Dubai wealth fund adds another builder in distress to its roster

[DUBAI] Investment Corp of Dubai (ICD) is gaining a larger footprint in the emirate's property market by asserting control over state-owned developer Meydan's real estate projects.

"We have embarked on a review of Meydan's business strategy," Mohammed Al Shaibani, ICD's chief executive officer, said in an emailed reply to questions. "Our aim is to improve efficiencies in operations."

Meydan, which built Dubai's horse racetrack, is now overseen by the same government committee that earlier this year took charge of Nakheel PJSC, another builder managed by the wealth fund, according to people familiar with the matter. ICD is also the biggest shareholder in Emaar Properties PJSC, Dubai's largest developer.

Facing a property glut, Dubai has moved to combine several of its state developers that have churned out an increasingly unsustainable supply of homes, offices and shopping centres. Already a drag on property values, some projects have run into financial trouble after the coronavirus pandemic wrought havoc across Dubai's economy.

PARTIAL CONSOLIDATION?

The review of Meydan's business is likely a step in partial consolidation of some of its operations with Nakheel, the people said, asking not to be identified because the deliberations are private.

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Mr Al Shaibani, who's also director general of the Dubai's ruler's court, in January replaced Ali Lootah as chairman of Nakheel, famous for building man-made islands in the shape of palm trees off Dubai's coast.

Meydan's two main lines of business - real estate and horse-racing - will remain separate, according to Mr Al Shaibani. "Most day-to-day management functions" have been delegated to Nakheel, he said.

"We are slimming down the company's debts while remaining fully committed to all liabilities," Mr Al Shaibani said. The goal is to bring down Meydan's debt by 40 per cent by the end of this quarter, he added.

A partnership with Indian developer Sobha Developers, negotiated in 2013, has also been dissolved, he said. Sobha didn't respond to emails and calls seeking comment.

Meydan Group and Sobha formed a joint venture to build 1,500 homes on four million square metres of land, a project known as District One. Hundreds of villas have been completed and sold. Sobha remains "an important business partner to Meydan", Mr Al Shaibani said.

ICD'S SWAY

Set up in 2006, ICD is the Dubai government's main investment arm and manages over US$300 billion of assets, according to the Sovereign Wealth Fund Institute. Its portfolio includes stakes in companies such as Emirates, the world's biggest carrier by international passengers, and Emirates NBD PJSC, Dubai's biggest lender.

Nakheel was at the centre of Dubai's debt crisis in 2009 that pushed the emirate to the brink of a default. After receiving support from the government, it now has billions of dirhams of projects and infrastructure development underway.

Accompanying Meydan's corporate carve-up is a wide-ranging review of its real estate operations. Construction of Meydan One Mall, designed to include more than 550 shops, has been suspended indefinitely, according to the people familiar with the matter.

The mall's prospects were already tenuous given its location near one of the world's largest shopping centres. ICD's assessment of Meydan's business includes "redesigning the master plan for the mall", Mr Al Shaibani said.

"We have paused certain projects to rethink their viability, and cost efficiency, and also their compatibility within a Dubai context, before we reignite and relaunch them more solidly," he said.

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