The $5.5 billion (Dh 20.2bn) deal between Abu Dhabi National Oil Company and Apollo Global Management into UAE property is both “substantial and significant” as it paves the way for further investment by global institutions into the emirate’s property market, according to the head of Savills’ Abu Dhabi office.
“It's a great, strategic move for Abu Dhabi,” said Edward Carnegy.
Some of the terms of the deal are confidential, such as the yield Apollo will earn in return for investing $2.7bn for a 49 per cent stake in Abu Dhabi Property Leasing Holding Company (ADPLHC) – the vehicle that owns the portfolio of properties in which Apollo has invested.
However, it shows Abu Dhabi is open for business, that it "is a welcoming destination for foreign direct investment [and] an attractive destination for global capital,” Mr Carnegy said.
Adnoc’s deal with Apollo is the latest in a series of transactions by the state-owned oil company to unlock value from non-core assets. It retains a majority share in ADPLHC and will maintain full control over the “select real estate and social infrastructure assets” in the portfolio, which is being leased back to the company under a 24-year master lease agreement.
“This a landmark institutional investment and Adnoc is paving the way for such investment from global institutions into Abu Dhabi and the UAE market,” Andrew Ausama, associate director at Core Real Estate, said.
Institutional investment in the UAE's property market is not new, but it is still rare. Apart from a few notable examples, such as Brookfield’s Dh5bn joint venture with Meraas to co-own retail assets, it has largely been confined to the Dubai office market.
These have typically been deals involving a single building, such as the sale and leaseback of Standard Chartered’s Downtown Dubai headquarters to the Kuwait Investment Authority or the sale of U-Bora Towers in Dubai’s Business Bay to Senyar Real Estate. In Abu Dhabi, one notable transaction to date has been SinoGulf Investments’ Dh658m sale of International Tower to Aldar Properties in 2017.
"The low levels of activity have been underpinned primarily by the scarcity of institutional grade assets being made available to the market and not the lack of demand,” Taimur Khan, head of research at Knight Frank Middle East, said.
“In fact, recent deal activity shows that investors are willing to pay competitive yields for best-in-class assets."
The UAE has plenty of institutional grade property, Mr Carnegy said, but much of it sits in portfolios owned by government bodies or government-related entities and to date there haven’t been the opportunities for institutions to invest in them. He now expects other organisations to do similar deals.
“We have heard of others in the pipeline,” he said.
“As global investor confidence rises on the back of such large-scale transactions and as more government and semi-government entities look towards unlocking capital from non-core assets such as real estate … we expect further investment opportunities to arise in the UAE market, garnering interest from international investors, sovereign wealth funds, private equity and pension funds,” Mr Ausama said.
Given the current economic backdrop, Mr Khan also expects more businesses, “both private and GREs (government-related entities)” to look at selling yielding assets and “use the proceeds as a capital source for their core business”.
WHAT FANS WILL LOVE ABOUT RUSSIA
FANS WILL LOVE
Uber is ridiculously cheap and, as Diego Saez discovered, mush safer. A 45-minute taxi from Pulova airport to Saint Petersburg’s Nevsky Prospect can cost as little as 500 roubles (Dh30).
FANS WILL LOATHE
Uber policy in Russia is that they can start the fare as soon as they arrive at the pick-up point — and oftentimes they start it even before arriving, or worse never arrive yet charge you anyway.
FANS WILL LOVE
It’s amazing how active Russians are on social media and your accounts will surge should you post while in the country. Throw in a few Cyrillic hashtags and watch your account numbers rocket.
FANS WILL LOATHE
With cold soups, bland dumplings and dried fish, Russian cuisine is not to everybody’s tastebuds. Fortunately, there are plenty Georgian restaurants to choose from, which are both excellent and economical.
FANS WILL LOVE
The World Cup will take place during St Petersburg's White Nights Festival, which means perpetual daylight in a city that genuinely never sleeps. (Think toddlers walking the streets with their grandmothers at 4am.)
FANS WILL LOATHE
The walk from Krestovsky Ostrov metro station to Saint Petersburg Arena on a rainy day makes you wonder why some of the $1.7 billion was not spent on a weather-protected walkway.
Dirham Stretcher tips for having a baby in the UAE
Selma Abdelhamid, the group's moderator, offers her guide to guide the cost of having a young family:
• Buy second hand stuff
They grow so fast. Don't get a second hand car seat though, unless you 100 per cent know it's not expired and hasn't been in an accident.
• Get a health card and vaccinate your child for free at government health centres
Ms Ma says she discovered this after spending thousands on vaccinations at private clinics.
• Join mum and baby coffee mornings provided by clinics, babysitting companies or nurseries.
Before joining baby classes ask for a free trial session. This way you will know if it's for you or not. You'll be surprised how great some classes are and how bad others are.
• Once baby is ready for solids, cook at home
Take the food with you in reusable pouches or jars. You'll save a fortune and you'll know exactly what you're feeding your child.
The biog
Family: He is the youngest of five brothers, of whom two are dentists.
Celebrities he worked on: Fabio Canavaro, Lojain Omran, RedOne, Saber Al Rabai.
Where he works: Liberty Dental Clinic
Founders: Abdulmajeed Alsukhan, Turki Bin Zarah and Abdulmohsen Albabtain.
Based: Riyadh
Offices: UAE, Vietnam and Germany
Founded: September, 2020
Number of employees: 70
Sector: FinTech, online payment solutions
Funding to date: $116m in two funding rounds
Investors: Checkout.com, Impact46, Vision Ventures, Wealth Well, Seedra, Khwarizmi, Hala Ventures, Nama Ventures and family offices
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
