The first time ever Arabian Business interviewed Mohamed Alabbar, on 13 July 2006, the Emaar chairman was in fighting mode. His company was the biggest property developer on the planet, worth $36bn. He had just delivered a 21 percent rise in half year profits to $1.38bn, and announced $21bn worth of new projects in the previous six months. He told us then: “You know what separates the men from the boys? Do you know what? It’s when you have to run a very large publicly listed company, and every 90 days you have to report the figures. You have to explain exactly what you’ve been doing. No excuses, just results. That’s what separates the men from the boys.”
Nearly eight years on, and actually not very much has changed. Sure, there was a mega recession, and yes the numbers today sound better in dirhams than dollars. But you want growth? You want relentless energy? You want determination? And most of all, do you want to see the 2006 numbers replicated possibly within just two years from now? Then Mohamed Alabbar is your best and only option.
A week ago Alabbar, not for the first time and definitely not for the last, stunned the financial markets by announcing a record AED16bn windfall for his shareholders, and the listing of his shopping malls and retail subsidiary. The new outfit is likely to be worth $9bn to $10bn when listed in both Dubai and London. If anyone thought that delivering a 70 percent one-year return on the share price would be a hard act to follow, they should think again. The men, once again, have been separated from the boys.
“If you are really concentrating on the ingredients, then you will have a good meal. Right now, we are focused on the kitchen,” he says.
Chances are Jamie Oliver would be proud of Alabbar’s kitchen and what’s being cooked up on a daily basis. The AED16bn payout to shareholders breaks Emaar’s own records, with AED9bn coming from the 25 percent shares being offered in the new listing, the rest from the 15 percent cash dividend and 10 percent bonus shares being given out. For so many years, Alabbar has been at the centre of battles with his shareholders, and the company’s AGM turned into pure theatre. Suddenly, and out of the blue, he has emerged as the shareholders’ hero.
“We’re a public company in the Middle East and still the culture is young, everybody wants to buy your shares, see the price increase, sell them and have their dividends quickly. But we are lucky enough because more than 60 percent of our shareholders are the original shareholders. We have to give them credit for being with us, they are solid and stable. The fundamentals are right and looking at the company for the next five years things look quite interesting even though five years is a long time, and we are comfortable enough to say it is time to reward our shareholders,” he says.
But this is just the start of the reward phase. Next up, and possibly before Ramadan, is the dual listing of the shopping malls and retail subsidiary. Emaar Malls & Retail is one of the high-growth business entities of Emaar, having recorded full-year 2013 revenue of AED2.837bn, an increase of over 20 percent compared to 2012. Gross operating profit for the unit increased to AED2.232bn, compared to AED1.856bn in the previous year.
Emaar’s malls assets include The Dubai Mall, Dubai Marina Mall, Souk Al Bahar and Gold & Diamond Park. The Dubai Mall’s 1,200 plus retail outlets recorded a 26 percent rise in sales during 2013 compared to the previous year. According to market estimates, more than 50 percent of all luxury goods sold in Dubai are purchased at the mall.
Emaar is enhancing the fashion and lifestyle choices at the mall with the expansion of its Fashion Avenue by another 1 million sq ft, which will add 150 new brands to the mall.
Last year 75 million people visited Dubai Mall, and Alabbar can already see the magic 100 million visitors a year in the next two years — not to mention his plans to build another mega mall, even bigger than this one. He may deep down have always preferred to keep Emaar as a private entity, but the reality is that Alabbar’s public company mantle is now stronger than ever.
“I owe it to my shareholders. We’re in at whatever price makes sense, we’re in. We have 17 years experience, we are bullet proof, we understand the pain, and we can take the heat from our shareholders. We made a few mistakes and I hope we don’t repeat them. But if it makes sense for the shareholders in the long term, then we should do it. No limits. The market has the energy and we have to jump at it,” he says, adding: “We had always wanted to do this that’s why we always created this structure with separate companies and separate general managers. These companies work independently even though they are owned by us, so that was the original thinking.”
All of which means that the malls IPO is the shape of things to come. He is also planning to list the company’s fully-owned Egyptian unit Emaar Misr, which has an investment portfolio of $7.6bn. The highly lucrative hospitality division, which includes The Address Hotels and Resorts brand, is also being primed for a trip to the stock market. That could happen as early as next year.
And beyond that? “Today I can’t see other segments, but then someday we might say should Downtown be a separate listed company? It all depends on the financials and the value it will bring for our shareholders. The value of At the Top, Burj Khalifa is incredibly high. Maybe someday people will want to be shareholders in that. If it makes value for our shareholders, our board will consider it,” he says.
What is also making sense right now is Emaar’s relentless launch of new projects, currently running at one a week through 2014. The workload is quite phenomenal but Alabbar says he has no intention of slowing down. “As long as the market can take it and is hungry for a product we will do it, even through the summer,” he says.
It’s sometimes hard to believe that just four years ago Emaar was staring at the abyss, with property prices having plummeted 60 percent following the crash. Today, Emaar is sitting on an AED8.5bn cash pile with minimal bank debt. Its latest results for the last quarter in 2013 showed a quarterly profit of AED756m ($206m), compared with AED512m in the corresponding period of 2012.
Significantly, the total value of sales in Dubai for 2013 was AED12bn, nearly three times the amount in 2012.
One project a week may seem excessive, but not when you look at the numbers and the demand with the value of sales in the first two months of 2014 at about AED5bn.
Every new launch usually means a new record for queues of potential buyers. Alabbar puts this all down to one word — trust.
He says: “It is about you as a person and what principles you follow in your life. To do such massive developments and be lucky enough to be born at the right time and place, deep inside you say why don’t we do it right? Why don’t we do it well? Our intention is to do good work, and after we do that, to take care of it. You are not buying a car or a TV; this is a purchase of a lifetime. And we are making money. Or you can be like other developers who give you a lucky draw for a car, and they sell you a building and they never come back there, and I don’t even think they know where the building is. They don’t care what happened to it. We care.”
He adds: “I do proper business every day. I think what others do, it’s a matter for the government to look into.”
One thing Emaar’s shareholders could fancy Alabbar looking into is the possibility of tying up with Nakheel. The Palm Jumeirah developer underwent a $16bn debt restructuring plan in 2011, but with several new launches, appears to be on the road to recovery. In February it announced that it had paid back $640m of bank debts 18 months ahead of maturity, and is even toying with its own IPO plans for 2018.
Given that Emaar is now cash rich, wouldn’t a takeover of Nakheel — and its hugely valuable beachfront land (which Emaar has none of) make sense?
Alabbar says: “What we realised is the best company to buy is Emaar. We wish everybody luck. But this is the company we know, and this is where we invest.”
So never to a Nakheel takeover? “If any deal makes fabulous sense then my board would look at it positively…We are all soldiers of Dubai. Whatever makes sense for our shareholders and Dubai, we will jump on it.”
You get the feeling that Alabbar will be jumping on many things in the coming months and years. As we end the interview, I ask him whether he ever sits back and feels proud of his achievements. He says all the credit, the real credit, belongs to his boss HH Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President and Prime Minister and the Ruler of Dubai. “I could have had a boss who said build a shopping mall. Or a boss who said make it big, make it nice, make it valuable. Make it spectacular. This AED16bn we are distributing, this is a gift from Sheikh Mohammed to our shareholders.”
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