The Master Builder Of The Middle East
As the sun bakes a desolate stretch of Saudi Arabia's Red Sea coast, construction crews are digging lagoons and planting palm trees along a wide boulevard. These are the modest beginnings of what is to become King Abdullah Economic City—a metropolis of 2 million people with a new university, an Islamic financial center, and a network of industrial parks, at a total cost of nearly $30 billion. It's the work of a joint venture between Dubai-based Emaar Properties and the Saudi government. And it's the biggest project ever launched by Emaar's hyperkinetic chairman, Mohamed Ali Alabbar, the Arab world's leading developer and a growing force in Asia and the U.S.
You don't, though, need to travel to Saudi Arabia to find evidence of Alabbar's sky-high ambitions. Back in his home base, the developer is reshaping Dubai with a $20billion project that will soon be home to the world's tallest building and biggest shopping mall. The centerpiece of the Downtown Burj Dubai project is to be a spire of some 2,300 feet and 170-plus floors, nearly twice the height of the Empire State Building. The tower will be surrounded by 19 apartment buildings, nine hotels, and the 1,500-store mall. "We might be like London and New York combined," Alabbar says, touring part of the development called the Old Town, where buff-colored domes invoke the atmosphere of a traditional Arab city.
Alabbar is part of a new generation of Arab entrepreneurs whose influence is growing throughout their own region and beyond. The Middle East certainly has its pockets of chaos and retrograde politics, but its youthful, fast-growing population also hungers for quality housing, health care, and education, and has the money to pay for it. Alabbar's goal is to meet that demand—first in his region and increasingly in growing markets such as India—and to prove that an Arab company can become a successful global competitor.
Emaar's villas and apartments are snapped up as fast as they're built. Many of the Burj Dubai units have been bought in advance, and the company expects to sell about 16,000 homes this year. Due to high demand and relatively low land costs, Emaar's profit margins are close to 50%. This year, the company is on track to see operating profits of $2.6 billion on revenues of $5.5 billion, up 40% and 45% respectively over last year, estimates Securities & Investment Co., a Bahrain-based investment bank. Emaar's market value on the Dubai bourse is $20 billion, one of the region's heftiest valuations.
THE SUPPORT OF A SHEIKH
A key part of that value lies in Alabbar's close ties with Dubai's powerful ruler, Sheikh Mohammed bin Rashid Al Maktoum. For more than a decade, Alabbar and the ruling family have closely collaborated in the creation and advancement of Dubai Inc. The government owns 32% of Emaar, and Alabbar is a member of the Executive Council, which makes the big decisions in Dubai. When the developer pitched Saudi Arabia's King Abdullah on the idea of the new Red Sea city in 2005, the Sheikh was at his side. And when Alabbar first approached the Sheikh about his plans for a 90-story building in the Burj Dubai complex, the ruler replied: "Why waste your time on 90 stories?" Alabbar says the Sheikh "takes the fear of failure away from you because he is with you."
Given Alabbar's ambition, he can probably use all the help he can muster. Emaar now operates in 16 countries, and the breakneck pace is taking its toll. "I had to develop 28 towers in six months or get fired," says Mark Amirault, a veteran of the Canadian real estate industry who joined Emaar a few years ago. "We have the vision and the strategy," says Alex Andarakis, a former Unilever executive who heads Emaar's marketing. "The question is, do we have the skills across the organization to execute?"
Alabbar seems aware of the strain. One goal of Emaar's $1 billion purchase of California developer John Laing Homes last year was to bring in new expertise. A John Laing executive has been put in charge of Emaar's India operations, and teams from the U.S. now frequently come to Dubai to offer advice. Alabbar also concedes he has made mistakes. His biggest snafu was in Egypt, where Emaar in March went through a nasty split with its local partner over control and finances. The dispute ended with a $142 million settlement paid by Emaar, brokered by the Egyptian government.
Alabbar's close relationship with the Sheikh has also come under scrutiny. In March, Emaar announced that the government would take an additional 28% stake in the company in exchange for unspecified building plots in a prime area of Dubai. The deal could help the company because vacant land is becoming scarce in the city. But investors complained about the sudden and murky decision. Emaar's stock plunged 17% over two weeks in March, though it has since recovered. "It is very unconventional to announce a large capital transaction and not provide details," says Bryan D'Aguiar, head of research at Securities & Investment. "A problem in this region is that you don't have full disclosure." Emaar says the land is being identified and will be independently assessed. And the government will receive the new stock as a five-year convertible bond, so current investors may benefit from the deal before the government gets its new shares.
Despite his connections, Alabbar comes from humble roots. The eldest of 12 children, he says he is "about 47 years old" because he has no record of his birth. He grew up in a palm frond shack in the old city of Dubai, the son of a captain of a dhow, a traditional trading vessel. Despite early hardships, Alabbar managed to land a government scholarship in the late '70s to study finance and business administration at Seattle University. That was his big break, but he was surprised his classmates had little idea where—or what—Dubai was. He told them they should simply "go to Saudi Arabia and turn right."
Alabbar's first job out of college was at the Central Bank of the United Arab Emirates, which oversees the currency used in Dubai and six other Gulf sheikhdoms. After assignments at the U.S. Federal Reserve and the Dutch central bank, Alabbar in 1987 took a job in Singapore as manager of Al Khaleej Investments, a Dubai government company that invested in real estate and other assets. That's where he spotted the potential profits that could be wrested from property in the Persian Gulf. When he returned to Dubai in 1992, he joined the government, running the Department of Economic Development, which he still heads. In 1997, he launched Emaar with $50 million pooled from associates and his savings. Since then, his life has become increasingly hectic. "Last year I flew 850 hours," says Alabbar. Now, with a net worth of some $500 million, Alabbar enjoys his own six-hole golf course at his palatial Dubai home—a short distance, and light years, from the palm shack of his youth.
By Stanley Reed