LONDON: Ali Rashid Lootah has a reputation for being a tough businessman. He has certainly led Nakheel through the toughest of times.
But nine years on from a crisis that threatened to send the Palm Islands developer to oblivion, the company has quietly built up a retail empire that will soon cover 17 million square feet of leasable area across the city.
Nakheel was arguably more instrumental than any other company in awakening the world to the ambition and drive of a small trading sheikhdom called Dubai.
When the developer completed The Palm more than a decade ago, it cemented the emirate’s international reputation as a place that could make the impossible possible.
The Palm made people believe in Dubai’s ability to deliver on the big talk. Without it, there may not have been a Burj Khalifa, a Ski Dubai or a Dubai Mall. It was not just about making tourists gasp in admiration from the top of double-decker sightseeing buses but, rather, eliciting the same enthusiastic response from the international investment community, which bought into this vision with nothing but “Field of Dreams” belief.
That belief suffered what could have been a fatal blow in the wake of the 2009 Dubai World debt crisis when the state-controlled conglomerate was forced into restructuring $23.5 billion of debt — most of it amassed by Nakheel.
The debt crisis marked the end of the era of “name lending,” not only in Dubai but across the Gulf — where banks had lent billions on the strength of a reputation — and with little care for credit ratings or due diligence.
That all changed on March 25, 2009. On the eve of the Eid Al-Adha holiday weekend, the Dubai World conglomerate, one of the big three “Dubai Inc” companies, asked its creditors to “stand still” on billions of dollars of debt.
Taking the helm of the developer in 2010, in the wake of a financial crisis that should have wiped it out, Lootah’s first job was to instil some discipline into a company that had lost the run of itself.
That demanded regaining investor confidence and formulating a business model that was not literally built on sand.
A civil engineer by profession, his tenure as chairman has been characterized by a sober and superlative-free approach to property development.
“I’m a pragmatic guy,” he said. “Why does everything have to be big? You have to launch what the market wants.”
Under Lootah, Nakheel has dialled back on the mega-projects for which it became known during the boom years. The Dubai World crisis, in which Nakheel was the principal protagonist, represented a radical change of direction for a developer that for much of the previous decade had kept the dredging fleets of the Netherlands busy building ever-bigger artificial islands.
Each day the fleets would sail out to the shallow waters of the Gulf before lowering giant suction machines to suck up the sand from the seabed. Then they would sail back to blast it from their hulls along the Dubai coastline in formations that became so large they would eventually be visible from space. It was construction on an epic scale.
Before the crisis, each new project had to outdo the one that went before.
Palm Island was followed with plans for another development down the coast in Jebel Ali and then another up the coast in Deira, and then a collection of islands formed in the shape of the globe that was called “The World.”
That, in turn, was followed with another islands development called “The Universe” which was never built, coinciding as it did with the global financial crisis.
In a few years, the hype had become the business model, and there could be only one outcome.
Since the Dubai World crisis, Nakheel has reinvented itself as one of Dubai’s biggest mall operators with ambitions to become a major hospitality player as well. By reducing its exposure to the boom and bust of residential development, the Palm builder is gradually morphing from developer to landlord.
The company now has about 15 malls across the city either under development or already opened — including the vast Ibn Battuta Mall and the soon-to-be-delivered Nakheel Mall on the trunk of The Palm. Hotel building is also a core focus of the new Nakheel, which is investing more than
€1 billion ($1.19 billion) in the hospitality sector and has 17 hotel properties under development.
But in the quest for recurring revenue, does Nakheel risk replacing a residential bubble with a retail one?
Lootah doesn’t think so, despite a glut of new shop space that has forced commercial rents down across the city.
He acknowledges that “landlords are adjusting” their rent expectations, but stresses that Nakheel malls are built to serve the developer’s existing communities.
“All our projects are carefully studied. We have retailers coming forward to rent space in our developments, so I think they will know their business and where to spend their money.”
Lootah estimates that the Nakheel Mall now under construction is already 70 percent pre-let, a figure that is likely to rise to about 80 percent by the end of the year. About 75 percent of The Pointe, another Nakheel bar and restaurant development on The Palm, is also let ahead of its completion later this year.
