Running Lebanon’s newest mall

Sleiman Mallat discusses the soon-to-open Beirut City Centre mall

Pure commercial plays are a sideline of real estate development in Lebanon when compared with the country’s mixed-use projects, and when measured against large-scale commercial projects elsewhere in the region, like upcoming new mega-malls in the Gulf and Egypt. Malls specialist Majid Al Futtaim (MAF) from the United Arab Emirates is taking its first Lebanese retail project into the home stretch as it is readying the Beirut City Centre mall for its opening in March. With 62,000 square meters (sqm) of gross leasable area, the property represents a major addition to commercial real estate in Lebanon. Executive talked about MAF’s strategy with Sleiman Mallat, senior mall manager for MAF Properties Lebanon.

Why do we need another shopping mall in Lebanon?

According to the studies that were done in Lebanon, the Lebanese market is underserved with shopping malls. That is why we need to build this shopping mall: to complement the offer that exists in the market.

Related: Battle of the Beirut Malls

Where will your customers come from? Does the mall aim to be a destination attracting people to drive in from a long distance or is it going to be a neighborhood mall?

We are aiming for both. In our study, we defined two trading areas. The primary trading area will be within a 15-minute drive from this shopping center. This will be the neighborhood around the shopping center. The secondary trading area will be a 30-minute drive from here, and for them this shopping mall will be a destination. 

What will be your anchor stores and the mix of offerings you will rely on in attracting customers?

We will have a Carrefour [hypermarket] and another anchor store will be [clothing retailer] Marks & Spencer. We will also have a Magic Planet for children and Vox Cinemas.

Click here to see a promotional video of the mall

And you said the Carrefour store will be the largest in the Middle East?

Yes, at 13,000 sqm.

That means almost one quarter of the entire shopping mall will be the Carrefour?

Yes.

Is it correct that this store is linked to the mall not only as a tenant but also because MAF Holding is a partner with Carrefour in the Middle East?

It will be managed by MAF Retail. We have MAF Properties taking care of all the development and management of the shopping center. MAF Retail, which is a separate business unit of MAF [Holding], is taking care of Carrefour and other retail brands that similarly are represented by MAF Retail.

Is the Magic Planet entertainment area also under MAF Retail?

Magic Planet is under MAF Ventures and Vox Cinemas is also under MAF Ventures; the leisure offerings are under MAF Ventures.

Can you tell us about the business mix between MAF Properties, MAF Retail and MAF Ventures? What will be the most important component in terms of generating revenue?

For us this is Carrefour because it will be the biggest operation inside the shopping center. The others will complete the offering and the revenue stream. However, for us as MAF Properties, the relationship we have with Carrefour and all other retailers is on a tenant base. They have a lease and they have to pay the rent just as any other retailer in this shopping center.

But on a group level, the relationship is synergetic?

Yes, 100 percent.

So you have already an occupancy guarantee from group clients that covers more than 50 percent of the whole leasable space at Beirut City Centre?

This is the main strategy. When we study a plot to build and develop a shopping center there, we secure that our major brands will work in this location. Then we start developing the location further. We have to make sure that our major brands and some other major groups are present, such as [Kuwait-based retail group] Alshaya and [Dubai-based group] Landmark.

Will you have exclusivity to have store brands of such groups in Lebanon?

No, we don’t oblige them to have this exclusivity but what we do have is the exclusivity of opening their first shop [in Lebanon] in Beirut City Centre. After that, they can open wherever they like.

You have much experience in the mall business in Lebanon, including working with the ABC Mall. How do you see the business of building and operating malls evolving in Lebanon?

Lebanese developers mainly develop small shopping centers that are not real malls. The complete offering is what will differentiate this shopping center from the small shopping malls. ABC is a shopping mall and City Mall is also a shopping mall, but as I said, Lebanon is underserved. All studies show that we can develop more shopping malls in Lebanon and we have another project, the Waterfront City Centre in Dbayeh.

Other than those two, does MAF have projects lined up in Lebanon?

No, not at this stage.

MAF was also in the process of building a retail complex near Damascus in Syria, which had to be halted during the unrest. How important were intended synergies with the operation in Syria for you?

There is a delay in the execution of the project but what is good about Syria is that due to the situation, we are now expanding and changing the whole design for the plot there. We have big hopes for Syria after the situation settles down.

But do you not need economies of scale to economically run a mall operation?

This is 100 percent right. In the business model we have a center of operations in Dubai that can provide us with all the support we need for the purpose of decreasing the cost of operations and management, so we don’t have double functionalities between the regional offices and Dubai. In Lebanon, once we have the other shopping center [up and running], we will also have a Lebanon office that will take care of both operations.

Syria would not be under this umbrella?

Syria can be under it. They would have their own office but when it comes to major functions like for example leasing, the leasing office in Lebanon will do all the leasing for the Levant. In future, the asset management [office] will do asset management for Syria and Lebanon at the same time.

Will you charge for parking at Beirut City Centre?

We bought the equipment and will study how the market will be at the time of the opening but there will be a free hour at the beginning. We will try to implement a paid parking scheme to reduce abuses. We don’t want to be a park and ride center and at the same time we are not interested in gaining money from the parking. What we want is to organize parking.

You told me you invested in what usually would be the municipal road infrastructure directly outside the building. Can you say how much?

Around $2.5 million.

And how much is the total investment into the mall?

More than $350 million.

Do you have a fixed time expectation during which you expect amortization of this investment?

Actually, in real estate we normally target 10 years or 10 percent of return on investment.

Some malls or would-be malls in Lebanon have turned out to be empty and even at leading malls you see retail spaces that did not find demand. Are you concerned that this would happen to Beirut City Centre?

You always have to replace some tenant or change a mix inside a shopping center. But we are at this stage 96 percent fully leased. This is signed contracts. The other four percent, we have signed proposals but we are still negotiating some terms and that is why we didn’t sign the contracts yet.

Are your leases based on profit sharing?

It is fixed rent plus percentage over sales, a combination of both.

How many people do you have to hire to run this place?

The management team will be around 30 persons and there will be service providers, like cleaning, security and parking management coming to around 160 people. This is for the management of the building. Then there are around 1,300 opportunities at the retailers, at the shops that will open in the spring. We are creating around 1,500 permanent jobs.

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.

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