Sheikhs, Lies and Real Estate: The Untold Story of Dubai (31 page)

I watched the rest of the show from backstage.
Fernando’s performance was incredible and got the entire audience on their feet
to party the night away. Men in expensive tuxedos and women in impractical ball
gowns danced on their chairs and on tables as he played his greatest hits.

‘What a show, Fernando!’ I said as he finally
returned backstage, sweating profusely.

‘Thanks, mate. But the night is only just
beginning. There’s a limo waiting for us outside to take us to my penthouse.
Are you ready for the night of your life?’ 

The rest of the night was a haze. I had vague
flashbacks of a hotel room, lots of booze and perhaps some drugs. There were
women, dozens of them, all stunning and exotic, and a pool and some empty
champagne bottles. I have no idea how I got home, but I was woken suddenly the following
evening by an email on my BlackBerry. As I scrambled for my phone, I noticed
through blurry eyes that it was from Taz’s assistant requesting a meeting. I replied
before rushing to the bathroom to throw up.

***

‘So did you enjoy the party?’ asked Taz, leaning back in
his white leather chair, puffing on a fat cigar.

‘It was incredible, I think. I don’t remember
much after the show,’ I said sheepishly. 

Taz winked. ‘Sounds like you had a crazy night!’

‘Yes, it seems I did. But thanks so much again
for the invitation, Taz.’

‘It was my pleasure to have you as our guest,’
he smiled. ‘But as I mentioned to you before, we need to talk serious business
now.’

‘Yes, of course. What would you like to
discuss?’

Taz sat back and stroked his chin for a moment.
‘I have been thinking some more about your fund idea. I see us working together
in two ways. First, you need investors, and I can bring you investors with
serious money. And second, you are looking for a strong pipeline of properties,
and I can also help you there.’

‘Okay, I’m listening,’ I replied.

‘Let’s just say I have friends who have substantial
capital and I can convince them to invest with you. But like every business
deal, I need something from you.’

‘Like what?’

‘On one side I will bring you investors for
your fund. If they invest, you pay me a percentage as an introduction fee. On
the other side, I will bring you deals for the fund. You will use their capital
to invest in these deals, and I will pay you a fee for investing in my deals.
This way, everybody wins.’

I was a little confused. ‘But why don’t you
just sell your investors the real estate directly?’

‘I could. But there is a small problem. These
are, you could say, “special investors”. You see, these investors cannot
technically invest directly into Dubai property, even though they have hundreds
of millions of dollars to do so.’

‘Why not?’

‘Because there are certain restrictions on these
investors.’

‘I’m sorry, Taz, I don’t understand.’

He got up and strolled over to where I was
sitting. He took a seat next to me and lowered his voice.

‘Can you keep this strictly between us?’

‘Of course.’

‘My investors are Israeli.’

I still didn’t get it. ‘What does that mean?’

Taz shook his head. ‘Are you telling me you
don’t know about the rules in the Gulf against doing business with Israel?’

‘I’m sorry, I don’t.’

He sighed. ‘There is an official ban on it.
Israel is the enemy. The countries of the Gulf do not even recognise its
existence, so any business dealings are completely forbidden.’

‘And do Israeli investors really want to invest
in a country where their money is not wanted?’

‘Brav, just look around you. Who is not making
money in Dubai? Everything is turning to gold here. People are making faster
returns on their capital than any other investment in the world. Which serious
investor would not want a piece of this?’

‘Okay, Taz, but I still don’t see how this fits
in with the Milestone fund.’

‘My friend, your fund is an offshore investment
vehicle. My investors keep their capital in offshore trusts and shell
companies. Milestone is a good name in the market. I think this is a unique
opportunity for us both.’

What Taz was asking was suddenly clear. He
wanted to use the Milestone fund structure as a front to help move funds
illegally from Israelis to Paradise City’s projects. The offshore structure removed
a layer of scrutiny by the authorities, and with an established and respected
name like Milestone behind it, it was unlikely to encourage too much
investigation. In return, he was willing to share fees with me every time the
fund invested in a Paradise City project, which was effectively a bribe.

I began to panic. ‘This is against the law,
Taz! What if the Dubai authorities were to find out who the investors in the
fund are?’

