Towering Ambition: The Rebirth Of Dubai
I recently travelled to Dubai to do some due diligence on one of our recent investments - an interior designer/outfitter.
The company specialises in large-scale commercial and residential developments in Malaysia, India and the Middle East.
Now, I'm normally very sceptical of a firm whose business comes more from overseas markets than its own domestic market, but the valuations on this company were so compelling that I decided to take a plunge and have a look at its biggest potential market, Dubai.
I do admit I have always been intrigued by the Palm Trilogy project in Dubai and jumped at a chance to view it from the inside. The person whose brainchild this project was is either a mad genius or a visionary and, given the success of the projects so far, it would seem to be the latter.
The Sheikh of Dubai, Mohammed bin Rashid Al Maktoum, seems reverred by the population, not surprising given the prosperity and the vision he has brought to the region.
Dubai is a city in which total expected investments for both private and public sectors over the next few years will probably equal the investment budget for the whole of ASEAN (Association of South East Asian Nations).
The last time I was in Dubai was pre the Palm project. I don't recognise it now, and I'm pretty sure I won't recognise it in two years time.
A purported quarter of the cranes in the world are currently in Dubai. The city is one big construction site.
I met the Dubai Chamber of Commerce, and they outlined their 30-year plan. Frankly these guys seem to have their act together.
If you think all of this is funded by oil money, well it probably is. However, Dubai no longer has much oil, in fact only 7% of Dubai's 2006 GDP came from oil revenue.
Still, although not much oil factors in the P&L anymore, the balance sheet was probably built from oil revenues.
The highlight of the trip was a visit up the trunk of the Palm Jumeirah to the tip of the Palm to see the Atlantis Hotel, a five star hotel and theme park development, which our company was outfitting the interior of.
Some 70% of all interior fittings, including the plaster walls, carvings and cabinets will be manufactured in Malaysia, though most of the material is likely to be imported, such as Italian leather and marble.
Because of its track record, Emaar, one of the two largest developers in Dubai, awarded this company a follow-on project, to outfit the Burj Dubai Shopping Mall and Hotel.
The mall, when completed, will be the largest in the world, and will be next to the Burj Dubai Tower, which last week became the World's tallest building (although the total number of floors is still a well-kept secret).
Thoughts of overheating, unbelievable projects and "who's going to buy this?" flashed in my mind. However, I'm a small minded kind of guy and not used to thinking big thoughts.
The masterplan for Dubai is not to build an isolated "integrated resort", but an integrated financial, commercial and holiday destination. The biggest "build it and they will come" scheme on the face of the planet.
To cater for an expected increase of the population from 5-6m currently to 9-10m by 2015, will no doubt require substantial investments, including a new airport big enough to support a capacity of 120m visitors; a 55 station Mass Rail Transport system; a total healthcare system; power plants to power everything and the list goes on.
The number of hotel rooms is expected to double from 31,580 rooms to 75,000 rooms by then, or the equvialent of around 200 more hotels.
In case you think there's an oversupply, the average occupancy rate for Dubai hotels in 2006 was 85%.
However, Dubai is not building any particular part first, but everything at once, the first phase of which is targeted to finish by end 2009.
That's a logistical and construction nightmare and fantasy all rolled in one.
For those companies that succesfully manage this process, the rewards are huge. For those that fail, the costs are crippling. Not only are penalty costs high, but so are running costs, given that everything from the nails to the labour force are imported.
Finally, I would like to leave you with thoughts on the most extravagant project I saw in Dubai, the new Dubai Racecourse Masterplan.
Interested investors can buy residential properties which are connected by an intercity canal network allowing them to drive their motor yacht either to the sea or to see the races at the new fully air-conditioned horse racecourse!
However, if you're interested in buying a unit, don't hold your breath. Phase I, expected to be completed by 2009 is already sold out, so you'll have to wait for Phase II!
In the meantime, I suppose you can order your yacht.
The company specialises in large-scale commercial and residential developments in Malaysia, India and the Middle East.
Now, I'm normally very sceptical of a firm whose business comes more from overseas markets than its own domestic market, but the valuations on this company were so compelling that I decided to take a plunge and have a look at its biggest potential market, Dubai.
I do admit I have always been intrigued by the Palm Trilogy project in Dubai and jumped at a chance to view it from the inside. The person whose brainchild this project was is either a mad genius or a visionary and, given the success of the projects so far, it would seem to be the latter.
The Sheikh of Dubai, Mohammed bin Rashid Al Maktoum, seems reverred by the population, not surprising given the prosperity and the vision he has brought to the region.
Dubai is a city in which total expected investments for both private and public sectors over the next few years will probably equal the investment budget for the whole of ASEAN (Association of South East Asian Nations).
The last time I was in Dubai was pre the Palm project. I don't recognise it now, and I'm pretty sure I won't recognise it in two years time.
A purported quarter of the cranes in the world are currently in Dubai. The city is one big construction site.
I met the Dubai Chamber of Commerce, and they outlined their 30-year plan. Frankly these guys seem to have their act together.
If you think all of this is funded by oil money, well it probably is. However, Dubai no longer has much oil, in fact only 7% of Dubai's 2006 GDP came from oil revenue.
Still, although not much oil factors in the P&L anymore, the balance sheet was probably built from oil revenues.
The highlight of the trip was a visit up the trunk of the Palm Jumeirah to the tip of the Palm to see the Atlantis Hotel, a five star hotel and theme park development, which our company was outfitting the interior of.
Some 70% of all interior fittings, including the plaster walls, carvings and cabinets will be manufactured in Malaysia, though most of the material is likely to be imported, such as Italian leather and marble.
Because of its track record, Emaar, one of the two largest developers in Dubai, awarded this company a follow-on project, to outfit the Burj Dubai Shopping Mall and Hotel.
The mall, when completed, will be the largest in the world, and will be next to the Burj Dubai Tower, which last week became the World's tallest building (although the total number of floors is still a well-kept secret).
Thoughts of overheating, unbelievable projects and "who's going to buy this?" flashed in my mind. However, I'm a small minded kind of guy and not used to thinking big thoughts.
The masterplan for Dubai is not to build an isolated "integrated resort", but an integrated financial, commercial and holiday destination. The biggest "build it and they will come" scheme on the face of the planet.
To cater for an expected increase of the population from 5-6m currently to 9-10m by 2015, will no doubt require substantial investments, including a new airport big enough to support a capacity of 120m visitors; a 55 station Mass Rail Transport system; a total healthcare system; power plants to power everything and the list goes on.
The number of hotel rooms is expected to double from 31,580 rooms to 75,000 rooms by then, or the equvialent of around 200 more hotels.
In case you think there's an oversupply, the average occupancy rate for Dubai hotels in 2006 was 85%.
However, Dubai is not building any particular part first, but everything at once, the first phase of which is targeted to finish by end 2009.
That's a logistical and construction nightmare and fantasy all rolled in one.
For those companies that succesfully manage this process, the rewards are huge. For those that fail, the costs are crippling. Not only are penalty costs high, but so are running costs, given that everything from the nails to the labour force are imported.
Finally, I would like to leave you with thoughts on the most extravagant project I saw in Dubai, the new Dubai Racecourse Masterplan.
Interested investors can buy residential properties which are connected by an intercity canal network allowing them to drive their motor yacht either to the sea or to see the races at the new fully air-conditioned horse racecourse!
However, if you're interested in buying a unit, don't hold your breath. Phase I, expected to be completed by 2009 is already sold out, so you'll have to wait for Phase II!
In the meantime, I suppose you can order your yacht.
Labels: Dubai, investments
posted by Kenneth | 12:15 PM
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