MUBADALA SEEKS PART­NERS AND PLANS ABU DHABI REIT

▶ The prop­erty unit aims to com­plete 60 per cent of its Al Maryah Is­land de­vel­op­ment by the end of the year

The National - News - - BUSINESS - SARAH TOWNSEND

Mubadala Real Es­tate, the prop­erty divi­sion of Abu Dhabi’s state in­vest­ment fund Mubadala In­vest­ment Com­pany, is in talks with po­ten­tial joint ven­ture part­ners to de­velop fu­ture projects, and plans to launch a real es­tate in­vest­ment trust (Reit) as it pre­pares for an ex­pected uptick in the UAE prop­erty mar­ket from 2019.

“We’re in dis­cus­sions with two or three de­vel­op­ers to do

joint ven­tures with them on a plot-by-plot ba­sis,” Ali Eid Al Mheiri, ex­ec­u­tive di­rec­tor of Mubadala Real Es­tate, told The Na­tional.

“Those talks have yet to be finalised, but we should be able to an­nounce them in 2018.”

The com­pany would not merge with an­other de­vel­oper, he said.

Last month, the UAE’s two big­gest de­vel­op­ers, Al­dar and Emaar Prop­er­ties, en­tered into a strate­gic part­ner­ship to de­velop fu­ture schemes in the UAE and be­yond. The an­nounce­ment “sends a good sig­nal to the mar­ket that there will be co­or­di­na­tion in terms of con­trol of sup­ply”, Mr Al Mheiri said.

The UAE real es­tate mar­ket has wit­nessed a slow­down due to an oil price slump that has crimped pur­chas­ing power and weak­ened de­mand. An abun­dance of new sup­ply de­spite tough con­di­tions has pushed res­i­den­tial rents down by al­most 10 per cent year-onyear in Abu Dhabi and sales prices by around 2 per cent, ac­cord­ing to con­sul­tancy Asteco.

Prices are ex­pected to con­tinue to de­cline through­out 2018 be­fore re­cov­er­ing in 2019, it said.

Mr Al Mheiri said he sees grow­ing de­mand for Reits, es­pe­cially while the mar­ket is tough. Com­pared to eq­uity in­vest­ing in a real es­tate com­pany, which in­volves “tak­ing the share price risk of the com­pany, driven by the sen­ti­ments of the mar­ket”, in­vest­ing in Reits is more ap­peal­ing.

“A lot of peo­ple would like to in­vest in real es­tate as­sets but can’t af­ford to buy a port­fo­lio of build­ings or even a build­ing. But when you in­vest in a Reit, you’re in­vest­ing in the in­come gen­er­ated by the as­sets, the long-term leases,” he said.

“I think peo­ple are hun­gry in the re­gion for in­vest­ment into Reits.”

Mubadala’s pro­posed Reit would ini­tially in­cor­po­rate as­sets from the half-de­vel­oped Al Maryah Is­land, the free zone that houses Abu Dhabi Global Mar­ket.

“Once we have crit­i­cal mass – once our [build­ings] at Al Maryah are leased at a cer­tain level – we may con­sider do­ing a Reit and list­ing it to the mar­ket,” the ex­ec­u­tive di­rec­tor said, with­out spec­i­fy­ing where the list­ing will take place. The plans are likely to be im­ple­mented within the next two years and the in­vest­ment ve­hi­cle will prob­a­bly in­clude a com­bi­na­tion of res­i­den­tial and com­mer­cial prop­er­ties, he said. Reits are listed funds that own in­come-pro­duc­ing com­mer­cial real es­tate and are legally obliged to dis­trib­ute a pro­por­tion of their in­come, usu­ally 80 or 90 per cent, as div­i­dends to share­hold­ers.

The in­vest­ment in­stru­ments are gain­ing pop­u­lar­ity in the Ara­bian Gulf as in­vestors seek more liquid real es­tate as­sets than stand­alone build­ings. The largest Reit in the UAE, Emi­rates Reit, which is owned by Dubai fund man­ager Equi­tativa, has more than $1 bil­lion of real es­tate as­sets un­der man­age­ment. Al­ter­na­tive in­vest-

We’re in dis­cus­sions with two or three de­vel­op­ers to do joint ven­tures with them on a plot-by-plot ba­sis ALI EID AL MHEIRI Ex­ec­u­tive di­rec­tor, Mubadala Real Es­tate

ment fund, Abu Dhabi Fi­nan­cial Group, plans to launch its sharia-com­pli­ant Eti­had Reit in the first half of 2018, sub­ject to reg­u­la­tory ap­provals.

Mubadala Real Es­tate aims to com­plete 60 per cent of build­ing and in­fra­struc­ture works at Al Maryah by the end of 2018.

The free zone houses La Ga­le­ria Mall, four of­fice tow­ers, the Four Sea­sons and Rose­wood ho­tels, the Al Maryah Cen­tral mall and two res­i­den­tial tow­ers yet to be com­pleted. Work is ex­pected to start on the re­main­ing 40 per cent of the mega de­vel­op­ment in the next 12 to 24 months once the de­vel­oper hits 80 per cent of its phase-one sales tar­get.

“We’ve seen a great soft­en­ing in the UAE [prop­erty mar­ket],” Mr Al Mheiri said. “In Abu Dhabi, the con­sol­i­da­tions have caused some peo­ple to be more cau­tious in how they spend their in­come; we have seen peo­ple go­ing from big­ger to smaller units, and peo­ple mov­ing from vil­las to apart­ments be­cause the cost of liv­ing went up.” Price soft­en­ing will con­tinue in 2018, but the mar­ket is likely to re­cover in 2019 sub­ject to greater equi­lib­rium be­tween sup­ply and de­mand and lo­cal eco­nomic growth.

The of­fice sec­tor is cur­rently 30 per cent over­sup­plied, he said.

As well as Al Maryah Is­land, Mubadala Real Es­tate is revising the mas­ter plan, un­veiled last April, for its Arzanah project, a pro­posed 1.9m-square-me­tre mixed-use com­mu­nity near Zayed Sports City.

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