Trapped: A Couple's Five Years of Hell in Dubai

by Lee, M

  The upper managers and I were instructed to suspend all building contracts, or, if that could not be done, to slow the payments down. However, we were to avoid getting to the point where the contractors would take legal action. The official line, repeated publicly over and over, was that everything was fine and Nakheel was on track, no need for concern.

  My immediate boss, Matt Joyce, appeared to have taken a fatalistic turn. Matt kept saying it was inevitable that the Palm Jebel Ali and Dubai Waterfront projects would merge and he would be out of a job because Marwan Al Qamzi, who ran Palm Jebel Ali, was an Emirati and would therefore be the front-runner for the newly created role.

  With Matt resigning himself to fate, I found I had become the representative for Dubai Waterfront at the many meetings with Nakheel’s senior decision-makers. We would run through the largest of the requests flooding in for deferral of payments and I’d get instructions from the newly formed Nakheel ‘Sales Committee’ on how to handle them.

  Language was bent to fit the new reality at Nakheel. Senior management began categorising projects as ‘long term’ and ‘short term’. ‘Long term’ being far less dangerous legally than ‘suspended’ or ‘cancelled’, which would put Nakheel in breach of contract and require them to refund all relevant payments. To this day no project has been cancelled at Nakheel, even though dust and sand now cover the equipment strewn over their abandoned — sorry, ‘longer term’ — pre-2009 development sites.

  Chapter 7

  THE UNRAVELLING BEGINS

  MARCUS

  Over the next twelve months, up to late 2009, Nakheel would make losses in excess of USD3.6 billion, leaving it with no way to repay the billions it had borrowed from international banks and financiers. Its failure brought Dubai as a whole to the brink of default, and only a multi-billion-dollar bailout of Nakheel’s parent company, Dubai World, by oil-rich neighbour Abu Dhabi prevented that happening. By then KT, the company’s CFO, was long gone, departing at what was officially the end of his contract. The company announcement dealt with his departure in a sentence, and didn’t even bother with the standard ‘thanks for the service’ line.

  Those events were still in train in November 2008 but the atmosphere was already very heavy. My senior colleagues and I were in pure crisis management mode: fending off creditors by phone and email while publicly maintaining the fiction that all projects would continue as scheduled.

  Nobody believed the management assurances that there would be no sackings. Rumours began circulating about a list of people destined for the chop. The rumours were correct. The company had to shed 1000 people in a first cull, and 200 of those came from Dubai Waterfront. Along with other managers I was given a figure and told to work out who would go. But not right away; the sackings needed to be put on hold until after Nakheel’s huge launch party for the Atlantis, its newest luxury hotel and resort.

  If you glanced at a Sunday paper or weekly gossip magazine in the week after 20 November 2008 you might have seen the shots of the glamorous celebrities flown in to attend the celebrations and read the breathless reports that made Dubai sound like a dream destination. Nakheel was spending more than USD22 million on 2000 guests, the most expensive launch party in history. Robert De Niro and Denzel Washington were among the rent-a-crowd, which also included Lindsay Lohan, Janet Jackson, the Duchess of York, Lily Allen and Shirley Bassey.

  Kylie Minogue was reportedly paid USD2 million to perform and the fireworks, which were ten times bigger than those of the Beijing Olympics opening ceremony and could supposedly be seen from space, cost USD3 million. Sickened by the waste, I stayed home and thought about how glad I would be to leave all this behind me.

  JULIE

  When I met Marcus in 1987 he was besotted by Kylie Minogue, playing his vinyl single of ‘Locomotion’ over and over. He continued to be a fan during Kylie’s long career. Months earlier I’d managed to get tickets to see Kylie in the public concert she was giving the day after her private Atlantis appearance. I thought Marcus would love it. But by the time the concert came around I wasn’t so sure. The morning after Nakheel’s appallingly gaudy extravaganza, I said to him, ‘Tonight we are going to see Kylie.’ I really wasn’t sure how he would react, but his old love for her won out — he was ecstatic. I still smile, picturing him bopping along that night to ‘Step Back in Time’ and ‘Better the Devil You Know’.

