As the launch of Abu Dhabi’s new central business district draws near, all eyes are on the developer. Government-owned entity Mubadala Real Estate and Hospitality (MREH), which recently bailed out property giant Aldar, has every intention of lapping up the publicity. In fact, the executive director of the firm, Peter Wilding, has done a spate of interviews in an attempt to promote Sowwah Island and its centrepiece, Sowwah Square, which he says is best compared with London’s Canary Wharf.
“What we are saying is that we are creating a new world-class place of business equal to what London did many years ago with the establishment of Canary Wharf,” says Wilding. “This is not in direct competition with DIFC or Bahrain — I think we’re complementing what they are doing by creating a place within Abu Dhabi, a true central business district.”
But as with many projects in the region, behind the hype and the excitement surrounding Sowwah Square’s launch at the end of the year, questions remain as to why it has been delayed. Originally planned to launch at the end of 2010, the project is actually a year behind schedule. Wilding hints at construction delays.
“When we embarked on this [project] we were very clear about the service levels we wanted to promote,” he says. “What we have done is maintain those levels of quality, of design, of integration, which has required more time than what was originally estimated. It has taken a further 20 percent of the time to ensure that we got it absolutely correct.”
Located at the heart of the 114-hectare Sowwah Island, it is hoped that Sowwah Square — which will be populated with finance companies, law firms and international consultancies — will attract a wave of businesses to the UAE capital and help diversify its economy away from oil as part of the emirate’s 2030 vision.
It will sit among a mix of commercial, residential, retail and hospitality developments belonging to Mubadala and other third-party developers across the island, in order to create a combined work and living space for business executives. Including four international grade-A office towers in addition to a central building occupied by the Abu Dhabi Securities Exchange, the square will provide a total of 180,000 sq m of commercial real estate.
But with office rents falling quarter on quarter in the UAE capital and an abundance of new office towers still to come online, property analysts remain nervous about developers’ ability to fill space. On the contrary, Wilding says two of the buildings are already “substantially” leased.
“Tower one (Al Sila) and tower four (Al Khatem) have had great success in the pre-lease market — these two towers are substantially leased,” he says. “Overall we’ve leased around 40 percent of the entire development.” Among those tenants who have signed up to lease property are Gulf Capital, Abu Dhabi Finance, Booz & Co, The Wynton Group, Goettsch Partners and Dunia Finance. This is in addition to law firms, such as Clifford Chance, Norton Rose, Herbert Smith, Baker Botts, Latham and Watkins, Hogan Lovells and Akin Gump. Wilding says that by the end of the year, he expects much more of Sowwah Square to be occupied, including the stock exchange building. He adds that he also has high hopes for the two remaining ‘unleased’ buildings.
“At the launch of Sowwah, which is planned for the end of the year, we will release towers two (Al Sarab) and three (Al Maqam) onto the leasing market. This is Abu Dhabi’s new central business district and by definition you would assume that it would be heavy with financial firms. And you can see by the leasing we have achieved to date that international firms have taken up that space.”
But the square is going to be more than just a group of office blocks. As well as the core commercial buildings, it will also include the Cleveland Clinic, due for completion in 2013, and a 33,000 sq m retail aspect, known as ‘The Galleria’, housing retail and food and beverage outlets. A Rosewood hotel and a Four Seasons hotel are also planned for the square, the latter being the first of its kind in the UAE. Wilding says all are making good progress.
“The new CBD is coming to life and taking shape. For the Rosewood [hotel] we will have substantial completion for the construction by April next year and we have the opening of the hotel in August,” he adds. “The retail [aspect] is currently under construction, due to be completed in 2013. Leasing of the new look retail has been very successful. We will release the information about these tenants progressively between now and the end of the year.”
He added that the construction contract for the Four Seasons is still out to tender, with a contract due to be awarded in the next few months.
As for the rest of the island, Wilding is also positive. Not only has the company recently completed two of the bridges connecting Sowwah to Abu Dhabi, but it has also opened up the entire road network on Sowwah, to create a more liveable environment.
“The road network is suspended so that when you come on to the island you are fourteen metres above sea level, which is now the road level,” he points out. “All of that is now complete and operational. Bridge three is currently under construction.”
On deals, Wilding remains fairly hush-hush, but says that the end of 2011 will also be significant developments other than the square. “We are now seeing activity by our third-party developers. On the plot sales we have got some significant progress on two of the plots, and we will be doing some ground-breaking between now and the end of the year. That’s with Al Hilal Bank and Farglory from Taiwan. I think their construction duration is two years so [completion] will be at the end of 2013. We can’t conclude any [further] arrangements but what we have seen throughout this year is that people now understand the value of what we’re creating down on Sowwah and we’ve had quite a lot of interest in the plots.”
Of course, Sowwah is just one of MREH’s projects. Asked about the mix of commercial, retail, residential and hospitality developments on the firm’s portfolio, Wilding says there is probably an even number of each. “As Mubadala, we are not a developer of any one asset class, we will look at the asset class that needs providing and we’ll fill that gap.”
