Straight Shooter – Khalaf Al Habtoor Interview

Khalaf Al Habtoor needs little introduction. The founder and chairman of the Dubai-based Al Habtoor Group is as renowned in the Arab world for his straight, no-nonsense opinions as he is his vast business interests. He believes the GCC is the only collective group of countries that can successfully oust Syrian president Bashar Al-Assad from power, says Nakheel’s decision to try to charge residents in its Shoreline development for beach access risked ruining the reputation of the emirate and warns caution for those looking to invest in the Middle East. Yet he is still most at ease talking shop.

“Giving up work would be very difficult for me. I am the type of person that needs to work; it is my fuel. If I don’t work, I cannot be driven,” he says. “I am in the office before 7 am, I have my tea, read the papers and then meet with my directors before 8 am. I don’t believe in these people that delegate. I delegate the responsibility but they have to report to me and brief me; even the tennis coaches brief me,” he laughs.

Such a hands-on approach might not be everyone’s cup of tea but it has certainly served Al Habtoor well. It has been 42 years since the young Emirati impressed Dubai’s then-ruler, Sheikh Rashid Bin Saeed Al Maktoum, when his firm Habtoor Engineering Enterprises completed the construction of a new hospital project six months ahead of schedule. Sheikh Rashid awarded Al Habtoor four more projects and offered him a 20-acre plot of land, which would later become the emirate’s first four-star hotel, all of which helped kick-start a business that is now one of the region’s most successful conglomerates.

The privately-owned company, which now boasts a portfolio spanning hospitality, construction, education and automotive operations and employs more than 40,000 staff, has helped Al Habtoor amass an estimated personal wealth that regularly sees him ranked amongst the world’s richest billionaires. But in more recent years it is his opinion pieces in the regional press — including his own Al Shindagah magazine — that have garnered just as much attention as his business interests.

Today, he is keen to talk about the bloody situation in Syria. “The GCC is the only one that has a hope to do something. We should not talk a lot, we should do. We [shouldn’t] care about Russia or China’s veto; we have to interfere. This is our Arabic family… Saudi Arabia should be saluted [because] at least they have been transparent and shown the world that they are [not prepared] to accept what is happening,” he says.

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“I agree with Saudi Arabia’s foreign minister, Prince Saud Al Faisal who said Bashar should go peacefully or by force. I would not wait for Hillary Clinton or Obama to make a decision; I would form my GCC with Jordan and enter into Syria to protect the civilians and to throw him out… He should then be taken to a criminal court.”

Al Habtoor is just as at ease talking about issues in his own country. The self-appointed speaker for the local community was one of the only high-profile businessmen to jump to Dubai’s defence when the emirate requested its $22bn debt standstill in November 2008. At the time Al Habtoor blamed much of the negative headlines on media exaggeration and inexperienced financial analysts.

“There is growth in the country, not only for us as Al Habtoor Group, but also in the country. You can see the improvement; you see the purchasing power, the visitors to the country — we are really seeing that in our hotels. All of the hotels in Dubai are more or less occupied and the rates are acceptable,” he says.

On business in the middle east, he says:

“A lot of companies are opening here; moving here from other countries. They are not only from unstable countries [such as those hit by the Arab Spring] but also from Europe because of the tax exemption here and because of the mental relaxation in this country. I would not go to a country and make a lot of money if I was not comfortable and relaxed with its regulations,” he adds.

“I would not recommend anybody to invest, for example, in places like the Middle East. I don’t mean the GCC, I mean the Middle East like Lebanon, Syria and Egypt. I would only recommend it if they change the laws, not commercial laws, the system of law and [appoint] independent judges,” he explains.

“Now many cases of arbitration are held in the London courts because no-one there can influence them.  Because of the law there, the regulatory environment and commercial law nobody can interfere…The return on investment here in my country is better than anywhere in the world,” he adds.

Despite his optimism, he does raise some concern over the uncompleted real estate projects in Dubai. The emirate scrapped 217 property projects as of the end of May in 2011, but Al Habtoor is convinced those developments that have been started must continue. “I will not go and stay in the desert, where they build a building that hasn’t been finished. They should be finished, they have no choice; they have to finish them. If they don’t have the funding the government should help them to fund it, or government should buy it. We should not leave uncompleted projects or anything in our country, our country is the jewel, the pearl of the Gulf,” he says.

