After a challenging 2018, Azizi Developments CEO Farhad Azizi says he's upbeat about the future of Dubai's property market and his own company's fortunes, both at home and abroad, regardless of what the gossipmongers have claimed
Gazing out the window from his Majlis room on the 15th floor of his office on Sheikh Zayed Road, Farhad Azizi takes in the full view of Dubai’s iconic skyline. As the CEO of Azizi Developments, a company with a vast project pipeline worth over $12.3 billion, he has played a prominent role in the city’s development.
But this is a view he rarely got to see in 2018, having spent most of last year travelling the globe scouting out opportunities for the company abroad. It was a whirlwind international journey that saw him take in Saudi Arabia, Germany, London and Canada.
At a time when Dubai real estate prices were continuing to slide, it seemed like the sensible decision to look overseas for opportunities. The only problem? His absence sparked wild rumours in Dubai’s close-knit but gossipy real estate community about where he may have been. Matters were made worse when, for a time, his name mysteriously vanished from the company’s website, forcing his father – Azizi Group Chairman Mirwais Azizi – to reassure Arabian Business that nothing untoward was happening.
When asked about his long absence, Azizi leans self-assuredly back into his gold-plated sofa, without even the faintest hint of distress in his finely tailored blue suit as he cracks a knowing smile and answers a question he seems to have expected was coming.
“I had to do that personally. You can’t assign someone to do that on your behalf,” he says. “Now I am here full time,” he adds, putting an end to the conspiracy theories.
Abroad, Azizi explains, his company is in the midst of discussions about building “iconic” developments in those markets which would stand in stark contrast to the large-scale “mass developments” more readily associated with its operations in Dubai.
While so far nothing has been finalised in any of the markets he spent time in, Azizi says the trips were not time wasted. They were a learning opportunity that gave the company “a taste of how a very mature, very seasoned market behaves and reacts to new developments.”
In 2018, we went through a lot of clean up. Today, we are in much healthier shape
“One of the things that is a big support in those markets is how the banking industry is a machine running the whole development. Banks are involved from day one. They are very strategic partners,” he says. [In the UAE], they are going down that path as well, but it takes some time. Banks here have been a bit more conservative.”
Among the most interesting markets that Azizi explored was Germany. Azizi proudly points out that the Azizi Group’s Germany-based company, Main-Tür GmbH, recently attained a “difficult to get” developers’ license after an intense, nine-month vetting process.
(Main-Tür GmbH is not to be confused with Meilenstein, a UAE-headquartered company whose managing director Jawad Azizi is Farhad’s brother and which also has operations in Germany. The company, which announced a foray into Dubai in October 2018, is not part of the Azizi Group.)
Despite that milestone for the larger group, he says that Azizi Developments has yet to ramp up operations in Germany to their full potential.
“I was testing out the market and it turned out to be pretty positive,” he adds. “But nowhere close, in terms of returns, to Dubai. The rate of return here is relatively higher for the developer and the clients. Every market has its pros and cons. None of them are perfect, including Germany, England and Toronto.”
In addition to industry rumours, Azizi Developments itself was also the focus of a newspaper report in August that “droves” of consultants and relationship managers left the firm after salaries were slashed by up to 33 percent in some cases.
Farhad readily admits that the company may have grown too fast, with staff numbers ballooning and rapidly becoming unwieldly, unmanageable and unsustainable in the long-term.
When asked about this story, Azizi adopts a serious, sombre tone – and is seemingly a bit puzzled at the fuss in the local media.
During the interview he likes to use the analogy of a glass of water: “If I give you a glass of water and you run with it, there’s a chance that you’ll spill,” he says of the company’s overall strategy.
“But if you walk with it slow, there’s a slimmer chance.”
Adopting this analogy, he says that the staff adjustments were a natural result of his company’s rapid growth.
“There are so many related companies. You need to be doing mortgages. You need to be doing facilities maintenance, and the real estate part. It becomes so big,” he remarks. “We felt it was becoming too much.”
According to the company, of the 20 percent of staff members that were culled, approximately half went to companies and departments that fall outside the Azizi Developments brand.
“We made separate entities, real separate entities, so that they could [each] become profit centres,” Azizi recalls. “It was not necessary to have so many directly and indirectly related and connected departments. It was going to take us away from our core business: which is to find a good location, design it well, give it to a good contractor, sell the property and deliver it in good time. In 2018, we went through a lot of clean up. Today, we are in much healthier shape.”
Returning to Azizi’s glass of water metaphor, it is evident that the developer may have tried to run too fast when it launched a raft of projects in 2013. The company seemed to explode out of nowhere. As if overnight, the streets of Dubai were full of blue and white Azizi signboards, while a veritable army of overzealous Azizi salespeople competed to sign up buyers.
While Azizi Developments’ business has been good – the company has over 200 projects in various stages of development – it has not escaped the challenges that have befallen the rest of the Dubai property market over the last year.
