Gold class

A decade ago, Jumeirah Lake Towers was just a piece of barren desert. Now, thanks to DMCC, it's one of the hottest real estate spots in Dubai and a prime driver of the economy
Gold class
The chairman of Dubai Multi Commodities Centre, Ahmed Bin Sulayem
By Ed Attwood
Sun 04 Sep 2011 11:29 AM

“Let’s just say I’ve never had a calm night of sleep since joining the Dubai Multi Commodities Centre [DMCC],” muses Ahmed Bin Sulayem. “But that’s what it takes; you have to be alert, you have to be concerned, and you have to be focused.”

Listening to the chairman of the DMCC, a sprawling free zone based in Jumeirah Lake Towers that is becoming ever more central to Dubai’s economic hopes, you might assume that these were the words of an executive reaching the twilight of his working years. Needless to say, you couldn’t be more wrong. Despite having sunk a decade of effort into the DMCC, which he helped found in 2002, Bin Sulayem is still only 33 years old, and is very clearly still driven to produce more.

That urge to succeed is more than obvious from the moment we sit down for an interview in the chairman’s office, perched high atop the Almas Tower. Despite the fact that it is Ramadan and Bin Sulayem has had one of his customary restless nights, he combats the fatigue with the fervour of a man who has always had to fight his corner. In fact, when he has started talking, it is not easy to get a word in edgeways. But amidst the quick-fire review of his role in the DMCC’s extraordinary growth over the last ten years, Bin Sulayem offers glimpses of disarming honesty.

“It’s all about attitude — I joined DMCC not from the Belgian diamond strip, or from Wall Street, or anything like that,” he recalls. “I’m sure HH Sheikh Mohammed [Bin Rashid Al Maktoum] had his reasons to recruit me, but if I was in his place, I wouldn’t have recruited myself.”

Back then, at the turn of the century, Jumeirah Lake Towers was little more than a good idea in the minds of the Dubai leadership. The idea of commodities and financial centres had been mooted and even built elsewhere, but had not met with some success. However, Dubai’s strategic position as gateway to both the Gulf and large emerging markets meant that the DMCC concept was born.

“There was this new project, or concept,” says Bin Sulayem. “It was a blank sheet of paper, but I did not know that. All I knew was that there was this gold project that I was being asked to join. And I thought, ‘I’m fresh, I’ll join up’.”

When Bin Sulayem was hired, the blueprint for DMCC quickly started taking shape, and the authorities settled on a barren piece of land that was available opposite what was then planned to be the Dubai Marina. The real estate portion of the free zone was centred around the Almas Tower, the highest office block in the region. In ten years, that landscape has been transformed. A total of 87 towers dot the project, surrounded by manmade lakes, luxury hotels and retail infrastructure. It is now considered one of Dubai's prime residential and commercial locations.

None of that was certain a decade ago, of course, and Bin Sulayem soon found himself having to make some tough decisions. Working in conjunction with his partner, Tawfique Abdullah, the DMCC listened to plans for the Almas Tower suggested by a well-known US consultant, but Bin Sulayem felt that the suggested designs weren’t strong enough.

“In the end we chose Atkins, and what made us interested in them was their ability to make buildings more efficient,” he says. “But I had to control them a little bit. Because the tower was on an island, they wanted it to ‘flex its muscles’. So we had to tone it down a bit, especially with regard to the curtain wall.”

Atkins also suggested that the Almas should have a wind turbine at the top, which at the time would have been a regional first. But Bin Sulayem was immediately sceptical about those plans. “My argument was that I’ve never seen Dubai being windy for six months of the year, so forget it,” he recalls. “‘But you’ll be the first,’ they said. ‘I don’t want to be the first idiot,’ I said.”

The design for Almas began as a 40-story tower, half of which was planned to be a hotel. However, the hotel issue soon became a bone of contention between Bin Sulayem and Abdullah. They disagreed on whether it should be at the base or at the top of the tower; Bin Sulayem suggested that the commercial end-users, as the core customer base of DMCC, should be rewarded with the prestigious upper floors, while his partner argued that the top half of the tower would be a great selling point with the lucrative tourist trade.

“It went back and forth and it got a bit tense,” says Bin Sulayem, allowing himself a wry smile at the memory. “After all, what’s a 23-year-old doing preaching to a 50-plus man?”

At the same time, Bin Sulayem — the then chief operating officer — found himself beginning to have serious doubts about the hotel trade full stop.

“The more I studied the hotel business, the dirtier it seemed to me,” he says. “Hotel operators would pretend to be interested, but might not go all the way with you just to waste time for their rivals. Now these are things you can't see in the first phase.”

