By Ed Attwood
Sheikh Saeed Obaid Al Maktoum, chairman of AJSM Investments, explains how his family firm managed to double its revenues last year, despite the difficult economic circumstances
From apps to offices, and from food to pharmaceuticals, there aren’t many sectors in which Sheikh Saeed Obaid Al Maktoum doesn’t have an interest.
“One of the most enjoyable things about my job is that I see different people every day,” he smiles. “I hear new ideas every day. My doors are open for everyone.”
Thus far, Sheikh Saeed’s policy has certainly served him well. As the youngest of five siblings, he decided four years ago to put all the family’s investments under one roof with a view to gaining better returns from the pooled wealth. The result is AJSM Investments, a holding company that is witnessing pretty impressive growth, especially given the current environment.
“When we started, my plan was to double our investment in five to six years,” Sheikh Saeed, the firm’s chairman, says. “I was hoping for a healthy increase of 20-25 percent year on year.”
AJSM Investments’ primary interest back then was property in the non-freehold parts of Dubai, which consisted of about 85 percent of the firm’s business. As time has progressed, the share of real estate in the group’s portfolio has shrunk to 40 percent thanks to a policy of diversification, but it’s clear that property still plays an important role.
In fact, it has been the key driver behind an impressive 100 percent increase in revenues at AJSM Investments in the last year alone, to around AED120m ($32.66m). Sheikh Saeed says his cause has been helped by plans from developers such as Nakheel and Emaar, who have offered structured and discounted land payment plans for locally owned businesses. That being said, tougher regulations and stiff competition are presenting their own challenges.
“The market is getting harder and harder every year, but at the same time it’s getting bigger,” he says. “There are stricter rules. The potential buyers are becoming more aware of the market, so they have more options, such as better payment plans.
“You have to have the right project, the right plan, the right advertising and the right timing. All of this makes it healthier for both developers and buyers.”
At the moment, AJSM Investments is concentrating on two major projects: a townhouses project in Nakheel’s masterplanned Al Furjan development, and two towers in Jumeirah Village Circle. Construction on the latter has just begun, with completion scheduled in about a year’s time, while the second project is still in the design phase.
“From what I see in the market, these are some of the most in-demand areas,” Sheikh Saeed says. “People are looking for low- to mid-range real estate, instead of the high-end real estate we’ve seen in recent years. So we’ve targeted this area more than anywhere else.”
Cheaper housing has certainly become a more prominent part of most UAE developers’ portfolios. Last month, state-owned Dubai Properties Group launched the first phase of its new affordable housing project in Dubailand, a development that it said sold out “within hours” on its launch day. Private developers, such as MAG Group and Danube, are also getting in on the act.
Sheikh Saeed says that as AJSM Investments has no commitment to banks and is entirely self-funding, the need to sell units rapidly offplan to get his projects funded isn’t the concern that it is for other developers.
“Mostly when I start my projects, it’s not like other people who will take a project, want to sell, make their money and leave,” he says. “I don’t mind building it and keeping it. I can rent, or sell after four years — it’s much easier for us.”
Any new project, of course, must be set against the backdrop of a slight decline in the Dubai housing market in recent months. While there is no sign of the price implosion witnessed six years ago, several factors such as the low oil price and the strength of the US dollar is keeping investors at bay. Sheikh Saeed also points out that negative sentiment, caused by conjecture and rumour in the market, has also played its part, but he certainly remains bullish about Dubai’s prospects.
“I’m in the real estate market, and a lot of people are worried about crashes and falling prices,” he says. “But I’m seeing healthy 25-30 percent profits, so what are these guys talking about? They’re not even in the business, they’re just hearing it.
“They start believing it, and then other people start believing it. It will be a slow year, yes, but not as bad as people think.”
But the property story is only a small part of AJSM Investments’ ambitious plans for the future. This year is set to be a landmark year for the firm, as investments in several different sectors start to pay off.
The recent purchase of a stake in Lifco Group, a Sharjah-based supermarket and wholesale firm with approximately $200m in revenues, is seeing AJSM Investments take more of a strategic role in driving the food giant’s growth.
“They’ve been in the country for about 40 years, but they’ve never expanded,” Sheikh Saeed says. “Since we bought into the company, I’ve been driving it to expand locally. We need to be more on the retail side — they are more focused on wholesale.”