Still, the retail sector is hurting in Dubai, with the emirate’s government recently announcing plans to investigate measures that will help support the sector, which is confronting not only a glut of new space but also the introduction of value-added tax (VAT) since the beginning of the year.
“The government is trying to help retailers and see what it can do,” he said. “Dubai depends on tourism and retail is one of the attractions of Dubai.”
Eight years after Lootah took the helm at Nakheel, the developer has repaid the bonds it sold as part of its financial restructuring and is ready to take on new debt to fund its expansion. The chairman has worked hard to regain the confidence of contractors and investors in that time.
Lootah sees that as a big part of his job and, typically, does not like to launch projects before contracts for their construction have been tendered. “We want the buyer to be confident,” he said.
He travels overseas frequently, often to finalize deals with retail or hospitality partners, such as the $160 million tie-up last month with Vienna House, Austria’s biggest hotel operator.
At such events you will be more likely to find him in the hotel gym than the reception ballroom.
“Everywhere I go, I take my gym bag,” he said.
We meet at one such event in Madrid where the movers and shakers of the global retail industry have congregated, many in survival mode amid the decimation of the High Street.
Lootah has just sat in on one of the conference sessions titled “Keep it simple, stupid.”
He chuckles at the title, which could also describe Nakheel’s approach to building small community malls.
That may explain why digital disruption in the retail industry does not, for the time being, seem to be causing Lootah too much lost sleep.
He is a believer in Dubai’s ability to reinvent itself and adapt to changing economic realities. “Retail will stay,” he said. “It will adjust. It will not die.”
A look behind Dubai’s Nakheel Chairman Ali Rashid Lootah’s ‘instrumental’ vision
A look behind Dubai’s Nakheel Chairman Ali Rashid Lootah’s ‘instrumental’ vision
- Chairman Ali Rashid Lootah has led Dubai's Palm Islands through the toughest of times
- Nakheel has dialled back on the mega-projects for which it became known during the boom years
Saudi Arabia unveils Green Finance Framework in sustainability push
RIYADH: Public and private participation in climate financing in Saudi Arabia is poised to receive a boost with the introduction of the Green Finance Framework.
This initiative, launched by the Ministry of Finance, is aimed at propelling the nation toward its sustainability goals and achieving net-zero emissions by 2060, Saudi Press Agency reported.
The framework is expected to contribute to the efforts aimed at reducing emissions through a circular carbon economy approach, along with positioning Saudi Arabia as a regional leader in sustainable finance.
It was in October 2021 that Saudi Arabia announced its ambitious goal to achieve net-zero emissions by 2060.
With this framework, the Kingdom aims to significantly reduce greenhouse gas emissions by 278 million tonnes annually by 2030, aligning with the commitments under the Paris Agreement.
The Paris Agreement is an international treaty on climate change that was produced in 2015 and compels signatories to work toward limiting the global temperature increase to 1.5 °C above pre-industrial levels.
The Kingdom has been spearheading several initiatives including the Saudi Green Initiative to combat the adverse effects of climate change over the past few years.
On March 27, the Kingdom celebrated its first Saudi Green Initiative Day highlighting the importance of fostering a sustainable legacy for future generations.
The celebration was organized under the theme “For Our Today and Their Tomorrow: KSA Together for a Greener Future” and it highlighted the collaboration of more than 80 public and private sector projects that are part of the SGI.
To date, Saudi Arabia has deployed 2.8 gigawatts of renewable energy to the national grid, powering more than 520,000 homes, with additional projects underway to increase capacity.
Moreover, more than 49 million trees and shrubs have been planted throughout the Kingdom since 2021, and extensive land rehabilitation efforts have been undertaken.
Additionally, energy giant Saudi Aramco, in collaboration with the Kingdom’s Ministry of Energy is building a carbon capture and storage hub in Jubail, which will have 9 million tonnes annual storage capacity upon its completion in 2027.
Closing Bell: Saudi main index slips to close at 12,565
RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Thursday, losing 42.09 points, or 0.33 percent, to close at 12,565.89.
The total trading turnover of the benchmark index was SR10.53 billion ($2.8 billion) as 54 stocks advanced, while 170 retreated.
