Dubai Holding, the massive investment group owned by Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum, is considering establishing a real estate investment fund to capitalize on the booming real estate market in Dubai, according to people familiar with the matter.
According to the sources, the company has approached banks, including Citigroup, HSBC, and Emirates NBD Capital, to present the real estate investment fund proposal. The sources requested anonymity because the information is private. The sources indicated that discussions are still in the early stages, and details regarding the fund size have not yet been finalized.
Representatives for Dubai Holding, HSBC, and Citigroup declined to comment, while a spokesperson for Emirates NBD did not respond to a request for comment.
Dubai Holding Investments
Dubai Holding is one of the leading investment companies in the emirate, with assets valued at 265 billion dirhams ($72 billion). Its diverse portfolio includes the luxury hotel chain Jumeirah, amusement parks, and the world’s tallest observation wheel, which has yet to be operational.
Establishing a real estate investment fund will provide investors with access to a range of key assets that generate returns and are managed by one of the largest real estate development companies in the city. According to people familiar with the matter, the fund will include some residential projects that have recently been transferred to Dubai Holding.
Dubai Real Estate Boom
This move coincides with the ongoing surge in demand for Dubai properties, as the low taxes have attracted thousands of wealthy individuals, seasoned financial experts, and entrepreneurs to the emirate in recent years. Home values in the city have risen for 16 consecutive quarters, and office rental activities continue to recover significantly.
Dubai primarily aims to enhance its capital markets, and launching a real estate investment fund would provide an additional avenue to attract financial inflows into the emirate. Efforts to bolster the Dubai Financial Market have resulted in new initial public offerings (IPOs) over the past two years.
Nevertheless, local real estate investment funds have faced challenges. Emirates REIT’s operator, Equitativa, was investigated by the Dubai Financial Services Authority four years ago due to governance practices, and the regulatory authority later imposed a fine on the company. Additionally, the Sharia-compliant real estate fund faced opposition from bondholders regarding its debt restructuring. However, earlier this month, it managed to sell a major asset in its portfolio to reduce its debt.
Acquisition of Nakheel and Meydan
Earlier this year, Dubai Holding acquired two state-backed real estate developers, Nakheel and Meydan.
Nakheel is primarily known as the developer of the Palm Islands in Dubai, but it was on the verge of default during the 2009 real estate market crash that nearly led to Dubai’s bankruptcy. Since then, the company has streamlined its operations and reduced costs.
Meydan, on the other hand, owns one of the world’s most prestigious horse racing tracks. Its total debt in 2021 was approximately $4 billion, with $2.6 billion requiring restructuring.
By bringing Nakheel and Meydan under the umbrella of Dubai Holding, Sheikh Mohammed bin Rashid Al Maktoum hopes to create a “more financially efficient entity,” according to his statements earlier this year.
Both companies have benefited from Dubai’s position as one of the best-performing real estate markets in the world. Last year, hundreds of brokers and investors lined up despite the summer heat for an opportunity to buy properties on the still-under-construction Jebel Ali Palm Island, where home prices start at 18.7 million dirhams.
Earlier this year, Dubai Holding refinanced a 30 billion dirham loan to replace the old facilities held by Nakheel and Meydan. This move, led by Dubai Holding CEO Amit Kaushal, was considered a potential prelude to taking some of the group’s units public in the next few years, according to people familiar with the matter.