‘The important question is, do they really want
to find out?’ He began to get heated as he spoke. ‘You think this city is where
it is because of working-class people putting their life savings into studio
apartments? Bullshit! Billions of dollars have flooded into this market in the
past few years. And you think that is clean money? No, my friend. Most of it is
dirty money. Laundered money. Blood money. The authorities don’t care one bit
where it comes from. They have never cared. Dubai has been a haven for arms
dealers, terrorists and money launderers from the beginning. Today these same
men are building the greatest city in the world. Too many important people are
making too much money to care where the hell the money is coming from. But it
has to be done a certain way for political reasons. They need to save face. Now
do you understand?’

‘Yes, but…’

‘But nothing! I told you I wanted a favour and
you agreed. I was very clear. Now I’m offering you an opportunity to make some
serious money, and you’re throwing it back in my face!’

‘I-I-I...’ He made me feel terrible, like I had
betrayed him somehow.

‘Let me tell you something about my story. I
have no formal education; I was kicked out of school at 16 for doing drugs. I
was down and out, brav, I didn’t have a future. How do you think a guy like me
got to where I am now? Do you think I did it by working my way up from the
bottom? No, man. I saw an opportunity. Do you know why Paradise City has been
so successful so quickly? Paradise City is a front for the Indian mafia. We
launder funds for gangsters. There, I said it! Are you shocked? Well, don’t be.
Most companies in Dubai are built on the same dirty money, believe me. The only
difference is I have the fucking balls to admit it. So what’s your answer?’

‘I can’t give you an answer now, I’m afraid,
Taz. I need to think about it.’

He stared into my eyes as if he was about to
strike me. ‘To think about what? I need a decision now!’

‘Then the answer is no.’

He jumped at me like an enraged animal. I
managed to push him off, but he picked up a white chair and came at me again. ‘I
treat you as my friend, I invite you to my event as my guest, I introduce you
to the biggest star in the world and this is how you fucking repay me? Get the
fuck out of my office!’

I happily obliged and ran towards the door,
while he continued to shout at me. ‘This is how you do business? I can’t
believe you fucking people!’

I was shaking in the cab back to the office,
and I decided to tell Rav the whole story. With Tariq’s
wasta
among
government officials and based on what Taz had revealed, I was sure Paradise
City could be investigated for money laundering and criminal activity. If I had
known Taz’s invitation to the party would be at such a high cost, I wouldn’t
have attended at all. A night with Fernando was not worth this insane price.
But one thing was for sure, it was unlikely that Paradise City’s no-broker
policy would be changing any time soon.

***

That evening, as I relaxed alone in my apartment after a
gruelling few days, I received a call from Sharaz, Aziz’s friend from the
Brotherhood. He had tried called me regularly since that night at the Casbar,
but I had consciously avoided him. It was now time to give him a clear hint
that I wasn’t interested in being his friend, so this time I picked up
expecting to brush him off for good.  

‘Adam, I really need to talk to you, man.’ He
was struggling to hold back his tears.

‘What’s wrong?’

‘Can you meet me in an hour in the Old Town? I
really need to speak to somebody right now.’ His voice was quivering and I knew
something serious had happened.

‘Of course. I’ll be there.’

When I arrived at the café, Sharaz was sitting
alone in the corner with his head in his hands. He looked dishevelled and
broken. I walked up to his table and sat down slowly.

‘Thanks for coming. I really didn’t know who
else to call,’ he said. His eyes were bloodshot and he was sniffing back his
tears.

‘No problem. What’s happened?’

‘Man, I fucked up. I really fucked up.’

‘What happened, Sharaz?’

‘She caught me, man! She caught me red-handed.
The bitch told her everything. I totally fucked up.’ He began to sob again. I
had no idea what he was talking about, so I probed a little further.

‘Sharaz, start at the top. I’m here to help
you.’

‘Okay, okay.’ He wiped the tears from his face
and composed himself. ‘Remember that Russian girl I introduced you to at the
Casbar? The blonde?’

I had seen so many Russian girls in the past
few months that I struggled to recall at first. But the image of Sharaz kissing
and caressing a woman’s thigh on the dance floor eventually came to mind. ‘Yes,
I do.’

‘Well, I was kind of seeing her a few times a
week. We were just fooling around, going for drinks and stuff. One night, we
got pretty drunk and went back to her place. One thing led to another...’ He
started to cry again.

‘Okay and...’

‘I didn’t mean for it to happen, really, I
didn’t mean it.’

‘Did you get her pregnant, Sharaz?’ I asked. He
nodded.

‘It just happened, man. I didn’t do it on
purpose.’

‘Shit. Okay, and then what?’

