Two of Abu Dhabi's leading property companies are expected to raise their investments in Medini after the overall project costs rose by 25 per cent to Dh91.8 billion (US$24.99 bn).
Costs rise for Malaysian venture
Two of Abu Dhabi's leading property companies are expected to raise their investments in Medini, a massive urban development in Malaysia, after the overall project costs rose by 25 per cent to Dh91.8 billion (US$24.99 bn). Aldar Properties and Mubadala Development, together with their partners Kuwait Finance House and Millennium Development International of Lebanon, had pledged an initial investment of Dh4.4bn in the development, which is being built in partnership with Iskandar Investment in the southern state of Johor, across a narrow strait from Singapore.
While several Dubai development companies have built up a large portfolio of projects abroad, the investment in Medini is Abu Dhabi's largest foray into the international property market. Mubadala has previously said its investments in the project would "secure long-term financial and strategic returns for Abu Dhabi". The money has so far been used to pay for land and infrastructure work at Medini, with more expected to be raised once structural work begins, according to Hanafiah Mansor, the senior vice president of marketing and business development at Iskandar Investment.
The cost of building Medini, a development of nine "clusters" which will include a mixture of residential, commercial and leisure areas, was originally estimated at Dh73.4bn. "The initial investment has been committed towards land and infrastructure, but it's going to cost much more," Mr Hanafiah said. "We expect the total development value to go up to Dh91.8bn, it will be a commitment of investment that comes from the four partners and others."
Two consortiums, Global Consortium and Medini Central, have been formed by the Middle East companies. Global Consortium, led by Mubadala and including Aldar and Millennium Development, will develop six of the nine clusters, including Iskandar Financial District, South East Asia's first Islamic and conventional finance centre, while Medini Central, led by Kuwait Finance House, will develop the remaining clusters. Iskandar Investment has a 30 per cent stake in both groups.
Khaldoon Khalifa al Mubarak, the chief executive of Mubadala, said: "You'll see first-class developments across the board, from the real estate component to the financial component to recreation and wellness. Each of these has a clear business case." The deals were announced at the Cityscape exhibition in Dubai last October, just as the financial crisis started to affect the UAE's property sector. Infrastructure work in zone A of Medini, where a Legoland theme park is due to open in 2012, began in July. Iskandar Investment is also in talks with other Middle East property developers for the construction of projects within Medini, although getting commitment has been slow because of the economic downturn, Mr Hanafiah said. "Our efforts today are focused on getting subsequent developers to come in," he said.
"The level of interest has always been there but commitment is not anywhere near as fast as we expected it to be. But we're sticking to the plan and ensuring that infrastructure continues to be developed. We hope that by the time the market turns around, all the infrastructure will be in place." Medini, which will cover 970 hectares, will be built in phases over 15 to 20 years. email@example.com