00:00Dubai developer Benghati is facing downgrade pressures from major rating agencies over tightening liquidity and elevated debt levels.
00:08While broader Middle East tensions have slowed sales, analysts warn the company's immediate challenge is maintaining enough cash flow to
00:16cover its looming debt maturities.
00:18Joining us now to discuss this is Mohammed Benghati, chairman of Benghati Holdings.
00:23Mohammed, good to have you on with us. You've heard the intro to this cash issues that these rating agencies
00:31have put out.
00:32Is there any truth to this? See, the job of rating agencies to provide whatever information they have at a
00:39given point of time.
00:40So we're not here to argue with any rating agencies. What we're focused on is our operational excellence and letting
00:46the performance speak for itself.
00:48I think what the rating agencies provided was a snapshot at a given point of time.
00:53And real estate is a very cash volatile business.
00:56What I mean is you have project handovers happening at different points of time.
00:59You have land acquisitions completing at different points of time.
01:03What I can tell you is since the publishing or since June, since our figures were published, we've handed over
01:10three projects worth 1.8 billion dirhams.
01:12These projects were more than 90 percent sold and 90 percent collected.
01:16So you can imagine the effect of that on our cash position.
01:19I can also remind everyone of the 10.6 billion dirhams that we reported worth of cash sending in our
01:26escrow accounts.
01:27So from a financial standpoint, the company is in a very healthy liquidity position.
01:32OK, but it's not just rating agencies because JP Morgan had put out a report recently as well,
01:37talking about the 500 million dollar bond maturing early next year, saying that the company may not even be able
01:43to pay it back.
01:45Is that that is another entity? Is that is there any truth to that argument?
01:49Well, I think I mean, we are the most people who have visibility on our position.
01:54I think I can confidently say that we're in a very good position to pay back all our dues and
02:02the sukuk that's maturing in February 2027.
02:05As I mentioned, we reported 10.6 billion dirhams in our escrows.
02:10We've handed over three projects worth 1.8 billion dirhams.
02:14And most importantly, I think, is we're very committed to completing 10 projects this year within the next four to
02:21five months, collectively worth 7.5 billion dirhams.
02:24These projects are 94 percent sold and on average around 80 percent collected.
02:29So we're pretty confident that we can settle our dues.
02:32OK, so we're talking about really, really big numbers here in terms of the projects that you're handing out.
02:37You can definitely see your sign all over the Dubai skyline, Mohamed.
02:41When we talk about developers in the country right now and because of the situation in the region, have you
02:47or any other developers that you know of had to provide some discounts to buyers in order to get those
02:54overwhelming revenues?
02:57I wouldn't say discount is the key word that we've been providing as developers.
03:01Maybe what I've seen in the market over the summer period, you know, the latest period, is perhaps more flexibility
03:07on payment plans, more flexibility on certain perks like DLD waivers or things like that.
03:12But we haven't really seen a drop in prices per se, not a considerable one, maybe some summer offers.
03:20So there hasn't been much pressure on price points.
03:24Perhaps we did see a bit of softening in terms of activity from the period of March till May.
03:29But then following that period, we did see activity pick up again.
03:32OK, and let's talk about just the broader market.
03:34Let's talk about supply and demand.
03:36It's been a big issue in Dubai, at least since I started working here in Bloomberg.
03:41I remember reporting on that committee for supply and demand that was started back in 2018, 2019, I believe.
03:47What does the situation look like now when we talk about how much supply is in the market and then
03:53just how much people are demanding for property?
03:57I think there is still a demand for property.
04:01I mean, the figures speak for themselves.
04:03If you look at the market, the performance this year, I would say the market's gone through three phases.
04:09I would call phase one the first two months of the year.
04:13So Jan and Feb, we saw an exceptional performance.
04:15We saw the market register around 70 billion dirhams each month of the year, the first two months.
04:2117,000 transactions in Jan and in Feb, 17,000 transactions.
