DUBAI // Owners of homes in the fire-ravaged Tamweel Tower are hopeful that repair work will begin in a few months – more than two years after the blaze that drove them from their apartments.
Talks with insurers are expected to be concluded soon and owners are hopeful of returning within nine months of repair work starting.
“It has been disclosed to us that the insurance company has offered to take over the building, complete restoration and hand it back,” said Arif Halela, an owner.
“With the help of the insurance authority, the owners’ association was able to agree a way forward with the insurance company and that’s what is on the table now. They will take control of the building, hire a contractor for the work and then hand over. The timeframe is eight-and-a-half months from the date the insurance company is given possession of the building.”
There was no response from Arab Orient Insurance, which cited technical delays since the insurance policy was in the name of the developer Tamweel and not the owners’ association, and on appointment of the association as legal representative of the owners.
The sight of people fleeing the burning tower in Dubai Marina last Saturday reminded Tamweel residents of the fire that was started by a discarded cigarette, forcing them out of their Jumeirah Lakes Towers building in November 2012.
The 160-apartment Tamweel Tower was shut down for safety reasons by authorities, unlike The Torch, where residents were allowed back in to apartments untouched by the fire.
Owners in the 34-storey Tamweel Tower have had no option but to rent homes elsewhere and continue to pay their mortgages.
They initially obtained a loss estimate, approvals from the municipality, put out tenders for contractors but the quote submitted was declined by the insurers which appointed another loss adjuster.
Other owners explained that among the sticking points was an indemnity letter the owners’ association was asked to sign as a prerequisite to the insurer taking over the building.
This arrangement would make the board of the owners’ association liable, and not the insurer, in case any owner sues the insurer for delay or incomplete repair work.
The association has agreed to the indemnity letter but requires clarification that it can appoint an independent consultant to check repair work before the building is handed back.
“We have been suffering for more than two years,” said Pallav Pancholi, who recalls the fear he felt while running down 23 floors with his wife and two young children.
“So many years have passed, we are still hoping that some day soon we will get our homes back. I pay mortgage and rent so I lose on both sides.”
For most residents, the wait has been financially draining.
“It’s almost at a point that the cost for us post-fire is higher than what was lost in the fire,” Mr Halela said.
“First the expectation was the restoration would be done in a year but we have had to move to rented apartments. It’s been a big burden to rent and still have to pay for an investment in Tamweel that doesn’t have value at present.
“Both Tamweel and the insurance company initially refused to take over and be responsible for restoration work. What happened in Tamweel was unprecedented in a freehold property, so there was no defined process.”
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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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