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'Question of risk vs reward'


10/06/2009 05:45 PM

Dubai: The Trump Organisation would be willing to stump up the cash to get construction started on the Trump International Hotel and Tower on Palm Jumeirah, depending on what the market looks like.

Donald Trump Junior, executive vice-president of the Trump Organisation, said that while his company is not an equity investor in the project, it would be willing to contribute financially in order to make it move faster.

"It depends on what I see throughout the rest of the market," Trump said during a media discussion.

"If I knew a lot of that supply was sucked up, that the demand was there, it's certainly not out of the question. But I'd have to see very significant moves to be willing to take that risk and I'd have to see those moves be significantly greater than what I'd see in the other markets that are vying for that same capital."

The Trump International Hotel and Tower on Palm Jumeirah is currently stalled although still in the pipeline despite rumours in Dubai that it may have been shelved completely.

The tower was launched in 2008 and was due to take pride of place on Palm Jumeirah until the global financial crisis reared its head.

Although Nakheel has admitted some of its projects have been put on hold, many doubted their future feasibility.

Trump said that he would love to see the project go ahead within the next two years.

"We're great partners with Nakheel. The project, when it makes sense, we plan on going forward with it. A lot has to happen because it makes no sense to throw good money after bad. I'd love it to get going in the next two years," Trump said yesterday, the first day of Cityscape.

While Trump International hasn't invested any equity in the project, the firm has retained its confidence in Nakheel, the project and Dubai.

The current issue of excess supply in the market needs to be addressed before the market can move forward.

Trump said the main issue in the past was a loss of focus where most developers were keen to sell out units fast and build astonishing projects. This encouraged investors and speculators to lose track of the concept of spending and led to such a level of "diminished returns" that we have seen in Dubai and globally.

However, Dubai's greatest asset, its imagination and ambition, was also its greatest liability.

"Prices have dropped around 50 per cent across the board in all markets. If you're looking at real estate as a long-term hold, given the world even today, these are the bases where you think yes, it's pretty attractive," Trump said.

"We made our best deals when no one else wanted real estate," he added.

Going into the future, Trump said Dubai needed to encourage responsible lending to the secondary mortgage market in order to get rid of the excess supply.

"The secondary mortgage market will suck up the excess inventory& responsible lending is a very important thing. You need to come up with something that makes sense, that will suck up some inventory and can create new demand for new projects," Trump added.

Corrections in real estate prices, specifically in the more mature western markets, are attracting would-be investors at the expense of many emerging markets, Trump said.

Emerging markets are not only competing with each other for a finite amount of investment funds, but they are now competing with more mature markets.

"It's a question of risk versus reward. The potential reward for investing in mature markets has improved significantly over the last couple of years, whereas the risk has if anything reduced. On the other hand, emerging markets, whilst they still represent good reward, their risk element - transparency, regulation - is still a concern. Therefore funds that would normally have been earmarked for emerging markets are now finding their way into the more mature real estate," he said.

 
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