By Zainab Fattah
When Morgan Parkerwas asked by one of Dubai’s biggest developers to review their $20bn plan to build the world’s largest mall and 100 hotels to surround it, he took it back to the drawing board.
The former head of the Rockefeller family’s Rose Rock real estate firm recommended a scaled-down plan for Dubai Holding LLC’s Mall of the World project that doesn’t require breaking records to attract attention.
Even the adjusted plans will face challenges in winning backers. Political turmoil, falling oil prices and declining Dubai home values have made Gulf-based financiers skittish about new investments. And big international funds have been wary of Dubai real estate since the near-default in 2009 after a spending spree on trophy projects including man-made islands.
“Most institutional investors don’t like to take on development risk especially in times like this,” said Gaurav Shivpuri, broker Jones Lang LaSalle Inc’s head of capital markets for the Middle East and North Africa. “The preference is usually for operating assets that provide income right away but again with the right price point some may be persuaded.”
Dubai Holding’s new plan includes three malls to be built in stages instead of one big shopping centre, allowing the project to grow gradually depending on demand and investment. The mantra, Parker says, is now on realistic projects that generate cash quickly instead of expensive buildings intended to burnish Dubai’s international image.
“We are avoiding the biggest of this and tallest of that,” said the 41-year-old, a former Morgan Stanley and Macquarie Group banker. “Dubai is maturing as a city and investors are looking for rational projects. At the end of the day, the money is made by the tenants paying the rent and they are looking for projects that function.”
The project is still ambitious by any city’s measure. The 850,000 sqm (9.15million sqft) of retail space would combine a Rodeo Drive-like fashion district with street shops and traditional malls. About 35 office buildings would be scattered throughout the development to support shops and restaurants across the area. The project’s 8,000 homes will range from luxury apartments to student housing and staff accommodation.
Stints as an investment banker gives Parker the understanding of what they’re seeking in real estate projects, while his role leading mall developer and owner Taubman Asia and work at Australia’s Lend Lease Group give practical development knowledge.
“This is a very very large project,” he said. “It’s going to require an enormous amount of work and capital to bring to fruition.”
Dubai Holding is in talks with six investors such as regional pension and sovereign funds to gauge demand, Parker said. He declined to provide names but said he aims to conclude partnership agreements with investors this year, and is seeking real estate funds with long-term investors.
Jones Lang LaSalle’s Shivpuri said regional investors are still interested in Dubai real estate as they tend to disregard geopolitical and legal risks that put off international investors.
However Richard Bradstock, head of Middle East at real estate investor IP Global Ltd, said local investment is under pressure because of the oil price slump and political instability.
“We are seeing enormous outflow of money from the region to places like the UK, Australia, Germany and the US,” he said. “Mostly because of geopolitical risks.”
Home prices fell throughout 2015, with Standard & Poor’s and Phidar Advisory both predicting a further decline this year. Phidar’s index of international demand for Dubai real estate dropped by 83 percent last year, driven by exchange-rate fluctuations.
Bloomberg
By Zainab Fattah
When Morgan Parkerwas asked by one of Dubai’s biggest developers to review their $20bn plan to build the world’s largest mall and 100 hotels to surround it, he took it back to the drawing board.
The former head of the Rockefeller family’s Rose Rock real estate firm recommended a scaled-down plan for Dubai Holding LLC’s Mall of the World project that doesn’t require breaking records to attract attention.
Even the adjusted plans will face challenges in winning backers. Political turmoil, falling oil prices and declining Dubai home values have made Gulf-based financiers skittish about new investments. And big international funds have been wary of Dubai real estate since the near-default in 2009 after a spending spree on trophy projects including man-made islands.
“Most institutional investors don’t like to take on development risk especially in times like this,” said Gaurav Shivpuri, broker Jones Lang LaSalle Inc’s head of capital markets for the Middle East and North Africa. “The preference is usually for operating assets that provide income right away but again with the right price point some may be persuaded.”
Dubai Holding’s new plan includes three malls to be built in stages instead of one big shopping centre, allowing the project to grow gradually depending on demand and investment. The mantra, Parker says, is now on realistic projects that generate cash quickly instead of expensive buildings intended to burnish Dubai’s international image.
“We are avoiding the biggest of this and tallest of that,” said the 41-year-old, a former Morgan Stanley and Macquarie Group banker. “Dubai is maturing as a city and investors are looking for rational projects. At the end of the day, the money is made by the tenants paying the rent and they are looking for projects that function.”
The project is still ambitious by any city’s measure. The 850,000 sqm (9.15million sqft) of retail space would combine a Rodeo Drive-like fashion district with street shops and traditional malls. About 35 office buildings would be scattered throughout the development to support shops and restaurants across the area. The project’s 8,000 homes will range from luxury apartments to student housing and staff accommodation.
Stints as an investment banker gives Parker the understanding of what they’re seeking in real estate projects, while his role leading mall developer and owner Taubman Asia and work at Australia’s Lend Lease Group give practical development knowledge.
“This is a very very large project,” he said. “It’s going to require an enormous amount of work and capital to bring to fruition.”
Dubai Holding is in talks with six investors such as regional pension and sovereign funds to gauge demand, Parker said. He declined to provide names but said he aims to conclude partnership agreements with investors this year, and is seeking real estate funds with long-term investors.
Jones Lang LaSalle’s Shivpuri said regional investors are still interested in Dubai real estate as they tend to disregard geopolitical and legal risks that put off international investors.
However Richard Bradstock, head of Middle East at real estate investor IP Global Ltd, said local investment is under pressure because of the oil price slump and political instability.
“We are seeing enormous outflow of money from the region to places like the UK, Australia, Germany and the US,” he said. “Mostly because of geopolitical risks.”
Home prices fell throughout 2015, with Standard & Poor’s and Phidar Advisory both predicting a further decline this year. Phidar’s index of international demand for Dubai real estate dropped by 83 percent last year, driven by exchange-rate fluctuations.
Bloomberg
