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Sun 12 Jul 2009 04:00 AM

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How the mighty have fallen

There's something sad about seeing Robin Lohmann brought so low by the unwinding of the market, Damian Reilly says.

How the mighty have fallen

It was in the late nineties that the government decided to allow foreign ownership of land in Dubai, thereby effectively releasing the biggest genie from a bottle the Gulf had seen since someone, many moons ago, decided to investigate what the black sticky stuff in the sand was.

From the start, my father was incredibly sniffy about the whole idea. When expatriates were first allowed to buy flats, in towers where the Marina now is, he pointed out that the flats were pokey, and the infrastructure was poor.

Thereafter, on each occasion that I returned to Dubai for university holidays, he would respond to my gasps of amazement about the pace of development in the emirate with grim predictions. “It is a bubble,” he would say. “The whole thing is going to go pop. Who is going to live in these flats? Construction workers? And what happens when they’re finished and go home?”

For ten long years, Dubai and the property market defied my father. While he determinedly stood on the sidelines, millionaires were made daily by the dozen, and the machine became ever more rampant and sophisticated.

Where, at the start of the 2000’s, frowsy housewives used to apologetically show potential buyers around flats, by the second half of the decade the estate agency business was a jungle populated by the same type of sharp-eyed spivs in suits you’d find in any other major city. The developers were the same. There was a gold rush going on, and everyone except my father knew it.

Robin Lohmann, this week’s print issue cover star, certainly knew it. I first interviewed him in March last year, when he was in his pomp. He was a breath of fresh air. In an industry of frantic money-men, Lohmann was a well-mannered model of assured calm. From behind an unbelievably huge desk, in an office whose wall-to-wall windows looked out over the ocean, he spoke quietly and with intelligent certainty. Not only was he making incredible sums of money, but he was happy to talk about how it was done.

He said he had 8,000 global investors, that he could sell entire buildings in two hours, and that construction of his celebrity branded towers would cost 1.5 billion dirhams. He even talked of profit margins of close to fifty percent.

In those days, of course, the world was a different place. We were all on the brink of something massive. To his credit, Lohmann saw it coming, but he thought it would only strengthen Dubai’s property story. He said: “I am quite surprised the stock market is still so stable. I was expecting a worse crash. It will come. Am I worried? No. There is so much money coming into Dubai from the rest of the world, from countries where economies are slowing. From Russia, from India, from Turkey. And then there are institutional investors coming. In America and Europe, you make six percent rental returns, maximum. Here you make up to twelve percent, tax free. This market is a huge, huge opportunity.”

Back then, Lohmann was the poster boy for the Dubai property story. His investors would no doubt beg to differ with me, but there is something sad about seeing him brought so low today by the unwinding of the market. Those investors believe that Lohmann is being frustratingly opaque in his dealings with them – they want to know where their cash has gone. But if what he says in our interview with him is true, then he is as much the victim of a lack of transparency as anyone who has given him money is. This interview is an effort at transparency, and Lohmann deserves credit for being man enough to do it. (I predict many more property developers will soon be spilling their hearts out, too: it’s funny how pressure makes people chatty).

Incidentally, I did eventually persuade my father to come into the market with me. In August last year, we were on the brink of buying a one bedroom apartment in the Marina for 2.5 million dirhams. I lost the mortgage forms at the last moment. We said we’d sort it out in when we returned from our respective holidays. Luckily, we never did.

Damian Reilly is the editor of Arabian Business English.

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SCC 11 years ago

I doubt too many would agree with you. The "poster boy" as AB labelled him was only 32 years old and showed a typical lack of grasp on the economic realities of the situation in an interview with you only 18 months ago. " It is simple. We develop and we flip. We make people money. There is a lot of talk about the property market not being sustainable but those people talking that way - well, they don't know what they are talking about"... "Prices will keep rising and I actually think we can double our turnover next year." And is it so difficult to check facts? The change occurred in May 2002, when Sheikh Mohammed issued a decree to allow foreigners to buy and own freehold property in selected areas of the city. Not 1999.

Arnie S 11 years ago

Wot? Reality intruding on your little Dubai dream Damian? Surely not? Are those pom-poms getting heavy? Face facts. The whole ACI thing was built on the so-called Dubai dream. People wouldn't be in this mess if they had lived the Dubai reality instead. A case of simple economics that most people were apparently too simple to understand. Everything is cyclical and if anyone is too naive to figure that out, any pocket money they get should be spent under the supervision of someone more adult. It does indeed appear that you were lucky Damian, because your poor grasp of primary school economics nearly got you in trouble. Lucky boy.

AD 11 years ago

Damian should be more careful at checking his happy university holiday times memories, before passing them as "facts". What's this talk about a decade long property market or foreign ownership of land allowed in late '90s or that there were apartments for sale where the Marina is now? Sorry mate but you seams to be still in Uni holidays hangover mood, cause all these "facts" are wrong and this seams more like a personal rant about the last two years and not the last decade. And yes, I've been living here long enough to have seen the canal at the Marina being dug, and I've followed and (photo)documented the rise of towers throughout Dubai since then.

paul 11 years ago

Pokey flats and poor infrastructure back in the late 90s? Take a look around you. Those big orange tanker trucks... they are the sewage system here. The sewage plant could not cope so they dug a huge big hole further out in the desert to dump the stuff. Emaar cannot even keep the coolers running in the Greens pools, just like last year they have all 'broken' at exactly the same time and will no doubt conveniently be fixed in November again, right as the cooling is not required and Emaar can afford to feed the meters with 50p pieces. Nothing in Dubai is built to last, everything is done and cheap and cheerful as possible and then coated with a bit of marble and gold trim and called 'luxury'. There was only ever a desire to spend money on what people would see, and to spend absolutely nothing on all the important stuff you cannot but is the backbone of any modern city. That is why the internet falls over when a fishing boat snags a cable off egypt, villas flood whenever it rains, half the sewage ends up being dumped into the sea from those notorious orange tankers and developments built more than 5 years ago suffer major mechanical failures constantly.

Amused 11 years ago

Damian, Non-nationals cannt own land in the UAE. Only some nebulous and everchangng sort of title to structures on land they don't own.

Etisalgood 11 years ago

Ofcourse nothing in Dubai is built to last. When you buy property as a foreigner, you do not own a free and clear title to either the land or even the structure. All you have is a "leasehold agreement upto 99 years, renewable every 10 years". God knows what that means, or what will happen in 2012 when the first batch of renewable 10 year leases start to mature. A little known fact is that even nationals cannot own land in Dubai. Land is "allocated" to them by the land department, but at the end of the day, ownership rights remain with the government of Dubai. That's why developers don't bother trying to build quality structures that will last a long time.