Imagine telling your boss at one of Dubai's biggest developers that something is wrong with a multibillion project.
According to Bloomberg, that's what former head of real estate firm Rose Rock, Morgan Parker, had to do as his first job at Dubai Holdings, one of Dubai's biggest developers. His first job was to tell his bosses everything erroneous with the $20 billion project to erect the world's largest mall and 100 hotels around it. And pointing out a lot of points to consider, the multi-billion Mall of the World project of Dubai Holdings LLC had to be scaled down as it was said that it did not require record breaking feats to be a major attractions.
"We are avoiding the biggest of this and tallest of that," said Parker, a former Morgan Stanley banker, according to Bloomberg. "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."
Dubai Holding is supported by ruler Sheikh Mohamed bin Rashid Al Maktoum but even so the project $20 billion proposed budget would require institutional investors. After several extravagant iconic projects that caused Dubai real estate at the brink of default, many investors have become cautious of new big investments, not to mention political turmoil, falling oil prices and declining Dubai home values to add to their list of worries.
Bloomberg quotes Gaurav Shivpuri, head of capital markets for the Middle East and North Africa at Jones Lang LaSalle Inc., "Most institutional investors don't like to take on development risk especially in times like this. The preference is usually for operating assets that provide income right away but again with the right price point some may be persuaded."
Thus, Dubai Holding's new plan is reported to comprise of three malls to be completed in stages, instead of one gigantic shopping mall. This allows the project to complete gradually with along with demand and investment. Parker reportedly stresses that the focus is now on realistic projects that generate cash quickly instead of ambitious projects to boost Dubai's image internationally.
