A View from the Top
The gleaming tower is impressive from all angles with the searing autumn sun bouncing off the mirrored glass and stainless steel. We know that when it opens the Burj Dubai will be the highest building in the world at over 800 meters, although the final height is being kept secret.
The targeted completion date was also a closely guarded secret, until I sat down with the Chairman of Emaar, Mohamed Alabar, who confidently told me he is, “shooting for (UAE) National Day” and that the December 2 goal is achievable. His team, including the CEO of his hospitality unit, seemed surprised by that statement, which sets the bar high after a half year of delays.
Dubai is a destination that has built its reputation on iconic buildings and development projects -- The Palm, The World and the sail-like Burj Al Arab. Next to the Burj Dubai is yet another landmark – “The Fountain.” Alabar invited me on an early evening tour of the fountain, which is the largest of its kind in the world.
It cost of more than $250 million to install and the jets can reach a height of 50 storeys. The entire downtown complex, which includes the giant Dubai Mall and The Address hotel, is impressive, and Alabar beams with youthful enthusiasm as he shows me around. While we walk, Alabar tells me he thought it was important to deliver the project after the global downturn, which rattled the desert foundations of Dubai.
My interview with the Emaar Chairman came during the eighth year of Cityscape, the property exhibition where in years gone by developers has money to burn. They launched multi-billion dollar projects and would splurge millions on model displays and stands. This year, the atmosphere was far more subdued and sober. Developers talked of completion dates and deliveries, not size and new products.
Alabar, arguably the largest developer in a region, was reflective about the events of last year and where we are today.
“We’ve learned the art of managing business, which has changed forever in my opinion. I thought I was conservative. I think I could have been more conservative,” adding, “I am much harsher in the operation now.”
Alabar could not address issues regarding the proposed merger between his group and the property development entities of Dubai Holdings, but he did not shy away from some of the more sensitive topics on the table these days – like Dubai’s debt.
On where demand would come from for the second tranche of the $20 billion bond offering, he said the “majority from the [UAE] government with some private sector.” Asked whether a total estimated debt of $59 billion can be serviced between now and the end of 2012, he said, “Between repayment and restructuring over the next three, four, five years, I really don’t see an issue there.”
When digging through the analyst reports, it seems a disproportionate amount of that debt sits within the empire of Dubai World and its property group Nakheel. It is weighing heavily on the Emirate overall. Dubai is eager to move on from a 40-50 percent property price-drop over the past year.
Questions remain about how certain entities will contend with that debt burden. When asked whether a major cleaning up was required, he was diplomatic and frank at the same time, “I think restructuring in all businesses is a must. We cannot do business the way we used to do. I have restructured my business and I am sure DP World is restructuring their business the way Mercedes Benz is restructuring its business. So the answer is yes.”
Alabar, like other executives, is confident that Dubai’s position as a financial services and trade hub with a more advanced infrastructure than its neighbours will allow for a faster recovery. He pointed out higher traffic numbers for Emirates Airlines recently and the return of expatriate white collar workers.
Our discussion took place while the IMF World Bank meetings were underway in Istanbul. The two organizations put out similar growth projections of between two and 2.5 percent for the UAE next year. The master developer thought that number is too conservative. The days of double digit growth are not coming back soon, but a figure about double that is what he has in mind for 2010.
During another series of conversations with executives from around the region, we talked about the “new normal” -- a new term to describe the post-downturn economy. The developed world is bracing for much slower growth for the next five years as a result of record debt levels. Many in the region are adapting to a different reality, even as they get ready to deliver on the next “biggest thing.”
ABOUT THIS BLOGJohn Defterios’ blog accompanies the weekly business program, Marketplace Middle East (MME) that is dedicated to the latest financial news from the Middle East. As MME anchor, John Defterios talks to the people in the know, finding out their opinions on the big business moves in the region, he provides his views via this weekly blog. We hope you will join the discussion around the issues raised.
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