Similarly, the Kingdom’s parallel market, Nomu, dropped 385.72 points, or 1.43 percent, to close at 26,622.88. This comes as 20 stocks advanced while as many as 42 retreated.
Meanwhile, the MSCI Tadawul Index rose 7.54 points, or 0.47 percent, to close at 1,599.02.
The best-performing stock of the day was Modern Mills for Food Products Co. The company’s share price surged 9.46 percent to SR68.30.
Other top performers include the Mediterranean and Gulf Insurance and Reinsurance Co. as well as Al Yamamah Steel Industries Co.
On the announcements front, Red Sea International Co. announced its annual consolidated financial result for the period ending Dec. 31.
According to a Tadawul statement, the entity’s revenues reached SR1.37 billion in 2023, reflecting an increase of 241 percent when compared to 2022 figures.
The rise in sales is mainly attributed to the strategic acquisition of a 51 percent stake in Fundamental Installation for Electric Work Co., or First Fix, with the recognition in RSI’s consolidated financial statements starting in the final quarter of the year.
Additionally, the company has tactically increased its focus on enhancing its supply chain and adopting competitive pricing strategies while advancing procurement techniques.
On a similar note, the firm’s net profits during the same period hit SR2.17 million, up from a net loss of SR198 million, which was recorded in the same period in 2022.
This rise is mainly linked to positive impact of the First Fix acquisition, in addition to the improvement in revenues and operating performance.
Moreover, Riyadh Steel Co. has also announced its annual financial results for 2023.
A bourse filing revealed that the firm’s net profit reached SR11.14 million in the period ending on Dec. 31, reflecting an increase of 118.8 percent compared to the corresponding period a year earlier.
The increase in net profit is primarily attributable to a reduction in the cost of revenue and secondarily to a rise in other income in comparison to the previous year.
Furthermore, Al-Baha Investment and Development Co. also announced its annual financial results for the period ending on Dec.31.
According to a Tadawul statement, the company’s net profit hit SR4.94 million in 2023, up from the net loss of SR8.09 million that was recorded in 2022.
The increase was owed to a 39 percent surge in the group’s revenues and reduced financing costs by 73 percent, among other reasons.
Saudi Arabia leads the charge toward energy transition: report
RIYADH: Saudi Arabia is emerging as a proactive leader, pioneering green initiatives to mitigate economic challenges posed by the transformation toward sustainability, according to the International Monetary Fund.
A recent report by the IMF highlighted the intricate dynamics at play and underscored the Gulf Cooperation Council and Saudi Arabia’s strategic positioning in this evolving scenario.
Titled “Key Challenges Faced by Fossil Fuel Exporters during the Energy Transition,” the study discussed climate change mitigation efforts in many fossil fuel exporting countries.
As Saudi Arabia and its GCC counterparts continue to lead the charge toward sustainability, they set a precedent for the global community.
By embracing green initiatives, investing in renewable energy, and fostering economic diversification, these nations are paving the way for a sustainable future, balancing economic prosperity with environmental responsibility.
The report emphasized that the Saudi Green Initiative launched in 2021 aimed at combating climate change and reducing carbon emissions.
It explained: “The Green Initiative is centered around three objectives, including targets for increasing the share of renewable energy in electricity generation up to 50 percent by 2030 and the deployment of circular carbon economy technologies, including carbon capture utilization and storage.”
Key challenges
The IMF stressed the need for economic diversification to effectively mitigate the impact of declining fossil fuel revenues.
Highlighting Saudi Arabia’s progress in economic diversification, the report explained: “The non-oil sector growth has accelerated since 2021, reaching 4.8 percent in 2022 spurred by strong domestic demand, especially in the wholesale, retail trade, construction, and transport sectors.”
Similarly, Bahrain, Qatar, and the UAE are diversifying their economies away from hydrocarbons, the study added.
In the UAE, non-hydrocarbon GDP was expected to grow by 5.3 percent in 2022, driven by tourism and FIFA World Cup impacts.
Progress on the Comprehensive Economic Partnership Agreements will further boost trade, attract foreign direct investment, and enhance integration with global value chains, according to the report.
