BurJuman expansion project running late (page 3 of 3)

"We sat down with them, and we reached an agreement on compensation." Could he provide details of the settlement? "No, no, no. But we agreed." Did the agreement include something besides a rent-free period? "It's a combination," said Ibrahim. "To be frank with you, we agreed on certain parameters, including a rent-free period."

Did that include a cash payment? "I don't want to say 'money,' but at the end of the day, if you give them a rent-free period, instead of paying them the money, we don't receive the money." Asked about the $14 million figure, Ibrahim was insistent? "No, no, no, no. We didn't talk about a figure like this."

Was it lower? "Yes, much lower. We had a very amicable settlement. It was in no way close to this figure." Ibrahim claims that 60 percent of Burjuman retailers agreed not to seek any compensation at all; he says that others accepted a three-month rent-free period, from the soft opening in June until the official opening in September.

However, Arabies TRENDS has learned that, as of April 21st, at least a few retailers - who were unhappy with what they saw as preferential treatment for Saks - had rejected the Burjuman offer. "Burjuman management cannot have one set of rules for Saks and another for the rest of us," the representative of a Dubai-based company that holds franchise rights for a number of top European fashion brands said in April.

"I have spoken to some of the other companies in the same situation I am in, and we have discussed the idea of a class-action lawsuit to protect our interests." For the Al-Ghurair Group, this is all unfamiliar territory. Over the last 10 years, Burjuman has been a huge popular success, all the while building a reputation for delivering results: the percentage of mall visitors buying goods ran in the upper 40 percent range, against an industry average of 25 percent.

For several years, Burjuman continued to dominate the top end of the sector. While rival Deira City Center was certainly successful in attracting footfall (with over 30,000 visitors a day), Burjuman was quietly churning out profits - with just over half the number of visitors. But it was not long before Burjuman began to feel the heat. The opening of Wafi Mall five years ago provided Burjuman with its first taste of real competition.

However, Burjuman managed to hold its ground, and continued to attract customers - from both Dubai and overseas. As well, the recent boom in new mall projects in Dubai does not seem to have had any impact on Burjuman's fortunes. If anything, the emergence of new competition helped to highlight the fact that Burjuman was the preferred address for discerning shoppers.

Did Burjuman's string of successes go to its head? The general manager of a rival mall in Dubai thinks so. "The way the expansion was handled clearly smacks of mismanagement," the mall manager said. "It shows they, too, can have feet of clay."

While the delays and negotiations are proving an embarrassment for Burjuman, they may also have serious consequences for its flagship tenant. Saks Fifth Avenue management had identified the Middle East as an area in which to focus expansion; they were reportedly waiting for the Dubai opening before unveiling other projects in the region. Saks's entry into Dubai, following on its Saudi branch, was expected to be smooth sailing.

It would be an opportunity, management hoped, to establish Saks's brand identity as a regional leader. That may go a long way towards explaining why the company's local representatives are keen to avoid any public controversy.

But controversy is now inevitable. And the timing couldn't be worse. Emaar Properties, the real estate heavyweight, is currently developing the world's biggest mall just a few minutes' drive from Burjuman - with over 2 million square feet of space and construction scheduled to be complete by 2007.

Meanwhile, the Majid Al Futtaim (MAF) Group is developing the Mall of the Emirates on the same stretch of road. This project, set for 2006, will also be one of the biggest malls outside North America. (The MAF Group is also the owner of the hugely popular Deira City Center.) If it is unable to resolve its current problems quickly and shift its focus to the future, Burjuman could find itself outgunned by rivals Emaar and the MAF Group.

In the end, Burjuman management - led by soft-spoken and thoughtful Majid Saif Al Ghurair, who is the current president of the Middle East Council of Shopping Centers - should be able to draw clear lessons from the past. The shopping mall business may be a relatively recent phenomenon in the UAE, but there are already extremely instructive examples of how to successfully manage a mall here - and how to run one straight into the ground.