‘She just kept texting me and calling me, like
some crazy, possessed bitch. She threatened to tell my wife everything if I
didn’t agree to pay her a regular maintenance allowance when the child was born.’

‘Did you agree?’

‘Yes, I did. But a few days later she…’ 

‘Did your wife find out, Sharaz?’

‘She read my emails last night. She knows
everything...’ He shook his head. ‘What the fuck am I gonna do? I’ve lost
everything!’

My heart sank to my stomach. I had seen this on
the cards that night in the Casbar, but I had been helpless to do anything
about it. Sharaz’s wife had already booked her flight home to London with his
son. It was a tragic situation, and although he had only himself to blame for
his stupidity, I couldn’t help feel sorry for him as he helplessly watched his
family crumble.

Like so many others, Sharaz had fallen victim
to the dark side of the Dubai Dream. The city was a honey trap full of gold
diggers looking for vulnerable men, and Sharaz had fallen right in. Hard-working
family men were helplessly lured by the temptation of this Arabian fantasyland
like moths to the flame. Friendly women were only a phone call away, and men
across the city were caught in a web of self-deception and temptation every day.
It made good men neglect their real responsibilities, and in a few tragic cases
like Sharaz’s they were left washed up and bereft.

In a land without limitations, many pushed too
far and lost themselves in the process. Sharaz was not the first to fall into
the pit, and he would certainly not be the last.

The famous ‘Skyscraper Index’ was the brainchild of economist
Andrew Lawrence. In his 1999 note as the Research Director at German investment
bank Dresdner Kleinwort Wasserstein, Lawrence suggested that there was a direct
correlation between business cycles and tall buildings. The World Trade Center
in New York opened just before the 1973–74 Wall Street Crash. The Petronas
Towers in Kuala Lumpur were completed prior to the Asian financial crisis in
1998. London’s Canary Wharf tower opened in 1990 before a major recession. It
seemed that history was suggesting that mankind’s penchant for architectural
overreach was an eerily reliable omen of troubles ahead.

I was sitting at the Calabar, a swanky outdoor
lounge at the base of the mighty Burj Dubai, on the day it was officially
announced as the tallest building in the world. It was a proud moment. I had
witnessed every step of its growth from humble foundations into the mammoth
spire of steel, aluminium and glass it was today. I looked up at it floor by
floor to the point where the distant tip of the mighty icicle finally met the
sky, almost straining my neck in the process. There was no doubt that it was an
architectural feat and a masterpiece of construction that aptly celebrated Dubai’s
‘can do’ mindset.

It was also the week that shocking news broke of
the collapse of US investment banking giant Lehman Brothers. On the flat-screen
televisions mounted above the pool bar were distressing pictures of forlorn
bankers escorted out of office blocks, carrying their possessions in brown
cardboard boxes. Yet nobody around the pool seemed to care much. Dubai was a
world away from the petty troubles of the West, and most Westerners were
thankful to have escaped the toil of their home countries. Few Dubai residents
had any idea how severe the growing financial crisis in the US and Europe
really was, including me, until my old lawyer friend Anthony called from London
to tell me.

‘Mate, the West is falling apart!’ I could hear
the desperation in his voice. ‘This Lehman thing has fucked everything up.’

‘Yes, I was watching it on the news earlier. It
looks pretty bad.’

‘It’s a freaking disaster! Everybody is scared shitless
about their jobs. Half the people I know now want to move to Dubai.’

‘Really, why Dubai?’

‘Are you kidding me? Things are cruising over
there, right? Haven’t you heard the phrase?’

‘What phrase?’

‘Dubai, Shanghai, Mumbai or goodbye! While
people are losing their jobs here, you guys are building the world’s tallest
tower and tree-shaped islands. Everybody in the West is looking East now as a
safe haven from the crisis.’

Anthony was right. While the titans of Western
capitalism were toppling, Dubai looked invincible to the outside world. There
were more Porsches and Ferraris on the roads than ever before. The malls were
packed, the restaurants were bustling and the clubs were buzzing. Tourists were
still flooding into the city in droves and the hotels were at capacity. And so
recruitment companies in Dubai were inundated with the CVs of senior
professionals from London and New York, and many investment banks shifted their
best people to their Dubai offices to escape the turmoil at home.

