x Abu Dhabi, UAETuesday 25 July 2017

Austrian developer plans a World empire in the Gulf

Josef Kleindienst has spent most of his life as a policeman. But when he decided to write a tell-all book about corruption that implicated the controversial head of Austria's right-wing Freedom Party, he took a sharp change in career. He is now the head of the first company to start building on the World islands in Dubai.

 
 

When Josef Kleindienst takes one of his frequent trips out to the World islands off the coast of Dubai to visit the "Heart of Europe", passing empty spits of land where construction is supposed to be taking place, he smiles at the glorious isolation.

Surrounded by the blue waters of the Gulf and hosting only the occasional visitor, his construction equipment stands out on the white sands of some of the more than 150 islands in the shape of a map of the continents.

"When we purchased the islands, it was part of a very beautiful picture painted by Nakheel," says a tanned Mr Kleindienst in his thick Austrian accent. "There were going to be all these projects and hotels. Crises are very good at destroying pictures. When I go there, I can imagine our holiday homes."

Of the hundreds of projects across the region that were shelved in the aftermath of the global financial crisis, the fantastical plans for The World were probably the quickest to be put on the back burner. As developers scaled back, many people quietly said it would be folly to soldier on. This Austrian thought otherwise.

Mr Kleindienst, 47, who joined the great property game late in life after almost two decades as a policeman in Vienna, decided that the best thing to do was keep going.

The initial phase of the Heart of Europe project, set on six islands, will consist of 20 villas for holidaymakers. Twelve of the homes have already been sold. Then he will gradually begin sections of the more than Dh3 billion (US$816.7 million) project, including a floating hotel, shopping arcade and more homes.

The risk is clear: he has enough financial power to fund 30 per cent of the project. The remainder of the money will need to be raised through the almost non-existent off-plan property market, banks and investors.

The fates of the first buyers of The World have been diverse. John O'Dolan, a businessman involved with a consortium that owned "Ireland", committed suicide last year after his company got into financial difficulties. Four companies owned by Gulf Global Group of Sharjah are suing Nakheel in the Dubai World Tribunal for a refund of $15.3m for several island purchases claiming a "breach of contract". Most owners, such as Jean van Gysel, a Belgian baron who bought "Greece", are simply waiting to see what happens next.

Mr Kleindienst, it seems, is made of sterner stuff. Using a fortune he amassed in the past seven years by investing and brokering deals in the Dubai property boom, he is ploughing money into The World while others are waiting for an upturn.

That is not to say everything is going swimmingly. Full construction has already been pushed back substantially after running into engineering issues and difficulties obtaining permits.

His engineers are trying to determine what problems may occur, because no one else is starting construction alongside him. Before any buildings can be built, each island needs to be levelled using an enormous machine that compacts and stabilises the sand.

If everyone else begins compacting their islands after he starts building, it could theoretically affect the shape of his islands.

Another issue is that if he wants to plant coconut trees as planned on the island, the Dubai authorities have told him he will have to do so ensuring no fertiliser is leaked into the sea. But Mr Kleindienst expects the pace of construction to again pick up early next year.

The question on most people's lips when they hear of his almost Quixotic efforts to march on despite rising costs is, why?

"I'm confident we will succeed," he says. "I don't think in terms of challenges. I think of risks, which you can reduce, and opportunities."

The project is not the first time he has found himself facing pressure from all sides. Mr Kleindienst is best known in Austria for causing one of the greatest political controversies the country has seen in the past decade.

In 2000, he published a book titled I Confess, in which he detailed the systemic bribery of officers sympathetic to the controversial Freedom Party in exchange for confidential information. That information was used to besmirch rivals of the Freedom Party and threaten journalists before publication of unfavourable articles. Newspapers said at the time the scandal had "echoes of Watergate".

Shady dealings included an officer handing over documents to the party showing a reporter who was once investigated for the rape of a young woman. In Austria, to question someone and take DNA samples, a case must be opened - meaning that even if he or she was eventually ruled out as the perpetrator, they were once technically a "suspect", Mr Kleindienst says. The party then threatened to reveal the information to shut the reporter up.

Some leftist politicians were tarnished with revelations about their financial status revealed in police reports.

"Of course, it was clear we were breaking the law," Mr Kleindienst told The Independent after the publication of the book. "But it was more important to help the party fight its enemies."

The right-wing Freedom Party became infamous in Europe in the 1990s after its one-time leader, Jorg Haider, made favourable comments about the Nazis and espoused xenophobic and sometimes anti-Semitic views.

The investigation into Mr Haider's role in the "spy affair" as the scandal became known, was shelved just a year after the book was published. Mr Haider, whom Mr Kleindienst had known personally, died in a drink-driving accident in October 2008.

As the head of a police union and a senior human resources official in the police department, Mr Kleindienst says he was intimately aware of the problem. He says he published I Confess because no official would take on the case unless it became a major controversy for everyday Austrians. In the bitter period just after the book was released, he became the relentless target of inquiries and censure from Freedom Party leaders.

He says the lesson he learnt from the controversy was: "do real estate business and don't interfere with corruption affairs".

Mr Kleindienst has written and co-written several other books, including the life story of Adolf Hitler's maid, a call to action for credit card companies to prevent anyone from purchasing child pornography and a comedy about "why we should live in a world that has no fees".

His second career in property was no coincidence. His family has long been involved in the business in Austria and he completed his first big deal in Hungary while still working as a police officer. The same bank that lent him the money for that project, Raiffeisen Bank, sent him an invitation to go to Dubai in 2003 to check out the property market.

"I realised then that if you don't go to Dubai in 2003, then you should not be in the real estate business," he said. "It was the most booming place in the world."

Each deal led to a bigger deal. As Emaar Properties' broker in Europe, he sold hundreds of off-plan properties to investors and earned a good fee on each. Those returns were reinvested in land and projects in 11 countries, including projects in Jumeirah Village, The Waterfront and Dubai Investment Park.

The change from police officer to businessman is a matter of appearances, he says. "If you are a policeman, you have a certain type of car and uniform that helps you do your job," he says. "If you are a businessman, it's the same. You have a certain watch, car and clothes that people expect if they want to do business. Otherwise, I would just wear a T-shirt and jeans."

Today, Mr Kleindienst is focusing almost all his efforts on islands. Beyond the Heart of Europe, he is now acting as the estate agent for the sellers of an island off Mykonos in Greece and another in Italy.

"If I had to decide to do only one thing, it would be to do island brokerage," he said. "They are so rare and high in demand. It's a fun business."

Asked if another book could be in the pipeline, perhaps covering the rise and fall of the property sector in Dubai, Mr Kleindienst pauses for a moment.

"No, I don't think so," he says. "That's not the way I see it. To me it is another opportunity, the first phase of a new cycle. I will focus on my islands."

bhope@thenational.ae