04:26Then I would say the second period was perhaps the geopolitical shock, where understandably, you know, a lot of clients
04:34were perhaps pausing and reassessing.
04:37And that's where we saw, you know, demand perhaps soften a bit.
04:41So we saw the transactions fall from around 14,000 transactions in March all the way to 10,000 transactions
04:48in May.
04:49But if I were an analyst, I'd be very interested to know what happened after May.
04:53And that was very interesting for me because I'd call that the recovery period, June and July, where we saw
04:59transactions climb back up to 14,000 transactions per month on an average of 35 plus minus billion dirhams.
05:05But Mohamed, even in May, when you talk about 10,000 transactions, given the fact that this event, the geopolitical
05:12shock, has been unprecedented in the region, would you say that it could have been much worse and that it
05:19really did not get to the level where it got to that much worse phase?
05:24I think the market performed exceptionally well considering the circumstances.
05:28I mean, you know, even March at its figure was the highest March recorded, according to the figures in DLD.
05:36And then, as I mentioned, you know, historically, we know as developers that summer is usually where our sales drop.
05:42However, the complete opposite happened.
05:44You know, we're right out of the midst of a conflict in May and summer was just around the corner.
05:50So you would expect intuitively that the sales would drop.
05:54However, the complete opposite, the antithesis occurred.
05:56So sales increased monthly transactions from 10,000 to 14,000 and from 29 billion to 33 billion in June
06:03and to 35 billion in July plus minus.
06:06OK, so where are you seeing the most demand coming from?
06:09I think I would say most of it is local demand in addition to countries like India.
06:15We have a lot of Indian buyers coming in.
06:17We have a lot of buyers coming in from the UK, from Europe.
06:21But I think the majority is local demand.
06:24OK, and then you spoke about some of the projects that you're handing out.
06:28What are some of the biggest projects that you're working on?
06:31And are you concentrating still in the UAE or do you have wider ambitions geographically elsewhere?
06:37Well, I think everyone's aware of our branded projects.
06:40So we have Bugatti residences.
06:42We have Mercedes-Benz places, which, by the way, if you look at the skyline, is now shining between the
06:47towers, very close to completion.
06:50We have Burj Bingatti, Jacob & Co residences, which, again, is now very apparent in the Dubai skyline.
06:56So all our branded projects are very close to completion.
07:00And then we obviously have other projects, which is our mainstream projects, such as Bingatti Hills, which is almost 2
07:06billion dirhams worth of gross development value.
07:09We have Ngatti Hill Views, which, again, is another 2 billion worth of GDV.
07:13And a lot of other projects across areas like Al-Jaddaf, areas like Business Bay, Aquarise, if you've seen driving
07:19by Business Bay, Bingatti Skyrise, a GDV of 5 billion dirhams, more than 90 percent sold.
07:25So we've been doing a pretty good job, I would say.
07:28OK, so just to wrap it up and to go back to the initial point, do you think that those
07:33agencies, do you think that those banks are underestimating just how much cash can get caught up in the development
07:38cycle?
07:40I think, I mean, you know, these agencies, they provide whatever information they have at that given point of time.
07:45We have the advantage as being the organization itself, knowing what we have every single day.
07:51And so, as I mentioned earlier, I mean, I think the best indicator to look at, to judge the financial
07:57health of any developer, not just us, is the escrow account balance.
08:01In Arabic, we like to say, keep your luminary coin for your dark days.
08:06And that's exactly what we've been doing. So we've accumulated more than 10 billion dirhams in our escrow accounts.
08:11We obviously, as developers, can draw down on those funds.
08:15And in addition, we're not just relying on those funds.
08:18We're very much focused on the additional funds that are going to come from the handover of 10 projects worth
08:237.5 billion dirhams,
08:25which, again, more than 90 percent sold and 80 percent collected.
08:28All right.
08:28All right.
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