Abu Dhabi banks are cautious about financing real estate projects amid concern the property market is slowing, according to an executive from the New York-based real estate developer The Related Cos LP.
“Everyone is far more cautious about underwriting anything today,” Ken Himmel, chief executive officer of Related Urban, said in an interview with Bloomberg TV. “I don’t know how any commercial bank could rationally underwrite another project in Abu Dhabi, given the dynamics of the market, given what’s going on with supply and demand.”
Oil prices have declined about 50 percent in the past two years, prompting Abu Dhabi to take measures to bridge a budget deficit, including withdrawing deposits from local banks. The sheikhdom, holder of about 6 percent of global oil reserves, is also combining two of its largest banks. Abu Dhabi’s economic growth will slow to 1.5 percent this year from 4.3 percent in 2015, the International Monetary Fund said in May.
The property markets in both Abu Dhabi and Dubai have slowed this year as lower oil prices and a stronger dollar -- to which the local currency is pegged -- hurt demand from overseas. Residential values remained stable in Abu Dhabi’s newer developments, while most of the city’s older communities saw a decline in prices and rents as residents upgraded to newer homes with better amenities.
Gulf Related, a Related Cos’ joint venture with Gulf Capital, is building a $1 billion shopping mall that will house the Persian Gulf’s first Macy’s department store. Himmel expects the mall to open in August 2018 instead of March.
Al Maryah Central will also include Bloomingdale’s, The Toy Store and British upmarket grocer Waitrose. Gulf Related has leased about 50 percent of the available space in the 2.8 million square feet shopping center, the company said in a statement on Monday. Himmel said he expects to lease 75 percent of the property by the end of the year.
Gulf Related secured a $626 million loan from Abu Dhabi Commercial Bank PJSC a year ago to help finance the mall, with the rest of the money coming from the two companies and other investors.
The project will also include a residential tower that will open a year after the mall’s inauguration, followed by a hotel, Karim El Solh, Gulf Capital’s CEO, told reporters on Monday. He said the two buildings would cost $500 million with 60 percent of the funds coming from debt and the rest from equity.