Dubai-based developer Al-Futtaim Group is drawing up a masterplan for a multi-billion-dollar mixed-use scheme in Doha, similar to its existing $5bn Festival City shopping and residential complex in Dubai.
Al-Futtaim is in advanced negotiations with a landowner in Doha to acquire a site big enough to build a shopping mall capable of housing 250 different retail outlets, with 10 or more residential towers.
The Doha development, which could use the Festival City brand, is the fourth major retail and residential development in the region from the group, following projects in Egypt, Morocco and the UAE.
The developer is unusual in moving ahead with new schemes as few real estate projects in the Middle East & North Africa (Mena) have been launched since the credit crunch hit regional developers in late 2008.
“We are probably one of the few investors still looking at doing new developments in the region, which puts us in a great situation, very different from the competitive environment of the past few years,” says Marwan Shehadeh, managing director of Al-Futtaim Capital, the investment arm of the Al-Futtaim Group.
“We are very positive on the long-term prospects of the Mena real estate and retail markets, and are positioning ourselves today to reap the benefits when things turn around in the future.”
Al-Futtaim has the support of some of the region’s best-known retailers. It owns the licences for Japanese brands such as Toyota, Lexus, Honda, Panasonic, Toshiba and Sanyo, and US brands including Chrysler, Jeep, Dodge, and Toys R Us.
It also operates stores on behalf of the UK’s Marks & Spencer and Sweden’s Ikea.
“We hope to start working on the project soon,” says Shehadeh. “We hope the negotiations with the landowner will be finalised in the next couple of months and we are already preparing the masterplan.”
The company has yet to decide how it will fund the Doha project.
One option is to use some of the $500m invested in its Al-Futtaim Mena Real Estate Development and Al-Futtaim Mena Real Estate Sharia Development funds.
The latter fund’s structure allows Islamic investors to participate in large-scale, mixed-use developments in compliance with sharia law, while receiving the same returns as conventional investors (MEED 12:5:09).
Al-Futtaim is giving itself four years to invest the $500m the funds raised last year in real estate and retail developments.
The company has looked at building mixed-use developments in Saudi Arabia and Libya, but its plans for these two markets have not reached an advanced stage.
However, the funds are already being used for its existing developments in Egypt and Morocco.
In Morocco, the company is waiting for the necessary government approvals before acquiring seven square kilometres of land at Bouznika, half way between Rabat and Casablanca, on the main highway that connects the two cities.
In Egypt, Al-Futtaim’s $9bn Cairo Festival City is currently under construction.
“Our masterplanning [in Morocco] is well advanced,” says Shehadeh. “Cairo Festival City retail centre is at a very advanced stage of construction and we plan to open by the end of 2011.
“We have already signed up definitive leases for more than 42 per cent of the gross leaseable area, and have a huge demand for the balance. The Egyptian retail market has a strong future and our mall will without doubt be the dominant force on the eastern side of Cairo.
“We also expect to sign a £E2bn [$361m] loan to part-finance the mall very shortly.”
The Dubai-based developer has awarded several contracts for work on Cairo Festival City this year. In May, a joint venture of the UK/Dubai Al-Futtaim Carillion and Egypt’s Orascom Construction Industries won a $340m contract to build Cairo Festival City retail centre. In July, Egypt’s Siac Industrial Construction & Engineering Company won a $57m contract for work on the first phase of the development’s residential district, and Lebanon’s Arabian Construction Company picked up an $18m deal for work on the scheme.
“We are long-term investors and view the current slowdown as an opportunity to solidify our position as the leading private developer of large-scale, mixed-use projects in the Mena region,” says Shehadeh.
Al-Futtaim’s first Festival City project in Dubai is now largely complete. It has a shopping mall, a retail park for international brands such as Ikea, hotels, car showrooms, residential districts and a golf course (MEED 24:8:09).
Al-Futtaim built the development on land provided by the ruler of Dubai, Sheikh Mohammed bin Rashid al-Maktoum.
Last year, Dubai Holding, which is controlled by Sheikh Mohammed, took a 30 per cent stake in the project valued at $1.5bn, in a previously unreported transaction. Sheikh Mohammed took the $1.5bn stake as payment for the land.
When launched in 2002, Festival City was one of Dubai’s first major mixed-used developments.
Dubai Holding gave the project freehold status last year, enabling Al-Futtaim to sell both residential and retail properties in future.