The conversation quickly digresses as he moves onto Nakheel’s proposed plan to introduce membership fees for beach access to residents along the Shoreline, Palm Jumeirah. In true Al Habtoor-style, no holds are barred, and he lambasts the decision as both ‘dangerous’ to the country’s reputation and ‘unacceptable’. “It was 100 percent [damaging] and unacceptable. If I am buying a house and using the beach and I am later told I have to pay for the beach, this is abnormal. This is damaging the reputation of my country.

“I am 100 percent sure that the higher authorities were not aware of such a thing because they would not have accepted it… They would never have [agreed to] it but some people try to show they are making money for the government — they are damaging its reputation two million times [over] for a few dirhams. Our tenants, if I have an agreement with them, I would never, ever amend it, it’s not fair,” he adds.

Al Habtoor recently put his money where his mouth is when he announced in October that his group would resume work on a $272m hotel project on the Palm Jumeirah, which was stalled in the wake of Dubai’s debt crisis. “[I am] committed to participating [in Dubai real estate] and meeting my commitments by adding more projects, which we are going to announce soon,” he said at the time of the announcement.

Just three months later, the group announced it would spend up to $1.3bn regenerating the 34-year-old Metropolitan Hotel. The redevelopment is set to include three luxury hotels, a shopping arcade, tennis and sports academy, and themed restaurants as well as a Las Vegas-style theatre, and will, like the Palm Jumeirah hotel project, be funded entirely by the Al Habtoor Group.

“We are very much depending on our cash flow. It is not easy but we have our cash flow, which we forecasted for six or seven years,” he explains. “Banks have come to see us and talk but they are always in a stronger position because they have the money; they [want] to dictate and I never accept any dictation. If we work with the banks we work as partners.”

The two hotels are not the only investment Al Habtoor plans to make in the next twelve months. The chairman, who has been scouting Europe to acquire luxury hotels for some time now, says he is currently in the final stages of acquiring a €60m ($80m) five-star hotel in Budapest and is in talks with officials in France to buy a second hotel in Paris.

“We are in the finishing [stages] of taking over a hotel property in Budapest, Hungary. Hopefully, I think by the end of March all will be finalised. It’s a five-star hotel in the best place in Budapest… it’s around €60m,” he says. The group has also been contacted by French officials regarding the sale of a hotel in Paris. “I have been contacted and told there is a hotel sale but I don’t have the details yet. It’s in Paris, possibly a four-star hotel.”

The hotel acquisitions are not the first investments Al Habtoor has made in Europe. In 2008, he was one of several GCC investors that bought into the British bank Barclays as the lender looked to boost its capital amid the financial crisis. Abu Dhabi-based investment fund PCP3 acquired a 5.2 percent stake in Barclays in February 2010, in a deal valued at £1.2bn ($1.88bn).

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Al Habtoor has often discussed the possibility of listing his company shares on a local bourse to ensure its continuity but says he is he no closer to making a decision.  “It is still [an option] but sometimes there are positive and negatives. I have been studying this IPO more than 25 years and I update and update, changing my mind,” he laughs.

“We will look at it but we will go IPO by increasing the capital. I mean if our capital is $1 for example, we want to increase it say $1.30. I want to sell the 30 cents but the $1 is mine… the 30 cents will avoid any funding [issues] in the future if we want to expand, buy properties or do something. But I want to have the control within my management,” he explains.

He doesn’t, however, rule out a listing by Habtoor Leighton Group (HLG) — a joint venture company with Australia’s Leighton Holdings in which he owns a 27.5 percent stake — providing the contractor continues to grow its business. “Maybe Habtoor Leighton, which [we] are a minor shareholder in… they might go [for an IPO]. The decision is not in my hands, it is a decision of the major shareholder,” he says.

“They are a very big company; they have a lot of projects on especially in Abu Dhabi and Qatar and maybe Saudi Arabia… Definitely [I would like to see them IPO], provided they have big projects.”