Jassim Al-Seddiqi: The new face of Arabian Gulf finance

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Jassim Al-Seddiqi
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Jassim Al-Seddiqi
Updated 10 October 2017

Jassim Al-Seddiqi: The new face of Arabian Gulf finance

In just a few years, Jassim Al-Seddiqi has become the “go to” financier in the UAE capital Abu Dhabi, and made the company he runs — Abu Dhabi Financial Group (ADFG) — one of the most important investing institutions in the Arabian Gulf.
After training in engineering, he branched out into finance only in 2008. Now, not only does he handle investments for some of the biggest names in the Abu Dhabi establishment, but his firm has also become a core component of the UAE’s newest financial center, the Abu Dhabi Global Market.
Now Al-Seddiqi, 33, is increasingly switching his attention outside the UAE, and the new economic environment in Saudi Arabia is certain to play a big part in that global focus. “The Saudi privatization program and Saudi Aramco share sale will have a massive spillover effect for all of us,” the ADFG chief executive said.
ADFG already has a key foothold in Saudi Arabia via its 48 percent stake in Shuaa Capital, the venerable Dubai financial institution that hit hard times during the global financial crisis and has struggled to regain its former pre-eminence.
“Shuaa was just a skeleton really when we bought it. We made major changes to it, and for our part that has been positive, as you can see in the results in the first half of this year. You will see more progress in the second half. It is at its most profitable for years. It has a legacy in the UAE, but it is very much back in action now, across the region,” he said. 
Al-Seddiqi bought the shares from the government of Dubai last year in a $100 million transaction that was seen as a fresh start for the Dubai institution. Along with Shuaa’s businesses in capital markets, investment banking, asset management and credit provision, the deal brought with it two very important licenses in Saudi Arabia — with the Capital Markets Authority and the Saudi Arabian Monetary Authority — that gives ADFG operational freedom in the Kingdom.
“One of the big attractions of Shuaa was that it already had a presence in Saudi Arabia,” Al-Seddiqi said.
He is determined to put that to good use. “We’re looking to expand in Saudi in real estate investment trusts, initial public offerings (IPOs), cross-border advisory work and in underwriting. We’re interested in all the privatization plans. We’re in discussions with Saudi partners to invest alongside them. We’d very much like to do that,” he said.
Real estate is a big element in the ADFG portfolio, and is also featuring prominently in its Saudi thrust. There are ADFG hotel developments in Jeddah, Dhahran and Riyadh, and a 700-unit residential project in Riyadh. At some stage, they could all be rolled into a real estate investment trust and listed on a regional exchange.
ADFG has gone global in the real estate business, with high-end residential and commercial property, warehouses, shopping malls and hospitality assets across the UK, Middle East and Eastern Europe.
Last year, ADFG bought control of Northacre, one of the biggest developers of prime property projects. In Dubai last week, Al-Seddiqi and Niccolo di San Pietro, Northacres’s chief executive, unveiled their latest project in the upmarket “golden postcode” — SW1 — in London’s swanky West End: The £1.5 billion ($2 billion) redevelopment of the area around the former site of New Scotland Yard in Westminster.
Labelled “Broadway,” the project is now under way, with the austere 1960s Metropolitan Police headquarters having been demolished, and work begun on six towers of residential, commercial and leisure properties that will, ADFG hopes, become a new quarter in an area that borders on some of the UK capital’s most historic and valuable sites.
ADFG secured a £700 million loan from First Abu Dhabi Bank to get the project under way. It owns 40 percent of the project outright, with the balance funded by wealthy regional investors and one regional sovereign wealth fund.
It might seem something of a risk given the volatile state of the UK property market in the wake of the Brexit vote, but Al-Seddiqi and San Pietro have done their preparatory work thoroughly. “The project’s fully funded, and we are not too concerned over where Brexit will lead. We see London strictly from that long-term perspective,” Al-Seddiqi said.
ADFG now has some £3 billion of property assets in central London, but still sees the value of the city as an international investment destination. In fact, it believes the fall in prime asset values in the city — around 10 percent since the Brexit vote in summer 2016 — along with the roughly 20 percent decline in the British currency, represent a “good entry point” into real estate there.
As San Pietro said in Dubai: “Because the market is sluggish, probably now is the right time to buy into London. It’s been so every time there’s been uncertainty surrounding London’s property market in the last 20 years. This time needn’t be any different.”
Northacre, and ADFG, have a lot riding on central London real estate, with several other developments completed in the same area around the West End. But it still sees demand from the global investment community, especially in the Middle East and Asia, where they have been marketing the projects.
ADFG is also ambitious in real estate in Egypt, where it also has interests in education, as well as seeking to get more involved in the Egyptian financial scene via IPOs, advisory work and underwriting.
Its other notable international investment is in the Capital Plaza and CenterVille Hotel in Montenegro, the biggest mixed-use scheme in the Balkans.
Real estate is also a big part of ADFG’s UAE asset portfolio. Earlier this year, it launched the Etihad REIT, a Shariah-compliant investment instrument with 10 income-producing projects in its seed portfolio. That could be the subject of an IPO at some stage on a local market.
Given the strength of Al-Seddiqi’s connections in the UAE capital, such an IPO is likely to be on an Abu Dhabi market. Last year, ADFG provided a major boost to the Abu Dhabi Global Market (ADGM) when it launched its 735 million dirham ($200 million) “Goldilocks” fund in the financial center, with the prospect of listing it at some stage on an ADGM exchange of funds.
The “Goldilocks” concept is a new one for regional investors. Al-Seddiqi aims to replicate the strategy of “activist shareholders,” where a shareholder actively influences management toward optimizing the value of the shares, which is something quite common in Western markets. He calls it “constructivism,” or constructive activism, and he has used the tactic in relation to Shuaa and to GFH Financial, the Bahrain-based firm whose shares are listed in Bahrain, Kuwait and Dubai.
“Typical opportunities which Goldilocks invests in are companies whose intrinsic values are not recognized by the public market due to complex corporate or capital structures, asset mispricings, under-researched or ‘below the radar’ coverage, inefficient management and the lack of industry or market expertise in extracting value. We seek to add value through board representation and management engagement while investing for the short- to medium-term,” Al-Seddiqi said.
That strategy is paying off. “Things are going very well in Abu Dhabi. The Goldilocks fund is now worth 1.7 billion dirhams,” he said.
Abu Dhabi could also be a model for how the Saudi Arabian financial center might develop over the coming years in the course of the Vision 2030 transformation away from an economy based on oil and public sector dependency. Some observers believe that the increasingly close ties between Abu Dhabi and Riyadh could lead to a bigger role for the UAE capital in the Kingdom’s $200 billion privatization program launched as part of the transformation program.
“ADGM is a very progressive financial center. Because it is new, it has the ability to look back at all the other centers and see what has worked and what has not. It has a lot to offer Saudi Arabia in its transformation. Abu Dhabi could be a halfway house for Saudi Arabia as it spreads its message to the world,” Al-Seddiqi said.
He said the recent news that Virgin Group founder Richard Branson is interested in getting involved as an investor in Saudi Arabia’s Red Sea Resort was a major advance for the Kingdom. “I see that Richard Branson is involved, which is significant for Saudi Arabia,” he added.
“There are challenges for Saudi Arabia, of course. In every transformation there is a challenge. But the region has fared extremely well in challenging conditions over the past few years, and I think the tough part is behind us and things will get better now.
“The regional economies have been streamlined and rationalized, but what happens now will be an important step for all of them. Lifting the driving ban was a very big thing, but there are also very important things going on in tourism and leisure.
“But these things take time, and the leadership in Saudi Arabia is juggling things efficiently. The Saudi economy is very important for the region. If you’re not involved there, you are not doing the job properly,” he said.
Al-Seddiqi’s rise has been fast, and his ambition is big. One foreign banker in Abu Dhabi said: “He’s the rising force in the UAE financial scene, and could make ADFG into a regional financial powerhouse. He’s the face of the next generation in the Gulf.”


