Promising the World: Josef Kleindienst

They are almost the forgotten islands. Three hundred mounds of sand drenched up from the ocean in the form of something that is supposed to resemble the world 4km off the coast of Dubai.Hype over The World effectively drowned following the global financial crisis in 2008, but one developer is hoping to resuscitate the headline-grabbing development by bringing a touch of Europe to the desert. Snow and rain included.The Heart of Europe (THOE) is the first permanent project to be built on the islands, six years after they were handed over to owners by master developer Nakheel, also famous for the man-made Palm Jumeirah. Only a temporary beach club has since been erected on Lebanon island, and that is not believed to be performing particularly well.The Heart of Europe, a development by Austrian company Kleindienst Group covering the islands named Austria, Sweden, Switzerland, Germany, Monaco and St Petersburg, is going it alone. With little talk among other owners about developing their islands it is a very expensive risk.Kleindienst Group CEO Josef Kleindienst admits his initial purchase of Austria in 2007 was "an emotional decision" that then spiralled into a much bigger plan that required two more, and then three more, islands to a total of 6 million sq ft.Citing his 40 years' experience with islands, mostly in the Seychelles, Kleindienst is confident that his project -- and The World -- will be a financial success."I think in 20 years from now this will be the most expensive property in Dubai," he tells Arabian Business aboard the dedicated THOE yacht as we sail out to the islands."There is no other location available like this. There can be a taller tower [than Burj Khalifa]; another mall; another city centre can be built; another Dubai Marina can be built. We have seen this.Article continued on next page...[[page-break]]"A villa development can be developed 100 times, 200 times, until it reaches somewhere in the Hatta mountains or, on the other side, Saudi Arabia. So that means the location itself is available again, again and again. But The World islands will not be developed again, so this project is unique; it's a once-in-a-lifetime project."Kleindeinst's plan is pure hospitality, with a total of 3,000 rooms, ranging from a 500-room family resort on the main island to private yacht services in a marina at Monaco island, expected to become one of the most exclusive islands at The World.Compacting of the islands is almost complete and construction is due to begin in the next quarter, taking about two years to complete. The six islands will be connected by a floating bridge, part of which will also house the world's largest open aquarium that will include coral reefs and hundreds of species of marine life.Across the development there will be a water park, an aviary and a convention centre, as well as a year-round events calendar, European retail and food and beverage concepts, snorkelling, diving and a dedicated wedding hotel.Kleindienst says The Heart of Europe aims to attract visitors for 14 days -- nearly five times the average stay in Dubai but, he says, about the average vacation on a Seychelles island."We started with the assumption nobody would come because Dubai is so attractive already," he says. "So you need to bring something to a city having everything that is not available. Then we started to look into offers Europe has and Dubai doesn't."Complementing the European architecture that will be a key focus of the development, THOE will include 15,000 Mediterranean olive trees between 1,300 and 1,400 years old, plus rain and snow. The latter will be created using German technology that will produce artificial rain and snow in selected areas, across a total of 1.6 sq km, whenever the temperature reaches 27 degrees. Once it has cooled, the rain or snow will stop, falling again when it becomes too hot. Kleindienst says it will be the first time the world has had climate controlled streets and it will make outdoor dining in the Middle East possible 365 days of the year. But does he really believe anyone -- even a lifelong desert dweller -- would purposely want to holiday in rain or snow? Apparently, he does.Article continued on next page...[[page-break]]"You can go inside," Kleindienst says of those who are not attracted to wet weather."If you tell a German tourist 'please come to Dubai, we have rain', he will not be attracted, but a Middle East tourist will be attracted by rain. We hope also the Germans will want to come and see their technology providing rain and snow in the desert."You cannot have elements which attract everyone from everywhere; as we know rain is something very attractive to people living in a desert, who don't experience rain on a daily basis."Those people are expected to be the ones who sit in cafes and restaurants on a European-style promenade watching -- supposedly enjoying -- the rain and snow trickling down from imaginary clouds."Of course you will not sit outside and get wet, you'll sit under a canopy or inside," Kleindienst says. "You'll enjoy walking around in climate-controlled streets."It will give us the only place in Dubai, in the UAE, where you can walk and sit outside even in summer. This is something unique and we think very attractive."Kleindienst says the fake precipitation will not cost more than using air-conditioners to cool down an enclosed mall or walkway.Meanwhile, Kleindienst Group is still assessing how visitors will reach the project. The company has signed memorandums of understanding with Dubai's Roads and Transport Authority (RTA) to provide public ferries and water taxis, and with Seawings, which will provide chartered sea planes. It also is in discussions with yacht operators to service the islands, and helipads will be available.Article continued on next page...[[page-break]]But the firm also is floating the idea of a cable car connecting The Heart of Europe with the mainland, most likely at Jumeirah Beach or Umm Suqeim. Kleindienst says a feasibility study by Austrian company Doppelmayer Cable Car shows it is the best option, and he says the Dubai government offered initial support to the idea -- although he personally doesn't like it."It would be cheaper than building a floating bridge, it would be very efficient, it would even be a tourist attraction," he says. "We have discussed it on a government level already; we saw support for a cable car. We've calculated [it] ... would be the most economical way to transport people and even part of the goods."But it would go against our vision to create a holiday place close to Dubai but outside of Dubai. I think a certain distance and a certain hurdle to reach The Heart of Europe is necessary to understand it as a holiday place where you can experience European hospitality, European culture, European food and beverage, but close to Dubai."However, if another island developer chooses to build a cable car, Kleindienst says he would be forced to reconsider."If a cable car [was built] then we'd most probably need to connect [to the mainland]," he says.It does not seem that is likely any time soon, with few developers showing interest at The World, either publicly or in private discussions with Arabian Business.However, Kleindienst reckons 50 other island owners would immediately build if they could find the right joint venture partner.Even if they do not, he is adamant The Heart of Europe can stand alone."It's big enough and designed in a way that we don't depend on neighbouring islands and what they're doing," Kleindeinst says. "We always came from the point [of view that] we're the only one out there, but we don't want to wait for others and we don't want to depend on others.Article continued on next page...