Morgan Parker’s first job at one of Dubai’s biggest developers was to tell his bosses everything that was wrong with their $20 billion (€18.29bn) plan to build the world’s largest mall and 100 hotels to surround it.
A lot, it turned out.
The former head of the Rockefeller family’s Rose Rock real estate firm took Dubai Holding’s Mall of the World project back to the drawing board, pushing a scaled-down plan that doesn’t require breaking records to attract attention.
Even the watered-down 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’s head of capital markets for the Middle East and North Africa.
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, Mr 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 square meters (9.15 million square feet) 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 help reduce congestion and 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.
Although Dubai Holding is backed by ruler Sheikh Mohamed bin Rashid Al Maktoum, the project’s $20 billion price tag means the company needs institutional 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.
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.
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