INTERVIEW: Home ownership in the corona era

Updated 4 min 49 sec ago

INTERVIEW: Home ownership in the corona era

  • We want to make sure that every riyal of subsidy is used to its most effective extent

What a difference a pandemic makes. At the turn of 2020, Fabrice Susini, CEO of Saudi Real Estate Refinance Company (SRC), could look back on two years of significant progress toward the provision of affordable home ownership for the Kingdom’s aspirational young population.

Increased property ownership was one of the main aims of the plan to diversify the Saudi economy away from oil dependency, setting a target of 70 percent home ownership by 2030.

It was all going to plan. New mortgage issuance had been “staggering,” Susini said, and SRC had reached its target of facilitating 60 percent home ownership with months to spare.

“It was a very positive story,” he said, allowing him to work on the next phase of Saudi Arabia’s move toward being a home-owning economy — buying more mortgage portfolios from banks and other mortgage originators, injecting more liquidity into the housing market via domestic and international sukuk issuance, and offering new long-term fixed-rate mortgages to potential and actual home owners.

The economic lockdown that took increasing effect from March has changed the figures on which those plans were based. New mortgage applications, which has been running between SR20 million ($5.3 million) to SR50 million per week, dropped into single-digit millions as potential buyers were forced to stay at home rather than go viewing properties and took stock of their spending plans in light of the economic downturn that followed the pandemic outbreak.

“We expect to report a sharp drop for April and May. I would be surprised if the numbers remain the same,” Susini said. “But the fundamentals remain the same. It is still an underserved market, compared with the demands and needs of the young, dynamic population aspiring to home ownership. The process may be slowed by a couple of months, but the demographic is still there. There will be a slowdown but I’m sure a catch-up is coming and the forward movement will resume.”

One reason for his optimism is the action taken by the financial authorities to support the economy in its hour of need, especially the stimulus packages unveiled by the Saudi Arabian Monetary Authority (SAMA) and the Finance Ministry.

