Mubadala works on capital expansion

• Last Updated: May 05. 2009 7:29PM UAE / May 5. 2009 3:29PM GMT

Just over a year ago, Mubadala Real Estate and Hospitality emerged as a property development force in the capital with major projects on Sowwah Island and Zayed Sports City. Now the group is ready to increase its role in Abu Dhabi, according to an analysis of the company’s annual report and a copy of a new bond prospectus obtained by The National.

Mubadala, the investment arm of the Abu Dhabi Government, has been granted about 584 million square feet (5,425.7 hectares) of land in Abu Dhabi, the data show.

The enormous land bank, more than 6 per cent larger than the holdings of Aldar Properties, suggests the group is set to make significant forays into developing projects on Reem Island and the new Capital City planned for the outskirts of Abu Dhabi.

The real estate division is also emerging as one of Mubadala’s most profitable segments. While Mubadala had a net loss of Dh11.8bn (US$3.21bn) last year, the Real Estate and Hospitality division generated Dh737.4 million of operating income and had profits of Dh612.2m, the group said in a prospectus for $1.75bn worth of bonds that it announced last week it was offering to the market.

“Very clearly, Mubadala is playing a strategic role in Abu Dhabi and its real estate activities are no different,” says Blair Hagkull, the head of the property consultancy Jones Lang LaSalle for the Middle East and North Africa. “They have a tremendous stable of projects and are bringing together global best practice in the partnerships they are forming.”

Mubadala Real Estate and Hospitality has already announced a handful of large projects such as the Dh5.7bn Sowwah Square project on Sowwah Island, which will include a new home for the Abu Dhabi Securities Exchange, and Arzanah, a 9,000-unit residential project at Zayed Sports City.

Mubadala officials said they were not ready to release details of future developments, but Waleed al Muhairi, the chief operating officer, said in an interview last week with The National that the general plan for any development in the capital had already been laid out by the Urban Planning Council (UPC).

“We take care of the details,” he said. “We have the freedom to work within those constraints.”

For instance, the new Capital District is designed by the UPC to be a central area for “Government, academic and knowledge-based sectors”, including new universities and hi-tech businesses.

Mubadala is building a Dh4.1bn campus there for Zayed University that will take up about 8.3 million sq ft. It still has another 79 million sq ft of land in the area, according to the annual report.

On Reem Island, Mubadala is building a Dh1.6bn campus for the Paris-Sorbonne University that will accommodate 2,000 students on about 1,076,390 sq ft of land. Mubadala has another 2,195,839 sq ft of land on the eastern part of the island, the annual report says.

Another major holding for the company is the island of Abu al Habil, a thin piece of land that juts to the west of Yas Island, where Aldar is building a Formula One racetrack. The island is part of the new motorway that runs from Sheikh Zayed Road through Yas and Saadiyat islands to Mina Zayed. The UPC has designated the island as a national park, so it is unclear whether buildings will be allowed.

If so, one possibility for some of this land is hotels.

Mubadala has a partnership to develop with the KOR Hotel Group of the US, as well as a 50 per cent equity stake in the group. Mubadala says in its bond prospectus that it plans to build 10 hotels in Abu Dhabi under KOR Hotel’s two brands, Viceroy and The Tides.

Mubadala’s largest holding is located in Madinat Zayed, an area in the western part of the emirate. It is also planning to build a sub-electricity station for the Masdar City project, according to the company’s annual report. The zero-carbon Masdar City itself is being developed by Mubadala’s subsidiary – the Abu Dhabi Future Energy Company, or Masdar – near the airport. Mubadala’s land bank in Abu Dhabi city is more than 5 sq km.

Mubadala is also a joint developer of Lulu Island with Sorouh Real Estate, owning about 40 per cent of the land, or 39.7 million sq ft. Sorouh has previously said the island would be mostly low-rise residential projects, with resorts on the seaside and a striking tower that juts out of the side facing Abu Dhabi.

Mubadala also owns 160,000 sq ft at Mina Zayed, where it is building the MGM Grand Abu Dhabi and “over three dozen entertainment venues”, the bond prospectus says.

On Sowwah Island, Mubadala has another 9,883,651 sq ft of land that could be used for development in addition to the existing projects and allotments. About 718,000 sq ft of the island have already been divided into 10 parcels for sale, of which one sold last month to the National Bank of Abu Dhabi.

Mubadala has one international investment in the Iskandar Development Region in Malaysia, where it has an 18.6 per cent stake. The 642-hectare “integrated city development” has a planned initial investment of $900m from a group of developers that includes Mubadala, according to the bond prospectus.

* additional reporting by Wayne Arnold

bhope@thenational.ae