Sheikhs, Lies and Real Estate: The Untold Story of Dubai (33 page)

The warnings of an approaching sandstorm were plastered
across the city’s newspapers for days before it arrived. All residents were
advised to stay indoors until it had passed and encouraged to avoid driving at
all costs. On the day it finally came, I watched the tempest develop from the
sanctuary of my apartment window. The cloudless blue skies were quickly
engulfed by an ominous dark-grey swathe, and the winds battered callously
against my fragile living-room windows. It felt alarmingly apocalyptic and I
was certainly a little frightened.

But not everybody heeded the warnings. Although
most stayed clear, a few reckless folk ignored the cautions and drove into its
path without fear. Some called them brave, others foolish, but these naysayers didn’t
care for the consequences, preferring to leave their fate in the hands of God.  

***

‘I haven’t been paid this month, have you?’

‘No, I haven’t. What the hell is going on? I
didn’t come to Dubai to work for free!’

There was pandemonium at Milestone. It was
payday and nobody’s salary had hit their account. Most of the team had rent due
and payments on 4x4s and sports cars to make. After four months of zero sales
on the board, it seemed that Tariq was feeling the pinch. He had expanded his
staff by over 50 per cent and spent a fortune on the new offices. Paying salaries
without any returns was bleeding the company dry, and Milestone’s cash-flow
problems were becoming increasingly acute.

Rav called a meeting a day later, at which he
blamed the late salaries on a technical glitch, promising that everybody would
be paid within a week. It calmed the mood a little, but I knew it was just a
temporary solution to a more serious emerging cancer.

And then came the news that everybody had been
dreading. The email was sent to every member of the sales and business development
team, and simply read as follows:

Dear Milestone employee

You have been called to a face-to-face
meeting with your respective manager for a private appraisal. Please prepare a
summary of your sales figures to date to bring with you. Your time slot will be
sent to you shortly.

Milestone Senior Management

There were no further details about what was to
be discussed, so the rumour mill began to churn once again. What was the
purpose of the meeting? Were we all being fired? Was the company being sold?
Were salaries being cut after all? Every possible option was discussed and
dissected as the fear took hold.

My meeting was arranged with Rav. So on
Thursday morning an hour before lunchtime, I nervously marched into his office
to face my fate.

‘Come in, please take a seat.’ I had a sudden flashback
of being summoned to the headmaster’s room at school. ‘Okay, Adam, listen, I’m
not going to bullshit you. I think you know that the company is going through a
difficult time at the moment. You’re an intelligent young man, so I’m not going
to go through the reasons why.’

‘Of course,’ I replied earnestly.

‘We are currently speaking to every employee to
understand where they see themselves in the current market, and what they think
they can contribute to help Milestone get through this difficult time.’

I saw right through what Rav was trying to tell
me. This was not a performance review; it was a battle for survival! It was
obvious by now that firings were on the cards. The real purpose of the meetings
was to understand who to get rid of and when. I quickly realised that in the
next twenty minutes I would have to pull up my sleeves and fight for my job,
and I prepared myself for the challenge.

‘So, do you think you will be doing any
business in the next six months?’ asked Rav.

‘Absolutely!’ I replied assertively. ‘My
pipeline of deals has actually been growing and all of my clients still seem to
be very keen.’

Rav looked confused. ‘Really? But you don’t
think that as the market is changing your prospects will decrease?’

‘Oh, not at all. Quite the opposite, in fact.
That may be the case for retail customers, but I think sophisticated investors
have nothing to worry about. As the market softens a little, investors will
start to look at yields rather than pure capital appreciation, and yields in
Dubai are still better than anywhere else. Also, without mortgages fewer people
will be able to buy property, so they are more likely to rent, which will
further strengthen the rental market. The real losers in the situation are the
speculators. Serious investors won’t be affected at all.’

It was a lie of ludicrous proportions. Real
sophisticated investors would not have touched Dubai with a barge pole in these
market conditions. But as I sugar-wrapped my outrageous claims in some kind of
misguided theory, Rav looked somewhat convinced.

‘Hmm, maybe you’re right.’ He frowned and
scribbled something on the notepad in front of him. ‘I just have one more
question.’ Another question? I was not out of the woods just yet. ‘Would you be
able to survive if we, say, removed your salary and increased your commissions?’