“There has been a lot of support coming through for small to medium businesses and private companies, and that will balance and smooth out the process. I don’t see a big hit coming,” he said.

Effective monitoring and control of SAMA liquidity injections would ensure they reached the SME and private sector organizations they are mainly intended to help, he added.

“I’d be very surprised if any significant proportion was not properly channeled to the private sector and SMEs,” he said.


BIO

BORN: Rome, 1964

EDUCATION: 

  • Law degree, Paris X Nanterre University, France
  • Banking and finance degree, Sciences Po, Paris
  • Master’s degree, finance, Dauphine University, Paris
  • MBA, London Business School

CAREER

  • Relationship manager, Societe Generale
  • Analyst, Bayerische Landesbank
  • Global head of securitization, BNP
  • CEO, Saudi Real Estate Refinance Company

The mortgage industry in Saudi Arabia enjoys significant subsidies from the government for its products, and while some of these have been changed in recent week, reducing subsidies to mortgages for military and some civilian personnel, he does not see this as the beginning of a trend to remove subsidies for mortgages in the broader scope of SRC’s business.

“There is no danger to mortgage subsidies that I am aware of. The budget has been carried out, the resources are there. But of course we want to make sure that every riyal of subsidy is used to its most effective extent,” Susini said.

“When we saw the situation was becoming more challenging, the SAMA package was a great help by injecting liquidity into the financial system, but we also wanted to be more proactive ourselves in the relationship we have with our borrowers and our partners. We didn’t just want to wait until people were actually in difficulties before we acted,” he added.

The result was the “forbearance” plan for borrowers, by which SRC asked its mortgage partners to offer a three-month mortgage holiday to those who felt the need, and many took up the offer. “A big majority has gone for it. We see ourselves as a ‘citizen’ company and we do not just want to rely on the authorities. We asked ourselves what we can do in terms of citizenship and public policy initiatives,” Susini said.

There seems little prospect of a cascade of mortgage defaults as long as the current policy of government support continues, and SRC and mortgage originators persist with the policy of showing patience and understanding in difficult economic circumstances.

Nonetheless, prospective home owners are facing big challenges. Not only has the lockdown made the market mechanics of home-buying more difficult, with viewings almost impossible in the light of curfews and travel restrictions, but there is also the question of whether people will hesitate over such a life-changing decision. Will they want to buy a house or apartment while the pandemic continues to rage?

Susini thinks customers will learn to prioritize their financial decisions more carefully. “You might defer the purchase of a new car, but still want to buy a home. You would direct your choice toward those things you regard as more important. Home ownership is probably regarded as more essential,” he said.

The appetite of Saudi citizens for house purchase in the new circumstances will be better judged when SAMA and other financial bodies publish official figures in the near future, he said.

With regard to the overall health of the real estate market, Susini said that he has not seen a significant fall in property prices, but underlines the fact that SRC caters mainly for the affordable segment of the market, where big falls in value are less likely. He noted that apartments have been holding their value “quite well” in comparison with bigger units like townhouses and villas.

In an era when global interest rates are falling toward zero in many parts of the world, there could be an incentive for customers to go for the long-term fixed-rate deals SRC is offering.

“We’re seeing the need for more awareness of the benefits of fixed rates. Borrowers can grasp the benefit of remortgaging at rates that are significantly lower now than they were before. It is a choice for the borrower really. They can either own their home more quickly than before, or maintain their payments on more sensible terms. It can be beneficial for them whether rates are subsidized or not,” he said.

SRC reduced its lending rates for long-term fixed mortgages last month, is first cut this year following two rate reductions in 2019. Borrowers could now take advantage of a 5 percent rate on a 25-year mortgage, Susini said.

SRC is also working hard on the digital space, with online facilitators becoming more crucial to home purchase. The company is in the early stages of a study on fintech and digital mortgage origination, and some initiative could be forthcoming by the summer, he said.

“If you can talk of a silver lining from the current situation, it is that it is accelerating the digitization of financial processes. The payment processes are already quite well developed, but the sale of processes presents more of a challenge. The health ministry has organized some innovative processes around the digital market place, and the justice ministry has done good work on the digital origination of contracts.”

The strategy of including mortgage originators in the SRC set-up will continue, and Susini is holding talks with financial and corporate firms to bring more products under its portfolio. 

SRC is owned by the Public Investment Fund, the Kingdom’s $325 billion sovereign wealth fund, so it has access to finance at the highest level. But under Susini’s stewardship there has also been a willingness to raise money in local markets via domestic sukuk issues. Two have already been launched, and a third is lined up to take place in the summer.

After that, the company will be work on an international bond offering toward the end of the year, though he declined to say how much would be raised.

“We want to ensure we can continue to finance mortgages, to have sufficient tools and channels so that no bank or finance company is stopped from offering mortgages because of issues to do with capital ratios of liquidity,” Susini said.

He viewed recent downgrades by ratings agencies of banks’ creditworthiness or prospects as a “gray cloud” over liquidity.

“We want to be ready so that primary originators of mortgages have all the tools necessary to keep operating regardless of the problems they might face,” he added.