Financial analysts and experts from Dubai
jumped on the bandwagon and regularly began to appear on Bloomberg and CNBC to
offer elaborate ideas about why the Emirate was immune from the world’s problems.
They spoke of its unique political system and centrally controlled economy,
which meant it was not exposed to the raw forces of global capitalism. They
argued that the city was a safe haven for capital, that consumer confidence
would remain high and inward investment would continue. This theory that its economy
was somehow decoupled from the global system began to gain momentum, to the
point that most Dubai businesses accepted it as an economic fact.  

And on the back of this new vote of confidence
in the city’s fortunes, the property market continued to surge forward, and the
latest round of project launches were the most outrageous yet. There were proposals
for buildings lookin like Coke cans, various animals and even one in the form of
an Emirati man, complete with traditional headdress and
dishdasha
.
One developer proposed a ‘Chess City’ with thirty-two skyscrapers
built in the form of individual chess pieces on a giant back and white chess
board.
But perhaps the most far-fetched idea was the luxury underwater
resort, Hydropolis. Shaped like a giant jellyfish, the Hydropolis would consist
of two hundred luxury suites submerged sixty-six metres under the sea, offering
spectacular views of the ocean bed and passing mermaids! This one-of-a-kind
hotel would feature a cosmetic surgery facility and its very own missile
defence system. It was due for completion in 2014.

Milestone Properties was also entering a new
era of growth by the middle of 2008. After over ten years, the firm was finally
moving out of its tired old offices and into a brand new, state-of-the-art
sales centre in the Dubai Marina. Tariq had spent over a million dirhams
equipping the new office with the latest Italian furniture, computers and phone
lines. There was even a bar offering coffee and juices to clients in the
waiting area. Tariq had spent his entire summer recruiting an elite team of
experienced real estate agents from Europe to take the company into the next
phase of growth. Many of them were experienced brokers from Spain and the UK
who, in the face of the collapse of their respective markets, were now looking
for the next big thing.

Business confidence in the city was at an all-time
high and the property market was reaching new heights of ambition. And then in
August, like a bolt out of the blue, came the ominous Morgan Stanley Report. Entitled
‘Winners and Losers in MENA Property,’ its ominous findings sent shockwaves
throughout the market:  

We expect oversupply to hit Dubai in 2009,
leading to a period of price declines.

The report was the first credible projection
ever of a decline in real estate values in Dubai, predicting that property
prices could fall by as much as 10 per cent by 2010. It didn’t help that it was
written by one of the world’s most credible financial institutions, making its
findings more difficult to brush under the carpet. It was an unwelcome spanner
in the cogs of the well-oiled Dubai money machine, and an inevitably fierce
backlash followed from the heavyweights of the Emirate’s property industry.
They argued that the report’s valuation methodology was flawed and that it
ignored the simple fact that the fundamentals of the Dubai property market were
unique and exclusive compared to other regions. Some developers even threatened
legal action against the bank for the potential losses in revenue it could
cause. 

As I lay on my bed and read through the entire report,
a shudder went down my spine. There was not a single point in it I could
disagree with. It warned of the excessively speculative nature of the market,
the unsustainable rate of increase in property prices, the threat of spiralling
inflation, and the real risks of oversupply and correction. Its bold
observations vindicated every concern I had been feeling, and I was glad that
industry leaders would finally sit up and pay attention.

Given its groundbreaking revelations, I strongly
believed that everybody at Milestone should be fully aware of its findings. It
was important that everybody knew the state of the market and where we were
heading as a business. So I sent it to the entire team at Milestone, including Tariq,
Rav and Edward. By doing so, I was showing initiative which I was sure would
impress Tariq.

As I got ready for work the following morning,
I was expecting to be greeted as a hero in the office. But from the moment I
arrived I knew something wasn’t right. Nobody wished me good morning and it
seemed that everybody was avoiding eye contact with me. Even the usually bubbly
Sharon and Amy refused to acknowledge me. As I sat at my desk, Rav spotted me
from across the room and rushed over.

‘Can we have a chat?’ he said.

‘Sure,’ I replied.

‘Let’s grab a coffee downstairs. Follow me.’
Rav never usually had time for coffee, so I knew something was up.

‘That was a very interesting email you sent
around last night.’

‘You mean the report?’ I asked.

‘Yes, the report. I read through it this
morning. I must admit I didn’t understand it all, but I think I got the gist.’

‘Well, I found it quite enlightening! There’s a
lot of truth in its observations that we should probably discuss as a firm.’

‘Perhaps. But I don’t think it was such a good
move to send something like that to the whole company. I would strongly suggest
that you don’t do anything like that again.’ His tone was uncompromising.

