Deyaar chief Giebel steps down

More changes could follow as Dubai developer reshuffles.

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Markus Giebel has been replaced as the chief executive of Deyaar Development, Dubai's second-largest property developer, as part of a major management reshuffle that is expected to see the departure of other top executives. Saeed al Qatami has been appointed the acting chief executive, Deyaar said in a statement. Mr al Qatami was formerly the company's president of business development.

"The appointment is part of an ongoing management restructuring being undertaken in line with the company's long-term strategic objectives," the statement said. "Deyaar made this announcement following a resolution by the company's board of directors approving the appointment of al Qatami to this position, while also approving the dismissal of the previous chief executive officer, Markus Giebel, with immediate effect."

People familiar with the matter have said the changes could see the departure or resignation of other senior executives in the coming weeks. The chief financial officer, Krishnamurthy Sundaresan declined to comment when asked if he had submitted his resignation. "You need to be operationally efficient," Mr Sundaresan said. "We haven't figured out of all the changes yet." The change of management at Deyaar comes after a tumultuous two years for the company.

In April 2008, it emerged that the then-chief executive, Zack Shahin, had been detained on charges of corruption. That marked the first of a series of high-profile investigations in Dubai that led to more than a dozen other executives being jailed. Mr Shahin remains in custody while the case continues. Just seven months later, at Cityscape Dubai in October 2008, Deyaar came back into the spotlight with a new logo and a management team led by Mr Giebel. Mr Sundaresan was hired in the same month.

Mr Giebel embarked on a strategy to reduce the default rate of homebuyers, create a distressed assets fund with investors to buy up properties from struggling buyers and consolidate projects. Only about 5 per cent of Deyaar's 5,000 customers defaulted on their payments last year thanks in large part to its working with buyers on payment plans, reducing prices in some cases and cancelling some projects, the company said.

It also handed over eight projects last year, including The Citadel and Madison Residency, and plans to complete another six this year. Still, the property downturn has taken its toll on the company. Deyaar reported profits of Dh30 million (US$8.16m) last year, a 95 per cent decline from the year before. A proposed Dh500m distressed assets fund was postponed in February after several international investors pulled out.

Deyaar's shares have lost about 17 per cent this year. "Sustained down cycles put a lot of pressure on the management team to deliver on their promises," said Saud Masud, an analyst at UBS in Dubai. "Coming up with a strategy is one thing but executing it is another." Last June, Nasser al Shaikh resigned as the chairman of Deyaar Development after having been replaced as the director general of the Department of Finance a month earlier. Mr al Shaikh had overseen the hiring of Mr Giebel.

"They had lots of ideas but it doesn't seem as if they are moving very fast," said Nabil Ahmed, the head of research for the region at Deutsche Bank. "It's where you have a strong management team but they don't have the flexibility to do what they want to do." It is understood that the company is seeking to diversify its revenue stream using Singapore's CapitaLand as a possible growth model. "They are into everything: property development; fund management; leasing; [Real Estate Investment Trusts]; property management," Mr Sundaresan said.

The next big challenge for Deyaar is what to do after next year when it would have delivered most of its projects and seen revenues drop sharply, said Chet Riley, an analyst at Nomura Securities in Dubai. "We think the current management team has implemented a worthwhile strategy," he said. "Where we have concerns is the strategy [after] the Dubai development programme. We have no clear view or guidance from the company of how they are actually going to execute their overseas strategy, and this becomes a concern after 2011."

Mr al Qatami, who has been with Deyaar since 2007, previously held managerial positions at Dubai Islamic Bank and Standard Chartered Bank. Deyaar's stock lost about 0.6 per cent yesterday before the company made its disclosure. The stock has fallen by about 17 per cent this year.