A key decision needed to be made, and Bin Sulayem went with his gut instincts.

“I spoke to Tawfique and told him I had a solution that would make us both happy,” he says. “‘Where will the hotel be, then?’ he asked. ‘Nowhere, we’re dropping it — let’s move on,’ I said.”

However, the move to take out the hotel left an additional 20 floors of commercial space that DMCC needed to fill, a number that grew to 40 once plans to make the tower even higher were approved. Even though Dubai was in middle of its 2000s boom, competition for tenants from other parts of the growing city was still intense. Speculators were swarming over the residential and commercial market, and properties were being flipped on a daily basis.

It would have been easy for the DMCC leadership to make the Almas, and the other two towers it was developing, available to speculators in the same way that every other developer had done. But Bin Sulayem, who was thinking long term, had other ideas.

“I always felt strongly about never allowing the speculators to get in ahead of the end-users,” he recalls. “I hated that in all of the Dubai property projects. I was always, always of the mindset that if this is what you are building for the community, keep the mongrels away. Make sure end-users get a crack at it — give them a week or two. And then for the rest, that’s fine, it’s understandable — but don’t sell it to them before the drawings are even finalised. All of these things I hated.”

It was an approach that brought bewilderment from more experienced operators in the Dubai real estate market. Bin Sulayem says that both Dubai Properties Group (DPG)’s Adel Al Lootah and Wahid Atallah, who was executive director of Nakheel at the time, warned him that cutting out the speculators would soften investor interest in the tower.

“My response to both of them was — let me give a chance to our end users, and if I only sell ten floors, then by all means you can take it over [selling the rest of the building],” he says. “My staff then took the Oracle system — which is an extremely efficient and robust method of selling units in a timely manner — tailor-made the product to our specific needs and then implemented it.”

The result? In just two hours, the tallest office tower in the Middle East sold out completely — and at an above-market price, to boot. Furthermore, the chairman says that the approach has now been copied by firms like Emaar and Nakheel. Bin Sulayem smiles as he remembers taking a friend from DPG down to the sales centre, who described the ensuing melee as “a fish market”.

“The night before, I couldn’t sleep a wink,” he says. “But when it sold out, you bet I felt like I was floating when I left to drive home that same day.”

More was to come. The next day, the 37-floor Au (Gold) tower also sold out to end-users, while DMCC deliberately slowed purchases on its third tower, Ag (Silver) as the firm waited for major anchor tenants to come on board. If imitation is the highest form of flattery, then the authority has some stellar admirers overseas as well. There are some startling similarities in the design and set-up of the Las Vegas-based World Jewellery Centre, and parallels can also be drawn with New York’s International Gem Tower, which was launched in 2009.

Furthermore, interest in corporate space is still high; Bin Sulayem points out that Russian energy giant Lukoil has just taken over six floors in one tower and is on the hunt for even more space. As time has progressed, interest from the secondary market has also become a factor.

“There is now a waiting list for people who want to buy from the secondary market and move in — so there’s diamond traders, jewellery traders, energy companies and so on, all of whom are moving to Dubai,” he says.

The facts would appear to bear out Bin Sulayem’s claims of investor interest. Last year, DMCC registered 725 new companies — a record — and the authority has already overtaken that number in the first eight months or so of 2011. In addition, new units are coming onstream daily; three towers in Zayed Business Avenue are in the process of being handed over, while the chairman says that two to three other towers are currently being constructed “at breakneck speed”.

However, the numbers, by themselves, don’t explain exactly why DMCC is seeing such strong demand. When questioned on the issue, Bin Sulayem thinks that there are many reasons behind the free zone’s success. One is clearly diversity; in the ten years since it launched the DMCC has expanded into a significant number of products — not simply the gold and diamond trade, for which it is best known. Commodities have been the heartbeat of its operation, and that has incorporated everything from tea to cotton, and through to fuel oil trades on the Dubai Commodities and Gold Exchange (DGCX), the Middle East’s first commodities derivatives exchange.

Another boon for the DMCC, according to its chairman, has been the global recession. Bin Sulayem highlights the propensity of some countries to react to poor economic growth by taxing their high net worth individuals still further.

“These people aren’t tied down, they will spread their assets,” he points out. “No multinational business or organisation will put all its eggs in one basket. These people have become billionaires not because they are lucky, but because they are shrewd; they fit in with the market conditions; they are robust; and they act very fast.”

Other international factors have also played out in the DMCC’s favour. The chairman says that the Belgian government’s policies are frustrating diamond traders in what was once the undisputed global hub of the sector.