 ‘Why not, Rav? Don’t you think it’s important
that everybody in this firm knows the experts’ view on the market? You don’t
have to agree with what it says, but as real estate professionals, surely we
need to know what’s going on?’

Rav looked deep into my eyes before answering. ‘Son,
I understand that you come from an investment banking background and you have a
banking mindset. But the way we run things here is very different to what
you’re used to. Our sales people are not bankers. Most of them have never even
worked in real estate before. They’re not educated, intelligent and well-informed
like you. They are trained to say good things to the clients, take down details
and close. And that’s all we want them to do. Do you understand what I’m
telling you?’

‘No, I can’t say that I do.’

He looked over his shoulder before continuing. ‘We
don’t want them to think too much out of the box, and we certainly don’t want
them to start thinking negatively about what they are doing. They don’t
understand reports like this! Most of them have never heard of Morgan Stanley,
and we would prefer to keep it that way.’ He leaned back in his seat and sighed
heavily. ‘Look, things are going well right now. Better than ever, actually. We
certainly don’t want to rock the boat too much, and we simply can’t afford any
negativity to set in.’

I knew at that moment that this message was really
from Tariq, not Rav. In a way it was a warning to me not to interfere in the
running of the business. Tariq had trained his team to think and work in a certain
way, and by sharing the report I was somehow challenging the status quo and
encouraging them to think independently.

But brushing its findings under the carpet with
such ease in favour of short-term financial gain concerned me deeply. In a way,
the analyst who had compiled the report and I were in a similar boat. While I
had been cautioned for sharing it, he was also berated every day by all those
whose interests it threatened. There was no room for the voice of reason in
this greedy, money-obsessed game. I had tried to be too clever for my own good
and I was paying the price.  

The bad taste left by the report was quickly
forgotten as the preparations for Cityscape 2008 began in earnest. With so much
negative news looming, the event could not have come any sooner to cleanse the
air and bring everything back to normal. It was now a matter of pride, and this
was Dubai’s chance to show the world it was back to business as usual.
Milestone expected this to be its biggest Cityscape yet. The sales team were
already talking about the record commissions they would make, and some even
booked luxury vacations and sports cars in anticipation of the buckets of cash
coming their way.

Undoubtedly the stands were more jaw-dropping,
the saleswomen more beautiful and the projects more outrageous than ever before.
This year’s launches were bigger than anybody’s wildest dreams as the Dubai PR
machine rolled on relentlessly. A new developer called Meraas, Sheikh
Mohammed’s own private company, launched the three hundred and fifty billion dirham
Jumeirah Gardens development, located in the old Satwa area and planned to
house up to sixty thousand residents. And Nakheel launched the Nakheel Harbour
and Tower, an inland marina at the foot of what was set to be the world’s new tallest
tower, extending over a kilometre into the sky. Three times the height of the
Eiffel Tower, the skyscraper would utterly dwarf the mighty Burj Dubai.

As I walked though the packed halls, I abruptly
brushed shoulders with a man who almost made me tumble.

‘Hey! Sorry buddy, are you okay?’ I looked up
to see a familiar face offering his hand. It was none other than Hollywood
superstar Michael Douglas!

‘Thanks. I’m fine...’

‘No problem. I guess Dubai has blown you away
too, huh?’ He winked and walked on his way. But he was not the only celebrity I
would brush against that day. Actor Antonio Banderas, boxing champion Amir Khan
and Bollywood superstar Shah Rukh Khan were all drawing in the crowds to
various stands whose developers had recruited them for the event as brand
ambassadors. They smiled, posed for photographs and signed autographs for the
adoring crowds, bringing a touch of glamour to the proceedings.

Nevertheless, as Dubai continued on its
trajectory of unfettered expansion, it became more and more difficult to ignore
the fact that the rest of the world was falling to pieces. On the very day
Cityscape 2008 opened and the regional newspapers hailed Nakheel’s new tower,
the front page of the
New York Times
featured the ominous headline ‘Financial
Crisis Spreads in Europe’. The glitz, grandeur and glamour in the halls could
not hide the nervous murmurs. The gloomy news from the West had indubitably dented
the confidence of the punters who strolled around the stands with a distinct
sense of caution, adopting a ‘wait and see’ stance instead of diving in blindly
as they had before. 

On the Milestone stand, the sales team were
spending more time fighting fires than selling real estate. They were being
bombarded with questions from every direction about the future of the market,
and they struggled to keep up.