Majid al-Futtaim plans more malls

23 July 2013

Developments planned in Egypt, Lebanon, Abu Dhabi, Saudi Arabia

Majid Al-Futtaim (MAF) Holding is planning to construct shopping malls in Riyadh, Abu Dhabi and Lebanon, as well as expand its activities in Egypt, according to its chief executive officer, Iyad Malas.

He says the Dubai-based conglomerate is “actively looking for land” to build large-scale malls of at least 160,000 square metres gross leaseable area (GLA) in Abu Dhabi and Saudi Arabia.

In Lebanon, where the company this year opened the 60,000 sq m Beirut City Centre, the group eventually aims to build a mall on the northern coast on the way from Beirut to Tripoli, as well as another in the southern part of the Lebanese capital, close to the airport. MAF is exploring options to buy land, though it does not intend to start construction of the two additional malls for a few years.

Meanwhile development of mixed-use community project Waterfront City in Dbayeh, which will include a mall, has not yet taken off. The joint venture of MAF Properties and Société Joseph G. Khoury et Fils Holding is awaiting development permits from the government, which is currently entangled in political deadlock.

In Egypt the company wants to broaden its Maadi City Centre from 30,000 sq m GLA to more than 100,000 sq m, says Malas.

“We have land next door we can expand on, so we’re working on those plans,” he says. “There’s a third piece of land [we own] next to the airport that we’re also looking at developing.”

Construction of the Mall of Egypt in Cairo started in February, following a delay, and is now expected to open towards the end of 2015.

“These things are long-term in nature – it takes three years to build a mall – so clearly we’re watching the situation but we’re proceeding,” says Malas.

“In the past couple of weeks, there was a shortage of fuel so our contractor couldn’t do some work. Delays are bound to happen because of the situation, but from our prospective we’re going to proceed with our project according to plan.”

In addition, MAF is looking to add brands to its food retail network with the potential acquisition of Al-Mansour Group’s Metro supermarket chain and discount grocery store Kheir Zaman in Egypt, which he expects to be finalised in the next couple of months.

Private equity investor The Abraaj Group is studying the potential to sell its stores in Lebanon, Qatar, Jordan and Egypt, he says, although MAF is only discussing purchasing the stores in the latter two countries.

“That should also be [concluded] in the next couple of months,” he says.

But in the short term, the bulk of its investments will go towards projects in its core market Dubai, where it plans to spend AED3bn ($816.7m) over the next five years.

That includes the expansion of Mall of the Emirates (MoE), of which the first phase is the refurbishment of a 5,000sq m section, awarded to Khansaheb Civil Engineering. The remaining phases have yet to be awarded.

Other Dubai plans include the refurbishment of the Kempinski Hotel MoE connected to the mall and the construction of a community-type mall in the area around the Arabian Ranches, consisting of about 50 stores, a hypermarket and possibly a cinema.  

In Deira, MAF wants to build a hotel next to its City Centre mall, which KEO International Consultants has been appointed to design.

For all of its regional developments taken together, the company anticipates capital expenditures of close to $1bn a year, provided there are enough attractive opportunities available, according to Malas. Over the past two years, that has not been the case and MAF has been deleveraging, he adds.

The private company has a syndicated, standby loan facility of AED3.2bn maturing next year and is looking at refinancing from banks.

There also is still the intention to issue a hybrid bond, which combines elements of debt and equity, subject to market conditions.

The $500m bond was initially meant to finance a 25 per cent minority stake acquisition from French retailer Carrefour Group in MAF’s hypermarket business for €530m ($698.7m), in which it already owned the remaining 75 per cent. But MAF decided to postpone the bond as in recent months the market slumped following fears the US’ Federal Reserve will taper its bond-buying programme.

In future, plans are to issue 10-year bonds to help lengthen the company’s maturity profile, which currently is about four to five years.

In January, MAF announced its revenue over 2012 grew 10 per cent to AED21.6bn, with total assets valued at more than AED38bn and a net debt of about AED7bn.

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