Plans for a US$3 billion (Dh11.01bn) MGM Resorts-branded hotel and entertainment complex in Abu Dhabi's Mina Zayed are under review, says the developer behind the project.
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The review calls into question the fate of the broader Mina Zayed development, after Abu Dhabi's media hub, twofour54, last November shelved plans to build a campus there.The waterfront resort was to include hotels, with an MGM Grand property as the centrepiece, an indoor arena and a convention centre. MGM Resorts, a hospitality company based in Las Vegas, and Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, first announced plans for the project in 2007. Mina Zayed was selected as the location for the resort complex the following year.
"The [MGM] project is still being reviewed," Mubadala said yesterday. "Any material developments will be announced in due course."
The hotels and attractions were planned as part of the 60-hectare Mina Zayed waterfront redevelopment, which has been described as a major part of Abu Dhabi's tourism ambitions. Construction work was scheduled to start in 2009, with phase one of the master plan due to open next year.
Plans for other elements of the project, such as a superyacht marina, are still being finalised.
"The marina project at Mina Zayed has undergone feasibility studies, including the development of initial concepts for the site," Mubadala said.
Speaking about the Abu Dhabi market as a whole, analysts said several projects were likely to come under review as supply and demand was assessed.
"What we will see this year is a tendency for there being a review of projects in terms of scale and their use mix, and we would expect there to be further consolidation of projects over the next year," said David Dudley, the head of the Abu Dhabi office at Jones Lang LaSalle, Middle East and North Africa.
Last year, twofour54 said it had chosen another location for its planned expansion.
Three years ago, Mubadala said the MGM development was to have 1,000 hotel rooms and suites, including an MGM Grand resort as well as properties under its Skylofts and Signature brands.
"There will be approximately 400 hotel residences and 500 waterfront apartments which shall be made available to investors, with exclusive access to hotel services, facilities and private yacht berths," Mubadala said at the time.
The first phase of the development was to include the entertainment and convention districts, with the 600-room MGM Grand Abu Dhabi hotel, convention centre and arena on a 16ha plot at Mina Zayed, according to the original masterplan.
MGM Resorts declined to comment on the project.
Several luxury hotels are scheduled to open in Abu Dhabi this year, including a Hyatt hotel in the leaning Capital Gate building, as well as Jumeirah Group's first hotel in the emirate, a Ritz-Carlton property, and the Park Hyatt and St Regis resorts on Saadiyat Island.
Several hotel projects have suffered delays as occupancy levels and room rates suffered sharp declines last year following an increase in supply.
MGM plans to manage hotels under its MGM Grand, Bellagio and Skylofts brands as part of the $4bn Dubai Pearl development near the Palm Jumeriah. The multibillion CityCenter project, jointly owned by MGM Resorts and a subsidiary of Dubai World, opened in December 2009 in depressed market conditions in Las Vegas. Dubai World, through its subsidiary Infinity World, bought a 9.5 per cent stake in the company in 2007, which has since been diluted to about 5.3 per cent as MGM Resorts has issued more shares.
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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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