Take a deep breath, tiptoe towards the edge, and then look down. It’s an incredible view.
Sylvain Vieujot has done that a few times in his business career.
For a while, he was a senior executive at the management company that owned the Eiffel Tower in Paris; then looked at the vertiginous environment of the Dubai property market in 2006, when prices were soaring skywards towards the crash of 2009; then, as deputy executive chairman and co-manager of Emirates Real Estate Investment Trust (Reit), he was part of a team that began to scale the heights of the local property business again last year, with the first listing on a Dubai stock market for five years.
For that, you need a head for heights and a sureness of judgement and timing. It seems to have paid off for the 44-year-old Frenchman.
The initial public offering (IPO) of Reit has been a success by any standards. The shares have performed well since the listing in April, net asset values (the key indicator in the property market) are healthy, and profits have soared ahead as Dubai’s market has found its old confidence.
“We looked at it first in 2006, but it just didn’t make sense back then. Asset values were very high and rising, and investors were looking for rates of return of around 20 per cent, which wasn’t possible. I cannot claim I foresaw the crisis back then, but it just didn’t make sense,” he says.
Despite his background in property in France, when Mr Vieujot came to Dubai in 2006 it was not with the explicit aim of joining the emirate’s booming real estate market.
“I had an information technology company in France that had a lot of clients in India and China, but I was also spending a lot of time in America. Dubai was a very good base for me to stay in touch with all those clients,” he explains.
“But once I was in Dubai, I realised that real estate was one of the key drivers of the economy and business but there was no proper structure for investors, and no good, clear product to invest in. Institutions didn’t want to own buildings, but they did want a piece of the action of the market. A real estate investment tract was the best way to do that, but nobody had tried it in the Gulf region,” he adds.
One of the key challenges was to cultivate contacts in the local property market. He and his management team did this by forming an alliance with Dubai Islamic Bank, the Shariah-compliant lender, which in turn opened doors with government contacts that were to prove decisive in Emirates Reit’s development.
“You always need good relations with government and with government-related companies. Because of local restrictions on property ownership, we had to do it hand-in-hand with the authorities, and in the end obtained a decree that enabled us to buy property onshore,” he explains.
By 2009, when the Dubai market had hit rock bottom as the fallout from the Dubai World crisis swept across the property market, he and his partners saw the opportunity. Prices were low but the potential was enormous. The recovery that is now well established was the perfect springboard for the launch of Emirates Reit.
Does he think Dubai’s property recovery is sustainable this time round? “I don’t want to comment on market trends because that’s a risky business, as we’ve seen in the past. But today I would say there are lots of fantastic investment opportunities in the sectors that we know and understand, and yields are heading upwards again, at around 10 per cent,” says Mr Vieujot.
Those opportunities are broadly in the commercial property sector, which is slightly lagging behind residential in Dubai’s recovery, but that seems to be an incentive for Emirates Reit. The headline-grabbing deals it has done so far – backed by the US$200 million or so raised in the IPO – have been for parts of the Index Tower in Dubai International Financial Centre, and the GEMS World Academy sale and leaseback. In both cases, the investment was an opportunistic event.
“One significant source of properties for us are the businesses and companies that own some real estate for historic reasons, and want to refocus on their core business. This was the case with GEMS, who wanted to unlock capital; and with Index, where Emirates NBD had received the property as settlement of a non-performing loan. In both cases, selling to the Reit is a nice solution,” Mr Vieujot explains.
“But there are lots of sub-sectors we haven’t invested in yet, like industrial, warehousing, hospital and hotels.”
The IPO gave regional and international investors a means of getting into Dubai property without the risks and distractions of actually owning buildings. “The shares are more liquid than owning real estate. You can buy and sell them as you wish. We’re happy with the share price and with the volumes. Nasdaq Dubai [the market on which the shares are listed] has been good for us,” he says.
With Dubai’s long list of megaprojects, there will be no shortage of investment opportunities in the future. “Our goal is to buy properties that are completed or nearing completion. There are a lot of those coming in Dubai,” says Mr Vieujot.
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