arrested for suspected embezzlement.

Al-Shaikh remains pragmatic on the decline and the overall sell-off of real estate positions across the UAE markets.

"In the summer, the stock market is normally soft, and plus this summer we have had all these other extra-curricular activities [the anti-corruption probe]. Only the investigators will know if it's going to go to other companies. They were all real estate-related companies and I think this has added to the sell-off. That, and the Morgan Stanley report."

Morgan Stanley sparked local controversy with a report released in early August stating Dubai property prices were likely to fall 10 percent by 2010, as supply of real estate units outpaced demand in the Gulf emirate.

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