I froze. Rav had called my bluff. If what I had
just told him about my growing pipeline was true, then surely I should welcome
commissions over salary, as I was the only one in the company who stood to
close any deals. On the other hand, if I made it obvious that having no salary
was an issue, it would show a clear lack of confidence in my bold statements. I
had to think fast.

‘Well, as you know, Rav, investment
transactions take a little longer to close due to the more stringent due
diligence procedures. I would need an income while I am working through my deal
pipeline.’ It was the best I could do. But whether Rav, and ultimately Tariq,
would buy it was yet to be seen.

Two weeks later, and as expected, it was
announced that salaries were being scrapped and commissions were being
increased to 40 per cent across the board. There was outrage. Not only had
senior management gone back on their word regarding salaries, the revised
commissions were at least 10 percent less than most other firms were offering
to their teams. Naturally, many salespeople began to arrange interviews with
other brokerage houses; others threatened to leave. But they were missing the
big picture. What did the level of commission matter if there were no deals to
close?

I, on the other hand, had been spared. There
had been no notification that my salary had been removed or cut in any way,
much to my relief. Nevertheless, the message was clear. Based on what I had told
Rav, the pressure was now on me to bring in the bacon and save Milestone. While
I was safe for now, the countdown to oblivion had begun.

2008 became the year of the flipper, the jumper and the
runner. 

The flippers were the luckiest of the three.
Having seen the early signs of a correction on the horizon, they had
successfully flipped their assets in time and left the market relatively
unscathed. Some flippers settled for a small profit on their exits, others even
a loss, but their primary aim was an urgent escape before the tsunami arrived
and wiped them out completely. Unfortunately, flippers were firmly in the
minority.

Jumpers were taken by surprise by the sudden
turmoil. Faced with the prospect of bounced cheques, rising debts and looming
unemployment, these foolhardy investors settled up and left town with whatever
dignity they could salvage. They closed their accounts, paid their credit card
debts and bought one-way tickets for their home country with a heavy heart and
fond memories of the desert.

The runners weren’t so dignified. Drowning in
debt and unable to pay demanding creditors, they saw no way out except to drop
everything and run for the border. They left behind their property investments,
credit card debts and unpaid bills. Their only alternative to absconding was
debtor’s prison followed by certain deportation. Stories abounded of runners abandoning
their cars at the airport with the keys in the ignition and an apology note on
the windscreen reading ‘Expat out of money. Sorry!’

Dubai was unforgiving of the plight of its more
unfortunate guests. As soon as an expat lost their job, their visa was
cancelled, giving them just thirty days to leave the country. Although many
scrambled to sell their car, pay outstanding debts, shift their belongings and
wish friends goodbye within the allotted timeframe, it was perhaps no wonder
that many cut their losses and made a run for it. The country that they had
called home for years and that they had defended so vehemently in the face of outside
detractors and doubters had turned its back on them in their time of need. Many
expats felt utterly betrayed, and reluctantly accepted that they had overstayed
their welcome.

One British entrepreneur and ‘runner’ skipped
town after his company, a speciality gift service, couldn’t pay its bills. He
responded by writing an emotional letter to the ‘Dubai public’ that was
subsequently published in the press. In it he acknowledged that he owed money,
and explained that he had fled due to the lack of structured bankruptcy laws
and a banking system that had zero flexibility on loan repayments, which drove
him to make a ‘horrible decision’.  He revealed that personal threats were
being made against him and his family due to high levels of debt, which left
him no choice but to take them out of the country. As Dubai lacked bankruptcy
laws or US-style Chapter 11 protection, business owners were personally
responsible for their debt obligations and were left with little choice.

Heads rolled and cheques bounced as
redundancies and layoffs increased daily across the city. On average, one in every
twenty cheques written was sent back by a bank marked ‘Insufficient Funds’.
Many businesses were forced to lay off a large portion of their workforce, and
many more closed down. Dubai’s jail cells, once reserved for drink-drivers and
illegal immigrants, today were brimming with forlorn expatriates with bad
debts; the sorry victims of the dark side of the good life. 

