Property funds to launch in Abu Dhabi

Property funds to launch in Abu Dhabi

By Andrew England in Riyadh

Published: April 2 2008 18:34 | Last updated: April 2 2008 18:34

Abu Dhabi’s largest property developer plans to launch four real estate investment funds that will provide exposure to the oil-rich emirate’s booming property market.

Ronald Barrott, chief executive of Aldar Properties, told the Financial Times that the funds – one for each of retail, office, residential and hotel property – would launch next year. The aim is to expand the funds to become, eventually, multibillion-dollar vehicles.

The funds would be a first for Aldar and the United Arab Emirates, he said.

The company, which has about 25 per cent of its shares owned directly or indirectly by the government with the remaining shares floated on the Abu Dhabi Securities Market, has a development portfolio of about $65bn, a land bank of 35m square metres and is responsible for at least a third of Abu Dhabi’s development.

The final details have still to be worked out, but Aldar would manage the funds and hold a percentage of the shares – the amount still has to be decided – with the remainder open to foreign and domestic investors, Mr Barrott said.

“The fund may also have the opportunity when they mature to float them off into the securities market,” he said

He said the funds were part of the group’s “robust business plan”.

“The rationale is obviously to enable us to . . . manage the assets and make sure they achieve the potential growth we believe is there . . . and build our funds management business,” Mr Barrott said. “And to make available asset class specific funds to the investment market.”

Abu Dhabi is by far the UAE’s richest emirate and is home to 95 per cent of its hydrocarbons resources, as well as the UAE’s capital. After sitting in neighbouring Dubai’s shadow, the emirate is currently going through an extraordinary boom as its rulers seek to develop and diversify its economy and raise its profile.

The property market has witnessed soaring land prices and rent increases as demand for both residential and office space has far outstripped supply, with the rent price of a square metre of office space rising from 500 dirhams ($136) to more than 2,500 dirhams during the past two years.

A recent report by the Abu Dhabi Chamber of Commerce and Industry said some residential rent rates increased by 140 per cent last year and this year, adding that there was a shortage of 7,000 to 8,000 units in 2007, which could rise to 20,000 this year.

Mr Barrott said it could take four or five years to balance the gap between supply and demand.

“The only way we are really going to take the pressure out of the market is to get these developments up and built to increase the supply, because we only see demand going one way at the moment,” he said.