  MARCUS

  Unfortunately, there was no getting out of the sackings. I tried to be as logical and fair as possible. I considered how people were performing and how their roles fit together in whatever projects or tasks would still be required. If it came down to an even choice between two people and one was an Australian, they would be the one to go so that everyone could see there was no favouritism. That approach wasn’t very common, though. In many other parts of the company it was done by nationality — the manager would decide to sack all the Sri Lankans, for instance, regardless of the fact that they might all perform similar functions and getting rid of all of them would leave you with no-one who knew how to do that job. Or they might sack all the coffee-boys or administrative assistants, meeting the number quotient, but barely reducing the wages bill. With no-one overseeing the process it was yet another debacle.

  Once I’d finished breaking the news to the requisite number of people in my area, I was allocated to help one of the development divisions with their dismissals, which meant sacking another twenty people, many of whom I had never met before. It was horrible. Grown men cried, others became angry or pleaded to stay on.

  Some of the people sacked were recent hires. They had given up stable and lucrative positions elsewhere, often in another country, to accept Nakheel’s job offers. As Julie and I knew, what with having to pay twelve months’ (non-refundable) rent upfront and covering moving costs and other necessary outlay, it took between six months and a year before the move started to become worthwhile financially. These people were still tens of thousands of dollars in the red and they just had to wear the loss. No wonder they were angry and scared about how they would cope.

  Late in the day I learned that while Tony Perrin still had a job, our friend Justin Crooks had lost his position as Development Director at Palm Jebel Ali. Justin’s project, involving building all those villas over the water, had seemed ridiculously over the top even in the boom times; there was no way it could go ahead now.

  Justin was really good at his job and could simply have been assigned to another project. He had been reassured about his future by Matt Joyce and Marwan Al Qamzi, but those assurances were hollow. That night, when Julie and I had a beer with Justin and Jackie, I said to him, ‘One day you will see that they have done you a favour. You’re one of the lucky ones to be getting out of Nakheel.’ None of us realised just how true those words were.

  Sunland, the Australian company owned by the father-and-son team of Soheil and Sahba Abedian, was a minor player in the vast landscape of Dubai’s development, but for a company of its size it was heavily exposed. At the absolute peak of its share-price, in 2007, it had a theoretical worth of AUD1.3 billion. By the time the crash hit it was committed to five developments in Dubai, valued at AUD5.8 billion. All of them were on land that Sunland had bought at boom prices. The company had already accepted hundreds of millions in off-the-plan sales for three of these projects, only two of which were actually under construction and even then only at the initial stages.

  Image and perception were supremely important to the Abedians. In February 2007 Sunland had announced a record half-year profit (of AUD33.7 million), but the media didn’t applaud the way they were supposed to. Instead, The Australian used the phrase ‘taking a dive’ and The Australian Financial Review called it ‘a lacklustre after-tax profit’. Soheil and Sahba decided they urgently needed to improve the quality of their spin, so they hired PR agency Rowland. By March, Rowland had organised to take journalists from the two sceptical publications to Dubai, to coincide with the Palazzo Versace launch. Rowland reported that ‘numerous
press articles resulted, positioning Sunland in the business sector as a successful, strategic and pioneering development Group.’ The PR agents then approached publications like BRW and Boss, offering them ‘Sunland story ideas’, which paid off with ‘a series of positive feature stories’.

  The upshot, Rowland said, was that, ‘In February 2008, when Sunland again announced another record half-year profit, the media coverage told a different story to the previous year. Despite the global market volatility at the time, the media communicated Sunland’s crucial messaging’ with headlines such as The Australian’s ‘Sunland shines amid gloom’ and The Australian Financial Review’s ‘Sunland set to build on success’.

