When the real estate bubble burst spectacularly back in 2008, Peter Walichnowski was still building. Managing malls at a time when consumers were tightening their purse strings was not smooth sailing for the CEO of Majid Al Futtaim (MAF) Properties, but Walichnowski held to the long term vision of becoming the leading shopping mall company across the Middle East and beyond. Today, with Mall of the Emirates and iconic “City Centres” across the region featuring amongst an ever-growing portfolio, the Australian real estate expert is guiding Majid Al Futtaim Properties on the right track.
Over the past decade, new malls have sprung up across the MENA region, but Walichnowski maintains the edge with malls that are not merely shopping centers, but hubs of social life. Herein lays the CEO’s formula for success. “Don’t think of these as shopping centers” he remarks, “Dubai has city centers that cater for more than just shopping. That’s why Mr. Majid came up with the name ‘City Centre’ and that’s our main theme.”
Attesting to the success of this formula, Majid Al Futtaim Properties generated impressive figures for 2011 including a 19% increase in revenues to $762.1 million and earnings before Interest, Taxes Depreciation and Amortization (EBITDA) of $462.7 million, contributing 61% to the group’s total. These figures fall into a wider success story for 2011, with Majid Al Futtaim Holdings LLC achieving gross revenues of $5.3 billion in 2011 up from $4.8 billion in 2010, and a $0.4 billion increase in assets to $9.8 billion. Building on this strong performance, the debut issuance of $400 million in Sukuk in February which drew investors from Asia, Europe and the Middle East, paints a bright future for the holdings company, with MAF Properties leading the way.
“They maintained strong financial metrics due to active asset management and their operational performance was resilient with occupancy rates that remained around 98%,” explains Bashar Al-Natoor, director of corporate at FitchRatings which awarded the group a BBB rating with stable outlook in March.
After the decline and then stagnation of the past four years, the retail sector is strengthening and Dubai is vying with London for top spot as the world’s leading shopping destination—a development that the CEO is keen to embrace as the emirate accounts for around 70% of his company’s revenues. Furthermore, footfall in Mall of the Emirates alone reached 26 million last year.
A look back to the early 2000s when junction three was the furthest extremity of Dubai serves as a reminder of the impact that Majid Al Futtaim’s malls have had on both landscape and life within the emirate. Upon Walichnowski’s arrival in 2002 for his first stint with MAF heading up the group’s investment company, Al Futtaim’s vision was already taking shape in the form of Deira City Centre. In the absence of a true center in the emirate, Walichnowski explains that the founder’s aim was to create just that, and it wasn’t long before the Australian got down to business as he looked to dominate Dubai’s retail scene. “My wife told me I had to build her a shopping mall close to home so I put Mall of the Emirates at junction four!” jokes the chief executive.
The site for Mall of the Emirates had been owned for some time by Majid Al Futtaim, with a weathered sign for a modest outlet, Souq Nakheel, blowing in the wind. A scheme had been drawn up for a simple mall, and the idea was being sounded for a ski slope as Dubai’s government encouraged landowners to think outside the box. Inspired, Walichnowski and Al Futtaim scrapped the original plans in favour of a grander ambition. With evidence of Dubai’s plans manifested in extensions to the international airport, talks of a metro line, and huge infrastructure works underway, Walichnowski believed that they were undervaluing the proposed site with the existing plans, and had little reason to doubt the need for a new mall for new Dubai.
And so Mall of the Emirates was born opening its doors in late 2005 after just three years of planning and construction. What resulted was not simply a shopping mall, but a shopping resort including an integrated ski slope and two hotels, marketed so that people could go and not leave.
Seven years on, Walichnowski’s malls continue to appeal to a broad spectrum of tastes and pockets. But the Australian explains that the key to success is complex, “it is not only position and design, it’s also the management, and the aim is to get people coming back time and time again.”With the ongoing introduction of unique features, this is something that Walichnowski has strived to achieve, “You’ll never see a ski slope in a shopping mall. You won’t see a football pitch, which we have at Mirdiff, in a shopping mall” he enthuses.
Today, with a demand-driven market Walichnowski anticipates neither market saturation nor excessive competition, “no one is going to build another giant shopping centre opposite you if have one already” he remarks. Considering potential competitors and demonstrating that his malls appeal as much to tenants as visitors, he explains, “Yes they can buy the land, yes they can fund it...but the tenants won’t go in there because tenants want to have their shops spaced out.”
Admitting that there is always a degree of cannibalisation in a small city, however, the CEO knew from the outset that Deira City Centre would lose some sales to its new counterpart in Mirdiff. But he stresses that when you put it all together you increase the pie as well. Even the arrival of competitor Dubai Mall has not fazed the shopping mall enthusiast, instead regarding it as an added draw for tourists. In fact, despite the emergence of glamorous and younger rivals, Mall of the Emirates remains a favourite across the GCC. With a cinema, arts center and live penguins counting amongst the latest attractions, reminders of Majid Al Futtaim’s city center rather than shopping center approach are never far away.
But amidst the company’s success, Tommy Trask, primary credit analyst with Standard and Poor’s warns that concentration of assets in Dubai, currently a blessing, could be problematic in the future, “From a credit standpoint, we see high asset concentration in one city as a weakness” he remarks. However, with an eye always on long term growth, Walichnowski is increasingly exporting Majid Al Futtaim’s vision to other parts of the world.
Close ties with sister company MAF Retail, which has the Carrefour franchise for a number of locations have spurred Walichnowski to set his sights further afield from Azerbaijan, to Armenia. “In emerging economies hypermarket-based shopping malls are a strong formula for success and because we have the Carrefour anchor and the shopping mall skills, we can really create value” he remarks. However, with malls currently in Bahrain, Oman and Egypt, and plans to enter the Saudi market, MENA remains central to his strategy. Amongst the company’s latest developments due to be launched in 2013 and 2014 respectively are Beirut City Centre and Mall of Egypt located in Cairo’s 6th October area. With Egypt’s new arrival boasting Africa’s first indoor ski and snow park, Walichnowski once again proves that his malls are about more than just shopping.
As MAF Properties’ portfolio expands, focus on malls as brand builder, and Al Futtaim’s unwavering vision have allowed Walichnowski to navigate economic crisis. Despite taking a hit during recession, core business has remained intact and unfavourable operating environments in other parts of the world have translated into increased traffic for safe havens such as the UAE. “What we lost in Egypt was made up in Dubai so we still came out ahead, and the same can be said for Bahrain” explains the CEO.
Back on the homefront, Walichnowski’s priority is keeping the retail offer fresh and making Dubai world leader for retail brands. “Dubai can be number one” he asserts, citing only a 1% difference between London and Dubai in terms of international brands. But he laments that this can only happen if landlords are given the ability to change tenants at the end of their lease. As less appealing brands remain lodged in malls across the emirate, new brands languish on waiting lists. In Mall of the Emirates, 120 names wait patiently for their turn. “This is a kind of long term threat to Dubai” warns the CEO.
But with over three decades of experience developing and managing major real estate projects around the world, Walichnowski provides the safe hands and expertise needed to guide his company to continued success.
Spurred by the pioneering ambitions of H.H Sheikh Mohammed Bin Rashid Al Makhtoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, and the unwavering values of the company founder, Peter Walichnowski set out to develop groundbreaking malls that are not only shopping centers but city centers. Today, the ambitious chief executive continues the vision, unshaken by short term crisis. After all, he explains, “Shopping malls are not about building them; they’re about running them for 20 years, and keeping them fresh and appealing to the public.”