Finance Channel

As many Dubai firms are struggling to restructure their debts, companies in neighboring Abu Dhabi are taking initiatives to raise funds despite the bearish market.

While Abu Dhabi Islamic Bank (ADIB) is planning to raise about $5 billion by selling Islamic bonds (sukuk), state-owned Mubadala Development Company has come together with a major US property investment firm to launch a joint venture in a bid to raise capital to fund and invest in real estate projects in local and global markets.

In another development, Finance House, an Abu Dhabi-based lender and investment company, said on Wednesday that its board had approved foreign ownership of as much as 20 percent. Though Finance House Chairman Mohammed Alqubaisi said the company had maintained a “cautious stance” on its loan portfolio during the first half of 2010, resulting in a reduction of its loan book size to AED1.07 billion.

Meanwhile ADIB, the second-largest lender in the UAE, will raise the fund under a trust certificate issuance program detailed in a July 8 prospectus. HSBC has been named as the lead arranger of the Islamic bond program, according to the prospectus posted on the London Stock Exchange.

Though the bank did not specifically mention any reason for the planned sukuk issuance, it is assumed that the move is aimed at taking provisions against bad loans amid the global financial crisis, which has badly hit the neighboring emirate.

Separately, Mubadala and Pramerica Real Estate, a real estate investment and advisory unit of US-based Prudential Financial, have joined hands to create Mubadala Pramerica Real Estate Investors (Mubadala Pramerica REI). The Abu Dhabi-based company will sponsor funds that will invest in the region and worldwide.

“Initially, the company’s strategy will be to create investment opportunities to fund real estate projects in Abu Dhabi. In time, the firm will offer products across the entire spectrum of real estate categories, serving institutional investors in the US, Europe, Asia and the Middle East, along with products tailored for family office and high net worth investors from the region,” said Mubadala CEO Waleed Al-Muhairi.

Both partners are contributing an undisclosed amount of seed capital for the fund, and seeking to raise money from around the world to invest in Abu Dhabi property.

“The venture will aim to offer vehicles investing in affordable residential properties for nurses, engineers, technicians, teachers and other mid-income professionals in Abu Dhabi,” said Allen Smith, CEO of Pramerica Real Estate Investors.

The announcement of the fund comes amid a severe shortage of financing for property developers after the regional property recession pushed prices down more than 50 percent in the past one and-a-half years. The lack of funding has caused widespread slowdowns of projects across the country, including in parts of Abu Dhabi such as Reem Island.

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