The IMF highlighted that in Saudi Arabia, “the share of high-skilled jobs has increased to more than 40 percent in 2022, and female labor force participation doubled in four years to reach 37 percent in 2022.”
In its report, the Washington-based lender said the governments heavily reliant on revenues from fossil fuel exports face challenges in maintaining fiscal sustainability as these revenues decline.
“Countries with significant exposure to the fossil fuel industry may experience higher financial sector risks, including balance sheet effects, asset devaluation, and increased vulnerability to international market fluctuations,” it said.
The report added that transitioning away from fossil fuels may result in job losses in the fossil fuel industry, necessitating retraining programs and support for affected workers.
It called for structural reforms to address all the issues. “Accelerating structural reforms to diversify export bases and develop alternative industries is critical for mitigating the adverse macroeconomic effects of the energy transition,”the report said.
The IMF stressed the need for coordinated global efforts to overcome all these challenges. “Collaborative efforts can help ensure a smooth transition, mitigate transition costs, and support affected countries in diversifying their economies,” the report said.
New service at Jeddah port to boost Saudi-India trade
RIYADH: Saudi and Indian traders are set to benefit from Jeddah Islamic Port’s new service, bolstering trade connectivity between the nations.
The Saudi Ports Authority, also known as Mawani, on Thursday said that Unifeeder, a Danish logistics company, has introduced the “RGI” shipping service at the Saudi port. This initiative connects the Kingdom to Indian checkpoints, facilitating trade between the two nations and offering expedited and secure solutions for exporters and suppliers.
In a statement, Mawani affirmed that this undertaking showcases investors’ confidence in the Kingdom’s terminals, bolsters maritime transport and logistics services, and solidifies Jeddah Islamic Port’s status.
It added that the seaport is the Kingdom’s first dock for exports and imports, and the first re-export point in the Red Sea, with 62 multipurpose berths and a capacity of 130 million tonnes.
The new shipping service connects the Jeddah terminal to the ports of Mundra and Nhava Sheva in India, Jebel Ali in the UAE, and Sokhna in Egypt through regular weekly trips, with a capacity of up to 2,824 twenty-foot equivalent units, Mawani noted.
Mideast sets record in renewable energy capacity, Saudi Arabia reaches 2.6 GW: IRENA
RIYADH: Renewable energy capacity in the Middle East soared to a record high in 2023, with the addition of 5.1 gigawatts, marking a 16.6 percent increase from the previous year.
According to the latest data released by the International Renewable Energy Agency, this new addition brought the region’s total renewable energy capacity to 35.54 GW, with Saudi Arabia accounting for 2.68 GW.
The data showed that global green power capacity reached 3,870 GW in 2023, marking a 13.9 percent increase over the previous year. This represents the largest surge in sustainable energy capacity to date, with the addition of 473 GW.
Green sources constituted a record-breaking 86 percent of global power additions, primarily driven by substantial expansions in solar and wind energy.
Solar power alone contributed nearly three-quarters of renewable additions, totaling a record 346 GW, while an additional 116 GW of wind energy was incorporated, the report added.
Francesco La Camera, director general of IRENA, said: “Despite these unprecedented renewable additions in 2023, the world is still falling short of what is required to achieve the goal adopted at COP28 to triple installed renewable power capacity by 2030 to reach 11 TW.”
With one less year to meet the goal, he emphasized that the world now requires additions of approximately 1,050 GW each year for the remainder of this decade to align with the World Energy Transitions Outlook scenario and maintain a trajectory toward limiting global warming to 1.5 degrees Celsius.
The growth of sustainable energy is unevenly distributed globally, with Asia leading the expansion with a 473 GW increase, primarily propelled by China’s 63 percent surge to 297.6 GW. This highlights a notable discrepancy with other regions, particularly developing countries. While Africa saw some growth, it was modest at 4.6 percent, reaching 62 GW.
By the end of 2023, Camera said, renewable energy sources comprised 43 percent of the global installed power capacity.
“Yet, as we draw closer to a world in which renewable energy accounts for half of total capacity, many energy planning questions still need to be addressed to establish renewables as the most significant source of electricity generation - including in the context of grid flexibility and adaptation to variable renewable power,” he added.