  ‘The turnaround in the tone of media coverage was emphatic,’ according to the spinners. They also noted, ‘At the time of this media coverage Sunland’s share price jumped by $1.00 — achieving a record share value of $4.10.’

  All that image polishing was still paying off at the end of 2008. On 5 November, The Australian covered the announcement that an investment company owned by Australian golfer Adam Scott was to spend AUD85 million buying a 40 per cent share of the Atrium tower, which Sunland proposed to build on the D17 Dubai Waterfront plot it had bought from Nakheel.

  Despite the fact that Dubai was already well and truly in economic decline, the property editor gave plenty of credibility to the upbeat quotes from Sahba Abedian:

  Until this year, Dubai’s apartment market had been white-hot, with speculators — known locally as ‘flippers’ — buying chunks of new towers and quickly selling them again. However, several analysts believe the Dubai housing bubble will burst. Mr Abedian said the project would not start until half the apartments had been sold off the plan, which he expected would take nine to twelve months. ‘The frenzy of the market is not what it was twelve months ago, but there is still a strong investment appetite,’ Mr Abedian said.

  The story ended with the blithe assertion, ‘In Dubai, funding is not as much of a problem as it is for Australian developers as apartment buyers make progress payments, rather than paying the bulk of the price on completion.’ Oh well, that’s all right then.

  At the Sunland AGM in Australia on 10 November 2008, Sahba Abedian reassured investors that their Dubai projects were ‘offsetting the slower Australian economy’. His father maintained the fiction that all was well. A couple of weeks later Soheil Abedian spoke to London’s Sunday Times about Palazzo Versace Dubai, on which construction had begun and which was supposed to open in 2010, saying something so ridiculously over the top it was reported around the world. Describing how there would be a refrigerated pool and a wind-machine to help guests deal with 50°C temperatures, he added that even the beach would be chilled: ‘We will suck the heat out of the sand to keep it cool enough to lie on. This is the kind of luxury that top people want.’

  Back in the real world, there was plenty of fear and dread around the Nakheel office even after the lay-offs. No-one was certain how things stood from week to week, let alone any further into the future. Since mid-year, representatives from Dubai World Internal Audit had become a regular sight in the offices, conferring with Matt and Anthony Brearley so often that an office had been put aside for their use. Nothing official was said, but the word was they were looking into something to do with the planning of Phase 1 of Dubai Waterfront. I didn’t spend too much time thinking about it, there was so much else to take care of.

  Then something very strange happened. One morning as I arrived at work, Brearley’s assistant, Jessica, came over and said he had gone to Australia. His office was very close to mine and we often passed each other during the day so it seemed odd that he hadn’t mentioned the trip. I asked how long he was gone for. No, she explained, he’d cleared out. He’d packed up his house, arranged to ship his belongings home, sold his cars, left his dog with a friend, taken his family and flown out on what she’d been told were one-way tickets.

  Along with the rest of his division, Jessica was annoyed about the fact that her boss hadn’t said a thing about his plans. Brearley had been coming in to work every day, acting as if everything was normal, booking meetings for following weeks and doing everything else he would usually do, all the while knowing he was going to leave. It was very bizarre.

  Rumours started flying around the office, with people quick to describe what he’d done as ‘a runner’. I couldn’t make sense of it. It was the worst time for him to go, since he was handling all the contractual issues with the suppliers and also the disputes with purchasers over instalment payments.

  The only reason I could see was that he was frightened by some of the people he was dealing with. That may sound far-fetched, but at the time Dubai was home to several shady figures. The crash didn’t change that. A 2010 Guardian story about the work of the International Financial Action Task Force to prevent money laundering and terrorist financing said ‘the United Arab Emirates is not so much awash with vast oil wealth but built on a toxic tide of illicit cash: a place where Russian mafia and drug cartels clean their dirty cash and alQaida finances terror atrocities. And at its heart is Dubai’.