Many of the old heroes of the heyday became
villains overnight. Among them was Benito Valli of DCA. Once he had been the
golden boy of Dubai real estate; today DCA’s investors wanted his head on a
stick. Construction of three of the company’s projects had halted indefinitely
in 2008, and two others were over a year behind schedule. Benito’s investors
had not received a return for months and their patience was running thin. He reacted
by deflecting responsibility for DCA’s woes and blamed the delays on his South
Korean contractors, who filed for bankruptcy in December 2008. Nevertheless, it
soon emerged in the press that Benito had sent substantial funds to South
America and had paid a company in Panama seven hundred and fifty thousand euros
for a new South American identity. He was arrested at Dubai airport in February
2009 trying to board a plane to Panama. Benito was never heard of again.

Throughout the unravelling of Dubai, there were
no official announcements or press releases from the authorities. It was as if
the government was burying its head in the proverbial sand and consciously
brushing its growing problems under the carpet. This odd radio silence only
exacerbated the rumour mill, causing the crisis of confidence to worsen daily.
The flawless Dubai PR machine, which had meticulously managed each stage of the
city’s propulsion onto the global stage, was somehow broken, raising serious
concerns about the government’s ability to deal with the crash.

Eventually an announcement did come. In 2009,
Dubai caused shockwaves throughout the world when it declared that it was bust.
Dubai World, the holding company of national corporate gems such as Nakheel and
Dubai Ports, told its creditors that it could not pay its massive twenty-five billion
dollar debts, causing global financial markets to go into panic. The news
shattered the premise that the city’s institutions were government backed, and
confidence among Dubai’s key stakeholders disappeared overnight.

The Emirate’s creditors had always acted on the
underlying belief that the government had provided an iron-clad guarantee to
its institutions. On this dubious premise, Dubai’s companies and institutions
were regarded too big to fail, as a bailout by the authorities was beyond
doubt. But the Dubai World announcement proved that this was all a huge
fallacy. The government had distanced itself from its business interests in
challenging times, and in doing so rid itself of the liabilities. It seemed that
Dubai’s business model had been flawed from the beginning. ‘Dubai Inc. Was far
from the invincible leviathan everybody had been led to believe. In reality it
was verging on bankruptcy.

The worst of Dubai World’s debt problems were
in its prized development company Nakheel. An army of auditors were brought in
to sort out the mess, and what they found wasn’t pretty. Nakheel’s balance
sheet was a disaster and fears were growing that the company’s woes could even bring
down the entire economy. Dubai desperately needed money to avoid a default and
save face. The lack of meaningful oil revenues had always plagued the city, and
the absence of a nest egg for a rainy day meant that it was forced to raise
money by selling its most valuable assets. A buyer was waiting in the wings,
licking its lips and rubbing its palms with delight – cash-rich Abu Dhabi.

The deal was likely to have been struck
directly between the two sheikhs in the private Majlis, so nobody knew the
exact details of what was agreed. But it was unlikely that big brother helped
out its desperate neighbour for free. There were rumours that Dubai was forced
to give up significant stakes in most of its most prized assets, namely the
Atlantis hotel, Dubai Ports and Emirates airline. Considering Abu Dhabi’s close
relationship with the US, Dubai was also encouraged to scale back its historical
trade relations with Iran, by freezing company accounts and ceasing operations
for a number of Iranian companies in the Emirate. In the blink of an eye, Dubai
lost much of what it had spent years building. Like a sandcastle on the beach,
brand Dubai was swept away by the ruthless tide of politics.   

In January 2009, the Burj Dubai, the world’s
tallest building and the jewel of the property bonanza, was finally unveiled to
the world, albeit with subdued gusto. But there was a distinctive alteration in
the proceedings. ‘Burj Dubai’ had been renamed ‘Burj Khalifah’ after the Sheikh
of Abu Dhabi and the ruler of the UAE, Sheikh Khalifah Bin Zayed Al Nahyan. The
last minute change of name was explained as an act of tribute and the ultimate
mark of respect to the country’s ruler. But to many it was the final stamp of
humiliation by Abu Dhabi to ensure that Dubai had learnt its valuable lesson.