Thanks to AJSM Investments’ guidance, Lifco is building a new cheese factory in Jebel Ali that is expected to be completed in June this year. The firm is also looking at new supermarkets in Abu Dhabi and Sharjah, Sheikh Saeed says, while a 100,000 square foot centralised distribution centre is also being finalised in Jebel Ali.
“We are also looking into small retail shops selling organic fruits and vegetables, so instead of going to Spinneys or the supermarket, you can have something just around the corner,” the chairman adds.
Also on the agenda is the pharmaceuticals industry, which is seeing ever-increasing demand in the Gulf thanks to rapid population growth and lifestyle changes. In the UAE alone, the sector is expected to be worth an estimated $3.7bn by 2020. At present, the Gulf market is controlled by foreign firms, with only a few local manufacturers, such as Ras Al Khaimah’s Julphar, having much of an impact.
This year, Sheikh Saeed is setting up a joint venture with Greek and Portuguese partners to build what he terms “one of the biggest pharmaceutical factories in the UAE” at 12,000 square metres in size, which will export generic products.
“We’re targeting low to mid shelf products for Africa, Europe and Russia, places like these,” he says. “For the past two years, I’ve seen the UAE government pushing into industries. This is the way forward for us.”
Elsewhere, the firm is working hard on delivering a new app, Myhubber, which has been coded here in the UAE by an in-house software company. The app, which focuses on loyalty programmes for shoppers, and which allows retailers to target consumers with deals based on their location, has taken two years to develop.
While the current oil price environment has made it tough for local governments to balance their budgets, Sheikh Saeed says he remains confident that the private sector will pull through.
“It’s a good thing and a bad thing,” he says, of the collapse in the oil price over the last 18 months or so. “The bad thing is that most people are afraid to invest in times like these, people would rather wait.
“But the good thing is that it makes you looking into other businesses apart from energy. The most important thing is that it has pushed the UAE government into looking at other businesses — one of which is industry. This makes us realise we need to diversify more.”
To say that AJSM Investments has plenty on its hands is something of an understatement. Not that Sheikh Saeed seems at all fazed, and you get the impression that there are plenty of other diverse projects on the horizon.
“Everything comes through this office,” he says. “I’m here 9-5 and everything goes through me.
“My doors are open for everyone. Even if I’m personally not interested in the idea, I will give them advice, or point them to someone else, or even give them my own idea.
“I’m not just looking at investments of AED100m — even if the investment required is AED10,000 and a small project, I’m open to that.”
That approach blends in with Sheikh Saeed’s plans to foster a more entrepreneurial environment here in the UAE. Part of those plans include launching the region’s first Islamic crowdfunding platform. It may be a new concept for the Middle East, but the idea has gathered pace in Singapore and Malaysia.
“The difference is that we will be targeting halal projects, and that there’s no interest like in other crowdfunding projects — so it’s a non-profit organisation,” the chairman says. “The Islamic community is one of the largest in terms of charitable contributions — the average Muslim is believed to contribute $600 per year.
“We are planning to give back to society, and at the same time it will benefit both sides. The government mostly targets locals when it comes to initiatives like this, but as you know Dubai is a multicultural place, so why not target everyone with this? The majority of the population is non-local, but no-one ever targets them.”
As well as the crowdfunding platform, Sheikh Saeed is also in talks to set up a programme called AJSM Hero, which will target colleges and universities here in the UAE and pick capable students to foster their development.
“I’ve experienced this myself — it’s very satisfying when someone gives you a small push and the confidence to start something,” he says. “You become the happiest person alive. Even if you fail and fail and fail again, you’re still happy there’s someone pushing you.”
For the future, Sheikh Saeed says he is not looking too much beyond his original plan of growing between 20-25 percent per year. The firm’s liquidity means that there are no ambitions to go public as yet, and for the time being, he remains confident about AJSM Investments’ prospects.
“Is it challenging? No. Is it enjoyable? Yes. The more problems I have, the more I have to do,” he says. “When everything’s running smoothly — now, that’s a problem.”
This is very interesting. I wonder if AJSM has communication going with start-up accelerators in Dubai and Abu Dhabi especially Flat6Labs who have been working hard on attracting the right talent or start-ups from around the world and locally to run in their programs.
If I were ever to meet with AJSM and Sheikh Saeed personally, I definitely choose to introduce what it is that we do as a start-up and struggle with in the real estate industry with developers and of course the whole structure in which units are transacted.