[[page-break]]"But the more neighbour islands that follow this country [theme] idea the easier it would be for us to achieve our 14 days, because our visitor could spend one evening or one day in Cuba and stay one more day on The Heart of Europe and the opposite, so that means it would make [the experience] richer, but we are not depending on it."Nakheel's original concept of developing "the world" off the coast of Dubai is alive and well at The Heart of Europe, but according to Kleindienst other developers are so far swimming outside the flags.He says he has been in discussions with the owners of Cuba and Australasia, both of which were contemplating developments that in no way represent the countries the islands were named after -- which could realistically put the entire project at risk.The owners of 14 islands that make up Australasia, real estate development firm OQYANA, a joint venture between Kuwait's Investment Dar and Efad Holding Group, told him they planned to create a new brand -- that did not include kangaroos and barbecues -- and to build similar projects under that umbrella "all over the world".The owners of Cuba Island (a conglomerate of four individuals) asked his opinion about subdividing the island and selling villa plots, "because it's a simple, straightforward business model", Kleindienst says."We asked them not to do it," he says. "We asked them to build a typical Cuba that includes a Cuban club and entertainment and food because who has the chance to visit Cuba? So if you cannot visit the original Cuba, your second best chance is to visit 'Cuba island' with an authentic development."This could happen 300 times on these islands; it actually could make it the only place on this planet where you can visit the planet in one location and this is something not existing anywhere else."Kleindienst dismisses a suggestion that Nakheel should have included a clause in the sale contracts that stipulated the islands were to be developed in line with its vision for The World. Developers would always find a way around it, he says.Article continued on next page...[[page-break]]The World also has been dogged by complaints from developers that Nakheel has not provided promised infrastructure such as electricity, water and sewerage. Kleindienst Group launched legal action against Nakheel over the issue. The case was settled out of court; Kleindienst reveals to Arabian Business, the firm lost its bid to be given a discount for the lack of services provided.He says in hindsight the company was wrong to seek the discount."We asked something that wasn't in the contract," he says.The sale contract stated that owners would be liable for providing services on each island, he explains. The sticking point came in 2008 when Nakheel publicly declared it would provide basic infrastructure such as electricity, water and sewerage, as well as transport to the islands.When the financial crisis hit and Nakheel almost went bankrupt (it was restructured in 2011 and bailed out with bank loans totalling more than $2bn, of which it says it has repaid almost half) the verbal promise was renounced."Legally it was always clear but a lot of island developers or owners have been misled by Nakheel saying in 2008 it would build [the services]," Kleindienst says. "There was some confusion."I have seen the drawings for these service stations, we had meetings with the infrastructure consultants who've been involved in planning it so it means Nakheel did the right steps to provide it but when the crisis hit Dubai in late 2008 and Dubai World -- in this time Nakheel was part of Dubai World -- was affected by the crisis, all these drawings were put somewhere in a cupboard. I think there was a genuine plan to put it in place but the crisis stopped it."Kleindienst seems to have genuinely accepted the situation and moved on. And he's urging other developers to do the same. "I can tell them a couple of utility providers -- very experienced utility providers -- who want to take this business, so nobody should be upset at Nakheel for not providing something that others want to provide; there are solutions," he says.Article continued on next page...[[page-break]]As well as its contract with the RTA, Kleindienst Group has signed a deal with DP World to provide marine services at the project, while a yet-to-be-confirmed European business will operate THOE's power plant, which also will be hooked to solar power that is already being tested on the islands.Kleindienst says he is not surprised other island owners and developers are unnerved by the idea of providing their own basic infrastructure."We've been involved in island developments for years and we understand this subject and how to deal with this subject, but if a typical land developer who is used to a road provided by the RTA and the electricity and water provided by DEWA is going out there and he cannot find these services and he also doesn't have the experience how to build it then of course it's disturbing him," he says."For these developers it would be easier if somebody else would provide these services but these services need to be seen at the end of the day as a business ... and this is our angle. We outsource all of these elements from the development in a separate company and we design and build it together with specialists."The solutions are out there in the industry but of course you need to understand who the providers are for this solution and who the right partners are for this kind of business, because of our experience with islands for more than ten years we have a better understanding how to get this business sorted out."Kleindienst admits that despite his optimism some momentum has "definitely, definitely" been lost at The World and even the new wave of activity in the UAE real estate market has not reached the islands."We wanted to start to build end of 2008, beginning of 2009. A lot of developers had their plans ready, had started to sell off-plan and were geared up to build, and the crisis stopped all of this," he says."Now business is back, real estate is booming again, developers are busy -- but majority of developers -- actually everyone besides us -- are focusing on ... Dubai and not on the islands."But if he can pull off The Heart of Europe, The World may no longer be forgotten.