  Julie and I weren’t close to Brearley, but he and his wife, Sara, had once invited us to dinner. At some point during the conversation I’d joked, ‘You must be happy with all those Russians you have to deal with.’ The next day at work he came to me and said, ‘Never mention the Russians in front of my wife.’ Apparently she was already worried about it and had challenged him at some point, saying, ‘Why are you dealing with Russians? Don’t deal with the Russians.’ It didn’t really seem a likely explanation for his sudden departure, but I couldn’t think of anything better.

  Brearley called me two or three times over the next few weeks. That was a bit odd, since I wasn’t in his department and we weren’t social friends. In the first call he said, ‘So what’s happening there? Am I still going to have a job when I come back in six months’ time?’ I said, ‘Well no, because the GFC’s hit, everybody knows that.’ Brearley had never made a secret of his dislike for life in Dubai, so I wasn’t convinced when he said how disappointed he was. He continued to put out feelers in these calls, asking how many people had lost their jobs and what else was going on in the company. I’d briefly wonder why he kept calling, then move on to dealing with the next in a seemingly endless string of Nakheel’s payment dramas.

  One of these involved Sunland. Despite the Abedians’ reassuring spin, Sunland was on thin ice. In November I received a call from David Brown asking if I could help him by providing a letter about the potential value of the Dubai Waterfront plots Sunland had bought (or to be more accurate, had agreed to buy and had made some payments on), D17 and D5B. I figured he wanted this paperwork so Sunland could substantiate the ‘book value’ of its holdings to its investors or creditors.

  In the call I explained to Brown that the market had entirely dried up, so the only valuation we would be able to give him would be based on comparable sales, which would show the plots were currently worth virtually nothing. Despite the fact that Brown was in charge of Sunland’s Dubai operation, he asked me to speak to Soheil Abedian — who must have been standing right next to him because I could hear Brown passing the handset over. In sharp contrast to the things he was saying publicly, Abedian said he had never seen the likes of a crisis like the onset of the GFC in Dubai. I said that, as an experienced businessman, he would surely have been through such shocks before. No, he said, this crisis was different because here everything had stopped overnight: property and development had ‘totally collapsed’, as he put it.

  I said that this was precisely why we wouldn’t be able to give him the kind of letter he wanted — with no potential buyers, we could only assign a zero value to the sites, which clearly would not help him. Edgily, he asked if I knew anyone at all who might be a potential buyer for the plots, asking me to keep this request confidential — the market must not find out. I said again that unfortunately there simply weren’t any buyers.

  Abedian handed me back
to Brown, who said they’d received the kind of letter they were asking for from us before, so they should be able to get it now. He said the previous letter had come from Brearley. That didn’t sound right — valuation letters to customers was not within Brearley’s area of responsibility. Any such letter would have to come from my area or the analysts, who were qualified valuers. But Brown emailed me a copy showing that Brearley had indeed supplied Sunland with a valuation letter intended to reassure an auditor of the ‘book value’ of the plots. The letter was dated a year or so earlier, before the GFC hit. Sunland management now needed something more current.

  On a follow-up call from Brown I said that what I’d told him about the zero current values still applied. Brown became incensed and I tried to calm things down by saying, ‘David, I’ve explained my position. If you want to take it up with people higher, you can do that, but I don’t think I can help you.’ I ended by saying I would speak discreetly to the sales department about whether there were any potential buyers for the land.

  It wasn’t a pleasant call but with the whole of Dubai seemingly collapsing around us, I had bigger things to think about than the demands of one small company.

  A few days later Brown called again, seeking ‘an urgent meeting about some important matters’. When he came in for the meeting, late in the afternoon on 1 December he was clearly very worried, even desperate. He talked about the severity of the GFC and how exposed it had left Sunland in Dubai, how diabolical the situation was and how much financial pressure the company was under.