Aldar's $1.3bn convertible Islamic bond, museum deals

Known as a Sukuk Al Mudarabah, the $1.3 billion bond has Barclays Capital, Credit Suisse and the National Bank of Abu Dhabi acting as joint global coordinators for the issue.

Aldar Properties announced in October that it planned to raise around $4 billion in conventional and Islamic debt to fund projects. This is the normal pattern for private sector property developer with the correct level of gearing being applied to the equity base to maximize shareholder profits.

With the $40 billion Al Yas Island project revealed at Cityscape last December, the total value of projects under development by Aldar is now in excess of $54 billion, although this is clearly phased over a considerable time period.

Widening share ownership

Foreign investors are also not currently allowed to own shares in Aldar Properties, which are owned by UAE nationals only. So the convertible Islamic bond is also a start to the process of widening the shareholder base to include foreign owners.

Buy these bonds and you effectively own a proxy on the stock, and can become a shareholder in 2011. Aldar shares are presently at a low level following last year's UAE stock market crash and could recover considerably in value by that year.

Given the level of global institutional interest in investment in Abu Dhabi, the world's richest per capita city, and the paucity of alternative investment instruments, there should be huge interest in these bonds.

Cultural plans

Meanwhile, the designs for three museums and a centre for the performing arts on Saadiyat Island were rolled out this week at a ceremony attended by the Crown Prince, General Sheikh Mohammed bin Zayed Al Nahyan.

These comprised: the world's largest Guggenheim museum at three million square feet designed by Frank Gehry; the Classical Museum under a large dome by Jean Nouvel; Tadao Ando's Maritime Museum; and the Performing Arts Centre designed by Iraq's celebrated architect Zaha Hadid.

There is an exhibition of these striking new buildings at the Emirates Palace Hotel. Negotiations with the Paris Louvre Museum are also at an advanced stage. The objective is to create a Cultural District that will open by 2012 and will be entirely financed by the Abu Dhabi Government as a part of its drive to boost tourism to the emirate.

Clearly such an investment will also be good news for property investors in Abu Dhabi which is sometimes criticized for its lack of cultural facilities, and the stimulus to the tourism sector will help this expansion of the local economy.