“The Belgian government doesn’t differentiate [in its punishments] between tax avoidance and money laundering,” he says. “And that is the real issue. The owner of the company [that has been censured] can’t do anything for two or three days, his shipments are blocked and his clients could end up breaking off their agreements. It’s very disruptive.”

In addition to that, Antwerp is also reeling from security lapses that have tarnished the centre’s reputation. In 2003, thieves stole approximately $100m worth of diamonds from 123 safety deposit boxes in the city’s Diamond Centre. They were able to gain access to the vault through the commercial space next door, which they had rented for three years.

Bin Sulayem believes that Belgium's loss has been Dubai’s gain, and he has also been able to recruit some experienced talent from the European nation to review security procedures. On a later tour of the Diamond Exchange in the heart of the Almas Tower, the chairman apologises for the fact that he doesn’t even have the clearance to enter his own vault.

“Diamantaires are very superstitious; while you may think they are selling you a diamond, they are actually selling you an illusion,” the DMCC chairman says. “You could see two people selling the same diamond, but one might sell it for double the other, depending on the negotiations.”

That same superstition, Bin Sulayem believes, is helping drive the world's precious gem traders to Dubai.

“De Beers announced they would be moving to DMCC about a month back, and that’s because they are following their siteholders,” he adds. “Initially they did not want to do that and be blamed for taking the business away from Antwerp to Dubai, or for making it difficult for the African countries. But governments in those same African countries are now sending their diamonds here for tender. The diamond and jewellery industry are now seeing Dubai as a centre whether they like it or not. That’s just the reality right now.”

As the traders have poured in, the interest in the DGCX has risen as well. The exchange began with gold futures, but has since surprised its partners by the sheer number and variety of new contracts it has been willing to try out. After gold came silver, which was followed by fuel oil. Then, Bin Sulayem recalls, then-CEO David Rutledge suggested the idea of currencies, so the exchange soon launched yen-dollar, sterling-dollar and even rupee-dollar products as well.

“Historically, critics of DGCX said that the organisation lists products that are already on the market,” he says. “So what? We have a gold souk here, should we close that simply because there’s one somewhere else? I don’t buy that. Time zone, arbitration opportunities and swaps — all these are great opportunities. I'm going to enforce these opportunities in the exchange and make sure they are just as good as any of the top five exchanges in the world.

“And as far as the technology and the products are concerned, they are here already.”

But while interest in the DMCC is clearly strong, how is that reflected on the bottom line? For a start, the entity has no debt, a point that Bin Sulayem is — understandably — keen to stress in these straitened times. Dubai's Supreme Fiscal Committee, which was tasked with reviewing all government-related entities’ debt burdens post-Dubai World, has already given DMCC a clean bill of health. Bin Sulayem smiles at the memory of the meetings with senior government officials,

“I met with [Ahmed Humaid] Al Tayer [member of the Supreme Fiscal Committee] first and I think he was impressed with what he saw,” he says. “Then he called us in with HH Sheikh Ahmed Bin Saeed [Al Maktoum, chairman of the Supreme Fiscal Committee] and Mohammed Shaibani [director general of the Ruler’s Court] and that all went smoothly. Five months later, we went for another review and our cash position had actually approved. Al Tayer asked how this had happened and we said it was due payments, it was normal money coming in. They were very impressed, to the extent that during the third meeting, he just stopped it and told us there was no need to go any further.”

As the representative for a new generation of Emiratis, Bin Sulayem, it seems, is more than living up to the initial faith put in him by the ruler of Dubai. What does he think of the pipeline of new talent that the emirate will see in the next few years?

“I am very impressed with the next generation of Emiratis,” he says. “Those that are around eight years younger than me have had a better education than the rest of us, and exposure to the internet way ahead of people from my generation.”

The obvious question is where does Bin Sulayem go from here? For those who entrusted him with the DMCC project, the news is good; he doesn’t appear to be heading off any time soon.

“I never thought I would reach this point,” he says. “Words cannot describe the debt I owe to HH Sheikh Mohammed for giving me this opportunity.

“If you talk to my high school teachers, they would have told you — there’s nothing impressive about that one. I think I caused the most headaches for my father out of all my brothers.

“Now that I've reached where I’ve reached, people are seeing the two colours of my face,” Bin Sulayem continues. “They sometimes criticise the fact that I am too aggressive, but that might be the reason that DMCC is not in debt and embarrassing other competitors.”

The chairman says he has no intention of taking advantage of his current well-placed position to push for a career move. Ten years in, then, and Ahmed Bin Sulayem clearly believes there is at least another ten years in the tank.

“I keep saying to my team that this is not the end, far from it,” he smiles. “We have built a beautiful racing car. But now it’s time to run the race and do the laps.”

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