P&T has a number of mega deals in store

Nick Burns: “This was the perfect deal to allow us to set up from zero to 40 people and is the sort of deal you get once in a lifetime”

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The Hong Kong connection

It was a simple three letter word uttered in a single breath that brought to an end years of struggle for P&T Architects and Engineering. In 2004, when the Galadari brothers said ‘yes’ to P&T’s application to design the City of Arabia project in Dubai, the company had finally managed to break into the Middle Eastern market. But winning the AED6bn (US$1.6bn) contract had not been easy for the 168-year-old Hong Kong-based business, as it came after a string of failed attempts to set up in the GCC stretching back to the late-nineties.

“I started coming here in 1998 when we had a job with a hotel company in Bahrain, but that deal fell through following an argument,” says Nick Burns, CEO of P&T. “We thought this would be a good place to be, so we came back and tried to get work from various other competitions but got nowhere – we always managed to make the project managers happy but we could never get to the people that made the big decisions,” he adds.
Making connections

As part of the US$20bn Dubailand project that includes numerous tourist attractions with the aim of bringing 15 million people to Dubai by 2010, P&T will help to design Galadari’s City of Arabia project. P&T is charged with planning the Mall of Arabia (set to become the largest mall in the Middle East), Wadi Walk, Restless Planet and five additional towers.

Part of the struggle endured by the company to gain a foothold in the UAE was getting used to the notion of local connections. “The main stumbling block was understanding (the fact that) connections are more important in the Middle East than in Asia,” says Burns.

“Asia was like this 30 years ago where connections were much more important than performance, so we just weren’t getting access to the right people – it was a steep learning curve.” While Burns admits to being excited about the prospect of doing business in Dubai, he believes there are a number of issues to be addressed if the emirate is to continue its rapid growth as an international business hub. Although it aspires to be in the same league as the great commerce centres of the world like Hong Kong, New York or Singapore, Burns sees a number of things holding its progress back. “There doesn’t seem to be any regional planning going on, there’s a lack of any kind of public transport and only now they are talking about bringing in a railway system. Each site has been planned independently of other sites.”

“If you set up a multi-centred city, which Dubai has become, you need to think of the linkages and put those in before you set up the multi-centres. That’s why there are such very bad traffic problems here.”

Another issue that could effect Dubai’s development as an international meeting point for businesses is inflation. And the dreaded ‘i’ word has certainly taken its toll on P&T. “We are paying 15 to 20% higher salaries a year in Dubai compared to Hong Kong, where as before, they were 5% lower.” On a positive note, there is the obvious effect of Dubai’s overheated construction market on the company, with more and more property developers vying to get a piece of the action in the millionaires’ playground.

Learning process

“On the job market, the overheated construction industry helps us a lot because there is so much work floating around, so we have lots of opportunities we wouldn’t have if we were in a slump,” says Burns.

Having overcome so many hurdles to make it in the Middle East, Burns is well positioned to advise other ‘outsiders’ looking to break the region, although he admits he is still “in kindergarten in terms of local knowledge”. According to Burns, “making the right connection is very important, don’t practise without getting advise from local partners – we never go into a country and try to do it entirely ourselves,” he adds.

Coming to the UAE after devoting his entire career to the Hong Kong construction industry, Burns is fully aware of the differences between the two markets. One of the major differences is the varying way that fluctuating land prices and construction costs can affect the two markets.

“A typical project in Hong Kong sells for about US$1000 per sq ft, but the actual construction cost is only about US$150 a sq ft, so if construction costs double, it doesn’t take up such a high proportion of the sale plots. Land cost is very high in Hong Kong – about six times the building cost – but once you’ve spent money on the land you’ve got most of your money in place.” In the UAE, as Burns explains, developers building projects at around AED 300 (US$82) a sq ft may be selling at around AED800 (US$218) a sq ft – so clearly any fluctuation in land prices could greatly affect profits. This is something Burns – a relative newcomer to the region – will have to get used to. Admitting that the City of Arabia deal is the biggest the company has ever seen, he is certainly relishing the opportunity to work in the Middle East. “Our biggest deal before this was the Oriental Plaza in Tiananmen Square, Beijing and was worth around AED5bn (US$1.4bn). This was the perfect job to allow us to set up from zero to 40 people and is the sort of deal you get once in a lifetime,” he says. “In terms of income the deal is about 15% of our turnover,” he adds. As well as P&T’s lucrative contract with Galadari, the company has a AED1.8bn (US$490m) contract on Abu Dhabi’s Reem Island project with another four Middle Eastern projects in the pipeline.

Traditional structure

When Burns joined P&T some thirty years ago there were four partners at the helm of the company overseeing 70 people – today there are 14 shareholders running an 850-strong workforce. Despite being at the helm of the Far Eastern institution, Burns doesn’t see himself as a chief executive. “We never refer to anyone within the company as being a CEO and the only reason we do it in the Middle East is because people seem to think there’s a need for one here,” he says. “We operate entirely as a partnership, not a pyramidal structure which can often bring about conflict. The policy set down by the firm is that we should be the best at what we do and should enjoy it – you can’t do that in a pyramidal company.”

While P&T’s non-pyramidal structure may limit boardroom conflict, it could also be a limitation to any future expansion plans. “I don’t think the company could grow any more than 1200 members because we limit our meetings to ten people, so our structure couldn’t handle any more people. A lot of the big architectural companies have separate regional offices, each with different management styles – we don’t want this to happen as we want to stay centralised.”

If P&T’s long-awaited debut in the Middle East is a success, then maybe the company will eventually have to face expansion issues and the decentralisation of its structure. In the meantime however, the man who admits “I’ve only ever had one job” is happy with the way things are.

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