“Frankly speaking, 2018 was not the best of the best,” Azizi explains. “Sales wise, 2017 was better. Not by huge percentages, but 10 to 20 percent in different project locations. It was not just Azizi Developments. Many developers reported lower numbers.”
Azizi cracks a smile when asked whether he thinks the trend will continue. Already, he says, things have been looking up, with seven more projects slated for delivery in 2019, including properties in Healthcare City, Al Furjan and the Palm Jumeirah, along with the first phase of Azizi’s Meydan One flagship project, Azizi Riviera.
“I was surprised at how good December was. December was as good as December 2017,” he explains. “I looked at both and in December 2017, I had better inventory. If I had the same inventory [in 2018], it would have been better. For us, 2019 started out good. It’s been going according to our plans… this is a year in which we’ll have a lot of deliveries.”
With Azizi Developments more streamlined and his eyes firmly focused on what he repeatedly calls his company’s “bread and butter” operations at home, Azizi seems upbeat about the next few years.
This optimism, he says, is in no small part driven by an anticipated rebound in Dubai’s property market ahead of Expo 2020 that will leave Dubai a more mature, developed market than it has ever been.
Homebuyers want to be in a city that is safe, comfortable, where they have jobs and where the rules are very clear and transparent. Dubai has been offering a lot of that
“2020 will be the year with the most deliveries, so there’s a focus on that,” he says. “I think 2020 will be a year that is going to open up Dubai to so much more traffic and so many tourists loving it so much that they’ll want to buy a home and work here. It is a year so many of us are looking forward to, but it is after 2020 that Dubai will benefit from it. That’ll last for some time.”
As a developer, Azizi Developments is confident on demand remaining strong in the years after the Expo officially closes its gates to the world. The Azizi Riviera project alone will boast some 16,000 residential units. But over the last year, there has been a steady stream of reports surrounding what some have termed as an oversupplied real estate market.
Azizi, for his part, does not seem the slightest bit concerned that construction will outpace demand. In fact, he says he’s excited about what he believes is a new reality in Dubai. Gesturing towards the city – with many construction sites in view – through the window of his Majlis room, Azizi says that Dubai has finally become a “global city”.
“This isn’t the Dubai of 20 years ago. Today, there is a very constant demand for things,” he remarks. “The fluctuations won’t be big, if there are any. Things don’t spike up or go down quickly. This is something that gives a developer confidence to go acquire more plots.”
The Dubai of today, Azizi adds, stands in stark contrast to his memories of 2008, the year that Dubai’s economy and real estate market crashed in spectacular fashion, prompting a mass exodus of potential buyers and causing projects to grind to a standstill.
Azizi looks anguished when he recalls the frustration at the time. The downturn hit the company hard. A year after Azizi Developments was launched in 2007, for example, it bought plots and began building towers in Al Furjan, only to have property buyers back out, unwilling to continue the project and unable to continue the payments.
Working with the Dubai Land Department, the company ended up having to hand deposits back to the majority of its buyers, and lost over $40m that it spent on design, marketing and land payments. The troubled project was not revived until 2013 and deliveries only began three years later.
Looking back, Azizi says he is convinced that history will not repeat itself. “Eleven years ago was so different from now. The rules and laws were different. There were fewer restrictions,” he says. “These restrictions, and Dubai becoming more of a mature market, has allowed us to go and acquire big plots.”
What has changed then? For one, Azizi points to recent changes in the UAE’s laws that allow 100 percent foreign ownership of companies and 10-year residency visas for expats, investors and business people. “The new rules help big time, as more foreign companies are opening offices here. Those changes are opening doors.”
“Every year, things have become better and that helps developers,” he adds. “We want homebuyers. Homebuyers want to be in a city that is safe, comfortable, where they have jobs and where the rules are very clear and transparent. Dubai has been offering a lot of that.”
Dubai continues to offer the Azizi family a lot of opportunities and 2019 is likely to see more growth both here and abroad, regardless of the rumours their rivals may try to spin.
In late February, Azizi Developments unveiled Les Jardins, a giant park within Azizi Riviera. The park will span across the whole development, offering residential towers direct views and access to the gardens. The park will comprise ponds, fountains, paved jogging and walking paths, picnic areas and social spaces designed for larger events. There will also be barbecue areas for families living in the area to gather.
“One of our top priorities is to ensure the wellness of our residents and to add to their quality of life,” CEO Farhad Azizi says of the park. “Les Jardins will significantly enhance the well-being of our residents in Azizi Riviera, not only assuring them spectacular views but also the ideal environment to pursue a healthy and balanced lifestyle. The addition of the park will also add immense value to investors and assure strong returns.”
While nothing has been announced yet, Azizi says that the company is exploring its entry into the hospitality market, building upon the hotel apartments it has already developed in Dubai. “We want to do something in the future,” he explains. “We’ll be looking in different areas to build something from scratch or buy an existing property and turn it around, or keep the same operator… there’s a team on it, doing all their homework.”