Interview with Majid Saif Al Ghurair

Q. How do you see 2004 evolving for your group of companies? Which of the businesses has the brightest prospects for this year?

A. The UAE economy in general is doing extremely well, and, as you know, the real estate sector is booming. We have exploited that opportunity by capitalizing and growing the group in this important sector.

We are building new properties for the market and are also looking for new ideas concerning development in the area.

Q. Can you tell me more about your expansion plans? What kind of plans are they and when will they be completed?

A. Our existing shopping mall in Dubai - the Burjuman Shopping Mall - has a retail area of 300,000 square feet. We are expanding that to 750,000 square feet.

Hopefully, the project will be completed by March or April of this year. We're adding three towers - two are residential towers containing 170 apartments - and we are also going to have an office tower with 300,000 square feet of leaseable area.

We are also building another shopping mall on the other side of the city - the more expensive side - which will also have about 260,000 square feet of retail space. We are focusing on retail because, as you know, Dubai has become a shopping destination for all the neighboring countries. The Gulf Cooperation Council [GCC] countries, Iran and India all go shopping in Dubai.

Q. I understand that Burjuman's expansion is somewhat behind schedule and that there are some financial problems. Have you overcome these challenges?

A. There are no financial problems. But, as you know, in construction there are always administrative delays. New tenants may need to alter or expand their retail space, for example.

We were scheduled for January, but you have to consider the size of the project. We are building 4.4 million square feet of retail space, with four underground parking levels, ranging from 800 to 3,300 spaces. This is why the project went over schedule by two to three months. But this is normal in construction.

Q. The retail business in Dubai is about to be turned on its head. Plans for at least three new malls have been announced or are already under construction. How do you see Burjuman competing in this new environment?

A. There are 5 million square feet of retail space presently available in Dubai. In the next three to four years, another 10 million square feet will come up.

The market will be saturated. Two or three years back, shopping malls were really driving the market and dictating prices. Now, it is the other way around: retailers have the upper hand.

It's a cycle. This year, there will be a lot of spaces, but there are not many shopping malls. How are they going to work? The smaller ones are going to suffer.

In Dubai today, it's a fact that there are only three malls out of 23 that are really successful. Does that mean that there is oversupply in the market?

Maybe yes, maybe no. It depends how many tourists Dubai manages to attract. As you know, the airport will soon be expanded, so the number of visitors should increase dramatically. If it does, then it's fine. But if it doesn't, then, yes, there will be a problem.

If a new market suddenly opened up in the region, in Lebanon or Iran, say, it would have an effect on Dubai. But, in the near future, I don't see anything happening. We are benefiting from that fact that nothing is going on around us, which means that Dubai is a destination for several hundred million people.

Q. As you say, the shopping mall market may be healthy, but with an extra 10 million square feet coming onstream in the next two to three years, the business model will inevitably change. How will Burjuman respond to this challenge?

A. First of all, you have to identify the customer for whom you are going to build a shopping mall. If you identify a sector of the market and build for it, then customers are going to keep coming to your mall. But if you lose your focus, you become nobody's mall. Then, yes, you will have problems.

At Burjuman we are concentrating on upper-middle and high-end brands. And our expansion plans reflect this approach. We will continue to cater to that segment of the market and aim, with the expansion, to ensure that Burjuman continues to be a high-end mall, a mall for serious shoppers.

Q. But aren't you already suffering in that category because of the Wafi Mall and Wafi's expansion plans?

A. No, we're not. Wafi is a very different kind of complex. Wafi has expanded this year and on two or three occasions in the last few years, but each expansion has had its own characteristics. Wafi is doing lot of construction in the restaurant sector, with inside and outside venues. Burjuman is different.

We have a lot more shops than they do. The expansion will bring us up to around 400 shops. Wafi does not have that kind of number or, indeed, the same kind of tenants.

In our expansion, we are going to have Saks Fifth Avenue as our anchor. This is a major boost for Burjuman. We think we have the right mix for our customers.

Q. Do you have any plans to take the Burjuman model to other cities or other countries?

A. No. I don't think you can copy things that way. Especially with what's happening in Dubai. We have different ideas for Dubai.

A lot of people are saying that there is more space for retail in Dubai, but I think that is only true if you have different ideas. It is not worth reproducing what already exists.

Q. Wouldn't you like to expand your operations into other countries?

A. We are not thinking in terms of retail expansion abroad at the moment. Because, you know, it's not only the building and the retailer that are important. Looser regulations also have an effect on whether malls succeed or not.

In many Middle East countries, landlord-tenant relationships are not clearly defined. That causes a lot of problems.

Take the case of Egypt. A lot of malls have been developed there, but because there are no rules and regulations governing landlords and tenants, a lot of malls have suffered a great deal because the interest of the developer is to build and sell. But that formula doesn't work for shopping malls.

You need continuity, you need management, and you need the right tenant mix, and the whole thing has to be continually improved.

In Egypt, for example, there is no rent structure. The landlord makes his money by selling the space. As soon as you sell the space, then you have a problem. The operator doesn't take care of the shops, the approach to merchandising changes and the whole formula collapses.

Q. What are your targets for growth for 2004 and 2005?

A. Along industry lines. The growth rate in Dubai is 10-11 percent, which is good.

Q. In terms of turnover or profit?

A. Return on investment. We have some industries in Dubai - the aluminum business, for example - which expect annual growth of 15 percent. Even though there is a lot of competition in this business, we hope to achieve that.

Q. The center of Dubai now seems to be moving towards Jumeirah. Do you have any plans to move there?

A. We are thinking of doing a mixed-use kind of project in that area. But, as I said before, it's risky to simply reproduce what already exists. After all, it's only 20-25 kilometers away.

You can't build something that competes with your own real estate, especially if it's that close. So, yes, we are thinking of doing something, but we are acutely aware that it will have to be very different than what's available now in Burjuman.

Q. What will it look like?

A. We are thinking about the entertainment sector. We are looking at themed retailing, specialized retailing such as furniture outlets or carpet markets. It has to be a different kind of shopping.