x Abu Dhabi, UAEWednesday 26 July 2017

Deyaar faces testing times ahead as CEO Giebel goes

Shareholders experience deja vu despite a good start by the turnaround team brought in 18 months ago.

Marcus Giebel has left Deyaar after only 18 months as chief executive.
Marcus Giebel has left Deyaar after only 18 months as chief executive.

Deyaar Development is in turnaround mode, again, and for shareholders, it is like deja vu. In October 2008, just as the global financial crisis spread to Dubai, the property group hired a new management team. The move came seven months after the company had become embroiled in a fraud investigation that saw Zack Shahin, the then-chief executive, being detained on allegations of corruption. He is still in prison while the case continues.

With Markus Giebel installed as the new chief executive, the "turnaround" team quickly embarked on a bold strategy to reduce the default rate of homebuyers, create a distressed assets fund to buy properties from struggling buyers and consolidate projects. The plan started well, with Deyaar minimising the default rate to only about 5 per cent of its 5,000 customers. Mr Giebel and his team also had plans to take the developer into new markets such as Lebanon and Saudi Arabia, as well as build retirement homes and affordable housing.

The fresh, transparent approach inspired confidence, leading some major international investors to commit Dh200 million (US$54.4m) towards Deyaar's Dh500m distressed property fund. But the fund was put on hold at the end of last year when the investors lost confidence after the Dubai World conglomerate asked its creditors for a six-month standstill on its debts. And yesterday, less than two years since his appointment, Mr Giebel left the company. The move was part of a management shake-up that is expected to see the departure of other senior executives.

Saeed al Qatami has replaced Mr Giebel in an acting capacity - and he has his work cut out for him. "Coming up with a strategy is one thing but executing it is another," said Saud Masud, a property analyst with UBS. Nomura Securities downgraded Deyaar yesterday from "neutral" to "reduce" with a price target of Dh50, down from Dh92, citing a host of negatives including its small market capitalisation status, foreign ownership restrictions and lack of clarity on strategy.

Deyaar's shares closed yesterday at 47 fils, down 0.62 per cent. @Email:agiuffrida@thenational.ae