The titans of Western media had a field day
from the moment the news of Dubai’s problems began to surface. Despite the fact
that their own economies were crumbling before their eyes, the tragic rise and fall
of the Emirate was a more commercially viable story, as well as a useful
distraction from domestic economic woes. For years while the city had boomed, outside
observers had chastised Dubai for reliance on slave labour, disregard of environmental
concerns and contempt for democratic values. To them this demise was poetic
justice, and a flurry of damning and sensationalised articles surfaced almost
daily. Dragging Dubai’s name through the mud was both a commercial coup and a
satisfying act of revenge.  

Many Emiratis took the media onslaught personally.
The publication of a cartoon of their beloved Sheikh Mohammed drowning in a sea
of debt was seen by many as the final insult, prompting a bitter backlash.
Emirati journalists began blaming the decline of Dubai on the immoral influence
of Western expats, who had poisoned the moral fabric of its society with a
culture of greed and indulgence. The expats were likened to criminals who
exploited Dubai through excessive financing and loans, and fled when they
couldn’t afford to pay their debts. One prominent Emirati journalist responded
with a damning article on the UK’s own questionable historical human rights
record as the debate became an embittered battle for national pride. 

And so Dubai’s love affair with its Western
expatriates and foreign investors was over. The cultural chasm the city had
been so desperate to seal was only widened, and the ambitious experiment to
bridge two worlds failed with dramatic consequences.

***

Just a few weeks after the news of Dubai’s debt problems
went public, a most peculiar trend emerged at Milestone. One by one, team
members began to disappear, never to be seen again. There was no announcement
from the management and no goodbyes. They were simply there one day and gone
the next. The more senior team members were the first to go. Had they quit or
had they been let go? It didn’t make any sense for Milestone to fire these
guys. They were the heavy hitters who had pulled in the most money through the
good years. They also had the biggest clients and the best knowledge of the
market. If anybody was going to pull the company out of this mess, surely it
would be them. Their sudden departures caused a stir among more junior team
members; if these guys were being let go, what possible chance of survival
could they have?

After a movie at the mall one weekend, a chance
encounter helped clear up the mystery.  Sitting on a bench inside near the food
court, his head in his hands, was someone I had not seen in the office for over
a month.

‘Syed? Is that you?’

He looked up at me through weary eyes. ‘It’s
all over, Adam, the dream is over!’

‘What happened, Syed? Were you let go? Did you
leave?’ I asked.

‘What difference does it make?’

I convinced him to join me for a coffee, where
he spilled the beans.

‘Edward called me into his office a week ago.
He asked me if I had some cash in the bank. I didn’t have any idea why he was
asking, but I told him I had a little. The next thing I knew, I received a
letter saying I had been let go.’

‘But why you ahead of the others?’

‘I don’t know. I guess my crime was that I had
made a little money, so they assumed I could survive in Dubai longer than
others. The fact that I had been with the company since 2003 meant nothing to
them. I put my blood and guts into Milestone. I worked hard every day and this
is how they repay me. There’s no loyalty in this business,’ he said and shook
his head.

‘So what are you going to do now?’ I asked.

‘I have no clue. No rival firm will hire me
because they’re all cutting back like Milestone. I have no other skills. I have
no choice but to head back to Pakistan. Except I’m almost out of money, so I
don’t know how I can possibly afford the ticket home.’

I felt sorry for Syed, but there was nothing I
could do to help him. Like so many other young real estate agents across the
city, the market had callously chewed him up and spat him out. Sure, some of
them had made a little money, but now without a hope of finding another job in
the industry, many of them were struggling to stay afloat. It was game over and
a full-blown fight for survival had begun.

As much as the few surviving team members at
Milestone hit the phones and pleaded with investors, there was not so much as a
whisper of a potential deal in the pipeline. Over the following long and
painful weeks, more and more salespeople fell away. Some looked to change
careers and find jobs in other industries; others packed up and left the
country. Tariq’s business empire was crumbling before his eyes and the heyday
of Milestone was now nothing but a distant memory.

As I watched the decline helplessly from the
sidelines, I knew my days were numbered. I tried to bide my time, keep my head
down and hang on to a salary as long as I could. But it was the morning that
Connor, the darling of Milestone, failed to make it to his desk that I finally
realised the game was up. So I did what was timely, honourable and right. I
made a preemptive move that I was sure would save me from the inevitable
embarrassment around the corner.

I resigned with immediate effect.