Jumeirah Central is a ‘catalyst for a new industry’, says COO

Morgan Parker, the chief operating officer of Jumeirah Central, argues that one of the intended benefits of the Dh73.5 billion development will be the role it plays as "the catalyst for the growth of a new industry" in Dubai.
Mr Parker, a property finance industry veteran who worked for much of his career in the Asia Pacific region before joining Dubai Holding in March 2015, compares the opportunity in Dubai to the landscape in Singapore 20 years ago.
He says that Singapore in the mid-1990s was "very similar to Dubai in many ways … where you had four or five often government-related conglomerates owning a large percentage of commercial real estate assets".
In Singapore, due partly to a search for liquidity, many assets were spun out into listed vehicles in a bid to attract overseas investment.
"Fast forward 16 to 17 years and what you see is Singapore behaving as the centre of real estate capital in the Asia region. It has created an industry with tens of thousands of jobs.
"There are fund managers, asset managers, property managers, valuers, real estate lawyers that now are drawn to Singapore for employment.
"Because of the fact that once this real estate goes from the private hands of government-related entities and into public companies, you now have a different ownership ecosystem which requires an industry to be built around it."
Although he says that the flow of institutional capital into the Middle East is currently "negligible", he believes that this can be recreated with the right type of investment-grade product.
"I think our leadership quickly identified the opportunity for Jumeirah Central to be much more than just another urban master plan, but actually become the catalyst for the growth of a new industry. We, as a company, have a history of doing that," says Mr Parker.
"Tecom is not just another master plan. Media City and Internet City aren’t just real estate projects. These are actually catalysts for the development of certain industries in Dubai."
CBRE’s annual In and Out report governing global capital flows points out the scale of the challenge Mr Parker faces. Despite the lower oil price, the amount of money that was spent on commercial real estate outside the Middle East by local buyers almost trebled in 2015 to $16bn – from $5.5bn a year in the prior two years.
However, it said the market for inward investment into the Middle East "continues to see only marginal investment volumes".
Matthew Green, the UAE head of research and consultancy, said that "the market’s full potential is still to be realised amid limited availability of investment grade product, low investment volumes and a general disconnect between the valuation of buyers and sellers".
Mr Parker knows the issues faced. He acknowledges that there has been a lack of investment-grade commercial real estate available for sale to institutional buyers, with transactions involving built-for-purpose Dubai headquarters for Standard Chartered and HSBC being two recent examples.
"There is one of those every three or four years compared to Singapore, Hong Kong or London where there is one of those types of transactions occurring every month."
He says there has been plenty of investment-grade buildings developed in Dubai, most notably shopping centres, but most of these have been held as long-term investments by their owners. He also says there has been a "hesitancy or a lack of understanding" regarding Dubai’s legal system.
"It’s not a simplistic market," he acknowledges.
On top of this, there has been "a lack of maturation in the real estate financing market on the banking side", he argues, with local lenders often unwilling to offer non-recourse loans to the special purpose vehicles (SPV)often used by institutional investors to purchase assets, instead insisting on corporate loans with specific guarantees.

Source: The National