One of the most significant projects of the last two years has been the Viceroy Hotel in the Maldives. The project, which is still under construction on the crescent-shaped island of Vagaru, is located in the Shaviyani Atoll, one hour north of the capital Malé. Part of Mubadala’s international expansion strategy, it involves Mubadala as a developer and luxury hotelier EoN Resorts as the operator. As it happens, Mubadala is already a 50 percent shareholder in Viceroy Hotels & Resorts (VHR).
“Viceroy will open by the end of the year,” says Wilding, adding that the firm is also eyeing other opportunities for the brand’s expansion. “We have been very happy with the growth of Viceroy to date and the plan is to ensure we can maintain that momentum of growth. So we’re always looking at opportunities in that leisure band of hotels.”
Indeed, the firm is currently in the process of negotiating deals in the Middle East and Asia region, he says, hinting that some deals have already been signed, but refraining from giving further details. He also points out that the former Yas hotel in Abu Dhabi recently became the first Viceroy in the Middle East.
“We have two roles with Viceroy, we can sometimes be the landlord and sometimes the management company,” Wilding says. “In Abu Dhabi, we are the landlord, not the operator, as is the case with the Rosewood and the future Four Seasons.”
Does this mean that Mubadala would also consider partnering with other brands, or developing a brand of its own? “We have no immediate plans to partner with any other hotel operator, but that’s not to say we won’t in the future. We plan to put further emphasis on promoting the Viceroy brand.”
At the same time, he says, Mubadala will also be promoting the John Buck International (JBI) brand, a company in which MREH previously owned a 51 percent stake, but which it acquired wholly in March this year. The venture was created in 2008 as a spin-off from US developer the John Buck Company, to build commercial projects in the emirate.
“We already owned 51 percent of John Buck so what we decided earlier this year is to now buy it 100 percent,” Wilding says. “And that was through a process of both partners looking at different ways of growth and we decided it was better for us to acquire the full stake in the business. We are still assessing that business model of JBI. It is still a very good company, it still works very closely with what MREH does, and it acts as a project manager and developer on many of our projects [and for third parties]. But we’re still looking at how best to position John Buck going forward.”
For now, he says, the company will continue to work on projects such as Sowwah Island infrastructure and Sowwah Square.
JBI is just one of many firms in which Mubadala has shares. Such firms include Advanced Micro Devices and General Electric as well as local companies like telecom operator du and developer Aldar Properties. The investment fund posted $299m in profits for last year in March, 76 percent lower than the year previously on the back of the falling value of stakes it has in other companies. The deal with Aldar, which occurred in February this year, saw Mubadala support the debt-laden property company with a $760m bailout. Asked whether there are plans to provide any more finance to the company, Wilding declines to comment. “With Aldar, because it is a publicly listed company, we are bound not to answer anything. You would need to ask Aldar themselves.”
Looking ahead, Wilding is optimistic about MREH’s ventures. Despite some turbulence in the Abu Dhabi real estate market, he asserts that all planned projects will go ahead, and that the oversupply issue is not as bad as feared.
“The story of oversupply is not so strong,” he says. “In fact if you look at occupancy levels in hotels at the moment they are performing very well. [On the residential side], we haven’t got an enormous inventory to deal with, we have one residential property across the entire portfolio.”
Nevertheless, he says — unsurprisingly — that Mubadala has been keeping close tabs on the market, and intends to roll out its projects and their components in a timely fashion.
“We have been able to control our supply to the market,” he adds. “You have to ensure that you pick your product correctly to respond to the demands. The one we are completing at the moment is Rihan Heights, over two thirds of that residential space has been leased prior to completion.”
The project, which is phase 1 of the 150-hectare, mixed-used ‘Arzana’ masterplan, is being executed by Capitala, a joint venture between Singapore-based property company CapitaLand and Mubadala. Incorporating 860 apartments, Rihan Heights is due to be completed at the end of this year. However, according to Wilding, the firm is still in the process of deciding about the rest of the project. “We are currently assessing when we should be bringing the rest of the project on. It’s a matter of time [and]... demand. We need to be mindful of the current inventory levels within Abu Dhabi. But strategically it is a very important project for Abu Dhabi.”
Likewise, the Mina Zayed Waterfront project, a mixed-use precinct also being developed by Mubadala, is yet to even break ground. “We’re assessing the timing of that project, it’s a great site, but again we just need to make sure that we’re responding to the market demands,” says Wilding. “We’ve got nothing signed up at the moment [but] we’re still working on it [the design and planning of the project].”
He reiterates that Mubadala has not, and will not, scrap any of the projects it starts.
“We don’t cancel projects. We are absolutely convinced of the locations and opportunities and the benefits that these projects will create for Abu Dhabi, it is merely just a case of making sure that we have our plan is set, and then we will execute.”
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