Property weekly article:
Dynasty Zarooni looks to expand into new segment
Hitherto pre-dominantly operating as an investment company, Dynasty Zarooni is putting together three new prongs to diversify its revenue base and, at the
same time, break into new market segments. The brokerage division is already up and running since the beginning of the year, and will be complemented by
dedicated set-ups for handling long-term assets (primarily leased property) and structured financing deals.
First off, there will be a major expansion of the comapny’s beokerage division, which will see it create a network both in-country and in Russia and London.
The first link in the expanded distribution chain opened in Bur Juman which will be followed by others in Abu Dhabi, Jumeirah Lakes Towers and Shaikh Zayed
Road. St. Petersburg comes on line before the year is out and London by early next.
The plans at this stage, are to have as many as 35 such outlets in the medium term, including 20 in the UAE.
both
“We project that the brokerage division will represent 25 percent of our operating profits in time, and is a perfect complement to the gains made by the
investment division in the one-and-a-half years that Dynasty Zarooni has been operational.” states Rajesh Gupta, the Group’s Chief Financial Officer.
In terms of fit, where the investment division acquires whole buildings or portions of it and then sells on to investors, the brokerage division would
conceivably lease these assets and creating a steady income flow for Dynasty Zarooni.
“As we see it, the brokerage stock will be supplied by both our investment arm and those sold on by third-party investors,” adds Nikesh Vishram, CEO.
A face that works to the company’s advantage, says Alok Batra, Vice President for Sales and Marketing. “These investors realise the finesse we have in
generating sustainable income for them, which is why they would prefer if we did the post-sale management.”
As such, the company currently holds Dh3.67 billion of exclusive property stocks in Dubai and Abu Dhabi. It has invested in projects totalling over Dh21
billion in the UAE, of which Dh6 billion are in Abu Dhabi, making Dynasty Zarooni one of the largest privately owned entities operating in the UAE.
With the other divisions starting to pull their weight, the company contends that the investment division’s share of profitability of the total group’s
profits would drop to between 40 to 50 percent in the near term from the current 90 percent level.
“It makes sense to expand laterally, the status of the real estate market in Dubai and Abu Dhabi warrants that we do so.” comments Gupta,. “Our return on
equity is currently 440 percent on an annualised basis from the investment part of the business, and that’s phenomenal by any measure. Of course, it will
soften from such a level at some point, which is why having a diversified revenue stream comes in handy. We are in a situation where we can leverage the
performance of the investment division to telling effect on the others. As a case in point, the brokerage division is not cash consuming, there is just the
start-up investment that’s required. But it will form the most stable part of the business going forward, a cash cow so to speak.”
While brokerage and the rental operations conform with Dynasty Zarooni’s exisiting operations, where would the structure product division - the fourth prong
- fit in? “There is a global market out there that is very much looking at prospects in Dubai property,” says Neeraj Sehgal, Senior Vice-President,
Structured Products Division. “Mind you, there were quite a few pension funds stayed away from the events leading up to the current credit mess. These funds
need channels and destinations to invest, it’s not as if everyone will stay away from investing forever. We do not want to say much about our structured
products initiative at this stage, but there is an opportunity to reach out to global players and get their attention onto this part of the world. Again, our
decision to expand our global distribution network starting from now will help us in this regard.”
Gupta believes that private funds from India would be looking at Dubai more closely in the short-term, principally because of the current softness in the
property sector there. The same could be said about the investment flow from Pakistan, and Russia is also rated a strong possibility. Moreover, the
investment pipeline from the UK and Europe is not going to dry up all of a sudden.
“What many investors are doing is taking an extremely short-term view of the investment possibilities at this stage, what they need is to have a 2020 view.
There are certain markets that will stay attractive come what may and serious global investors realise that.” adds Batra.
“Take London for instance, there is no way anyone will say that it’s an ‘English’ city, Dubai’s strengths work at the same level - our view is that there is
no better place on this planet to invest at this stage than here.”
