Dubai World, the investment firm of the Dubai Government, said on Tuesday it was holding on to US real estate assets amid a sub-prime housing crisis that has slowed its investment decisions this year.
Dubai World, with a portfolio of more than $200 billion (Dh734bn), is still seeking investments in transport and logistics, financial services and for opportunistic deals in a battered realty market after the credit crisis rattled global markets.
"I'm more cautious because I don't think there's total transparency on how bad the situation is. At the moment we don't know, and it means a lot for our investment planning," said its chief investment officer Yu Lai Boon in an interview.
He said the concern is that the contagion, which has caused Western banks to write down billions of dollars and caused liquidity to dry up, could spread to Japan and China.
"If the world's top three economies are hit, then we have the makings of a worst case scenario. So we have to know," he said.
Dubai World, which invests via subsidiaries Nakheel and Istithmar, has a portfolio that ranges from British port operator P&O to retailer Barneys, and includes more than $20bn in real estate outside Dubai.
Yu said Dubai World had sold two buildings in New York near the market's peak in the first quarter of last year, and reinvested the gains in US markets that have seen corrections, but will retain its remaining US property assets.
"I don't think we want to sell right now. I'm happy to keep a holding pattern," he said, adding those properties are giving good rental returns in the meantime.
Yu said he intends to tap the credit markets more to fund future investments in order to maximise the rate of returns. He declined to reveal the exact value of assets Dubai World has on its books but said it is well over $200bn. "We plan to do as any prudent corporation does and that is to add some credit, to work the balance sheet that we have. Otherwise the balance sheet is too lazy," said Yu.
Dubai World is arranging a $5bn syndicated term loan to refinance a 364-day bridge loan signed last year to use as working capital, Yu said.
Yu, who left Singapore to join Nakheel as Chief Financial and Investment Officer in 2006 before moving on to Dubai World last year, said there were no plans to list more of its units due to poor market conditions this year.
The group's unit Dubai Ports World, the world's fourth-largest container port handler, listed on the Dubai International Financial Exchange on November 26 after raising almost $5bn in the region's biggest IPO.
"I don't think the current market is conducive for IPOs, but we'll look at other solutions including Reits and infrastructure trusts," said Yu, an urban land economist by training.
He said a real estate investment trust comprising developer Nakheel's residential assets in the UAE could be worth hundreds of millions, but a listing for Nakheel itself is not on the table.
Yu declined to comment on whether Dubai World will raise its stake in MGM Mirage citing market sensitivity, although the Michigan Gaming Board has allowed it to raise its holding up to 14.9 per cent. The group said earlier it had no immediate plans to raise the stake in MGM last year.