DUBAI // Regional holding companies are increasingly turning to retail as a means of diversifying their portfolios and capitalising on the second-most prosperous non-oil sector after the property market.
Dubai Properties Group (DPG), a division of Dubai Holding, is the latest to announce such an initiative with the launch of Dubai Retail. The company said its new subsidiary would consolidate its current retail operations and help develop the emirate's retail sector by constructing shopping malls and retail markets at key locations, including The Walk at the Jumeirah Beach Residence.
"We look forward to hosting and servicing both regional and international retailers as well as major hospitality brands at our facilities around Dubai," said Haiyan Mujarkech, the chief executive of Dubai Retail. "We have a talent pool that leads in industry expertise and market knowledge. That will prove to be the key determinant in our success."
Last year, Dubai International Capital, the international investment arm of Dubai Holding, announced the acquisition of a significant stake in Rivoli Group, which has a diverse portfolio of high-end international brands including Dunhill, Omega, Cartier and Montblanc. The company said that the investment would support the retail group's regional expansion drive.
Similarly, Kuwait's Al Mazaya Holding announced its first retail endeavour yesterday - a shopping centre near Kuwait City that will focus on selling building supplies.
Al Mazaya's Seven Zones Design Centre, due for completion by late this year, is being built with the region's booming construction industry in mind, offering more than 22,000 square metres of retail space.
With Dubai property prices predicted to fall by as much as 10 per cent by 2010, according to the latest research by Morgan Stanley, many developers and investment companies are turning to the retail sector as a hedge against inflation and market instabilities. However, according to Naeem Ghafoor, the chief executive of Skyline Retail Services Consultancy, retail investments by many regional firms may have been too hasty.
"If that retail arm is to acquire retailers and open stores, then I don't see any sense in that," said Mr Ghafoor. "If it is indeed to acquire land, build specific retail developments and then have a division in the company to sublease them, then there is a lot of value in that."
Another ambitious retail project was announced in June by RAK Holding, based in Ras al Khaimah, which unveiled plans to open its own grocery chain that would have stores within 500 metres of nearly every home in the UAE. Officials with the company say the chain, called Near Buy, will represent an investment of Dh100 million (US$27.2m).
"It's a mixed up strategy," said Mr Ghafoor. "They probably think that retail has fantastic margins, so they invest and then they think about the consequences later. They see Dubai growing and malls growing, so people think 'we should be doing the same thing'."
But as more companies enter this arena to diversify their portfolios, some have discovered that retail is not always a sure-fire investment.
Majid Al Futtaim (MAF) is currently evaluating strategic options for its MAF Fashion retail division, including a possible sale of the subsidiary, which holds the rights to sell Liz Claiborne brands such as Mexx, Lucky Brand Jeans and Juicy Couture in the Middle East. The group - which owns and operates the Mall of the Emirates and seven other shopping centres in the UAE, Oman, and Egypt - may exit the retail business as profit margins contract.
"You can be a jack of all trades and a master of none," said Mr Ghafoor. "Businesses should stick to what they know if they want to succeed."
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Drivers’ championship standings after Singapore:
1. Lewis Hamilton, Mercedes - 263
2. Sebastian Vettel, Ferrari - 235
3. Valtteri Bottas, Mercedes - 212
4. Daniel Ricciardo, Red Bull - 162
5. Kimi Raikkonen, Ferrari - 138
6. Sergio Perez, Force India - 68
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
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THE SPECS
Engine: 6.75-litre twin-turbocharged V12 petrol engine
Power: 420kW
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THE DEALS
Hamilton $60m x 2 = $120m
Vettel $45m x 2 = $90m
Ricciardo $35m x 2 = $70m
Verstappen $55m x 3 = $165m
Leclerc $20m x 2 = $40m
TOTAL $485m
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
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The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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Schedule
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The specs
Engine: 2.0-litre 4-cyl turbo
Power: 247hp at 6,500rpm
Torque: 370Nm from 1,500-3,500rpm
Transmission: 10-speed auto
Fuel consumption: 7.8L/100km
Price: from Dh94,900
On sale: now