Of all Abu Dhabi’s islands, Yas is the most developed and busiest in terms of business traffic and financial revenues. Underpinning Yas Island’s development is the construction and real estate company Aldar Properties and its influential CEO, Mohammed Al Mubarak. The real impetus behind this lucrative entertainment project, however, comes from much higher up the chain of command, and emanates from the broader strategy devised within the office of Abu Dhabi’s Crown Prince, Mohammed bin Zayed Al Nahyan.

Impact Points

  • In Abu Dhabi, the conversion of smaller islands into ‘entertainment hubs’ defines the mega-project philosophy adopted by the UAE’s capital city. This strategy also reveals which specific sectors and actors are most highly regarded by the political elite.
  • One such example is Yas Island. Through Aldar Properties as it primary developer, Yas has become home to a Formula 1 circuit, Ferrari theme park, waterpark, and various international hotels and restaurants.
  • More poignantly, the island is illustrative of Crown Prince Mohammed bin Zayed’s grip over Abu Dhabi. His promotion of Yas, and use of Aldar as its primary developer, shows that island-led development is central to achieving the political elite’s long-term economic objectives. 

Island based development projects are growing increasingly central to the United Arab Emirates’ (“UAE”) domestic investment strategy. In many ways, opulent mega-projects to the tune of billions of dollars have come to define the small Gulf country’s image abroad and continue to litter international coverage of its economy.

During the early 2000s, Dubai certainly led the way in this regard, and its high-profile island initiatives began in earnest through projects such as the Palm Jumeirah and the World Islands archipelago. Of course, Dubai’s lesser petroleum reserves meant that it would naturally move ahead of the other Emirates in terms of generating a non-oil income; but it is a fallacy, however, to think that this strategy starts and ends in Dubai.

While Dubai may be the subject of international acclaim for its lavish coastal projects, Abu Dhabi has both the capabilities and the willingness to usurp its Northern neighbour. Bigger, richer, and more ambitious with their strategy, evidence points towards the fact that the Al Nahyan family are now taking island development in the UAE one step further.

Developing Desert Islands
In the years since Sheikh Zayed’s death (2004), the late founder’s ambitious sons who continue to rule over Abu Dhabi have implemented an aggressive strategy of economic development in the Emirate.

A defining feature of their strategy has been to launch mega-projects on various smaller islands surrounding Abu Dhabi city. The aim is to create a cluster of ‘entertainment hubs’ ranging from leisure, arts, real estate, and tourism that will draw people to the Emirates’ capital city long into the future.

The primary motivation underpinning these efforts is an awareness that oil is an all too finite resource. With the recent downturn in the petroleum market providing a taste of what the post-oil environment may look like, these efforts are only going to garner greater momentum in the short to medium term. In light of this, investors are flocking to the island to capitalise on the momentum for this wave of politically motivated investment while it lasts.

As Abu Dhabi’s power players first began laying the foundations for its mega projects, Western officials intimate with the political sphere took note. Classified diplomatic cables dating back to 2008 make reference to several “priority projects” which include the development of three smaller islands around the island where Abu Dhabi city is situated (Wikileaks, 20.08.2008). Namely, these are Saadiyat, Lulu, and Yas.

Today, Saadiyat is well on its way to becoming the ‘cultural hub’ that the city’s leaders envisioned over a decade ago, with the Louvre Abu Dhabi set to open its gates on the 11th of November. The venue will house artwork held by the Louvre Museum in Paris as well as various other French museums, and is thus set to receive temporary exhibitions from arguably the world’s leading art house. Eventually, it will be home to a Guggenheim Museum, Sheikh Zayed Museum, and Maritime Museum, thereby cementing its status as a global art hub.

Lulu is also set to be a touristic island with views over Abu Dhabi city, but has lagged somewhat behind the development of the other two islands.

Yas: Aldar’s Playground
The crown jewel among these projects is undoubtedly Yas Island – a one-stop-shop for leisure and entertainment in Abu Dhabi. Not only is Yas the most developed of all Abu Dhabi’s islands, but it serves as a timely case study of political power and corporate favouritism among the political elite.

Simply put, Aldar Properties is the gatekeeper to Yas Island development.

This fact is openly acknowledged by the company as well as the media coverage afforded to the island, showing that it alone decides who wins a presence on Yas. As such, Aldar does not have to compete for business on Yas and enjoys a monopoly over its various construction projects. In fact, 55% of its total retail portfolio is found on Yas, compared to 7% on Reem and 1% on Abu Dhabi island itself (Aldar, 2016).

Aldar wholly owns the Yas Hotel LCC and Yas Links LCC, which gives it control over the Yas Viceroy Hotel as well as the island’s only golf course. Through its CEO, Mohammed Al Mubarak, Aldar is linked to Farah Leisure LLC and Miral Asset management, which are the other two primary entities that determine what and who gains access to the landmass.

Aldar further consolidated its domestic monopoly over the Emirati market in 2013 when shareholders voted to merge the company with Sohour Properties (The National, 04.03.2014). This move effectively ate into Sohour’s market share and removed competition, or at least the façade of it, within the UAE’s property development industry.

Illustrative of its overarching control, Aldar recently awarded an AED 500 million contract to Ghantoot General Construction to build over 512 houses; an AED 1.7 billion contract to Trojan General Contracting for 1,315 houses; and an AED 30 million contact to Dutch Foundation & Concrete Rehabilitation for more real estate development. Furthermore, it announced an AED 1.9 billion expansion plan earlier this year that involved opening a Hotel Mall and retail park on Yas island (meconstructionnews.com, 21.3.2017).

For their part, prominent locally owned entities have supported the Yas project. For example, the Al Fahim Group recently announced (04.05.2017) their intention to open an ‘Autohaus’ on the island to holding their Mercedes Benz vehicles, to which they hold the distribution rights in Abu Dhabi. Likewise, TwoFour54 stated its intentions to rehouse its building on Yas island over the long term. As expected, both entities partnered with Aldar to do so.

Given that 25 million people visited Yas Island in 2015, its prospects as a centre of investment are second to none. An awareness of its monopoly is necessary from an investment standpoint, but it is not sufficient on its own, given that context is everything in the Emirati market.

Under the Surface of Aldar
Mubadala Development Company (“Mubadala”) is a 29.75% shareholder in Aldar Properties and also happens to be one of Abu Dhabi’s most high-profile sovereign wealth funds. Mubadala was set up in 2002 immediately prior to the oil boom that catapulted the UAE’s fiscal position during the 2000s, and the entity benefitted massively from the inward flow of petrodollar revenues as a result.

Interestingly, Mubadala’s establishment occurred around the same time that Abu Dhabi’s Crown Prince, Mohammed bin Zayed Al Nahyan (“MbZ”), entered the political scene and provided an early hint of what his rule would look like. As such, Mubadala should be viewed as a vehicle for the Crown Prince in achieving his economic goals; an investment arm of the political elite designed to develop Abu Dhabi’s infrastructure and diversify its economy.

Mubadala’s ownership of Aldar has fluctuated over time, reaching lows of 19% in 2009 and highs of 54% in 2011. In this sense, it is clear that Aldar basically operates as a subsidiary company of Mubadala, irrespective of its exact shareholding structure currently on paper. Moreover, this means it is a key beneficiary of royal prestige and unrivalled in terms of winning projects from the government. All of this is to say that MbZ essentially sponsors the company and affords it the business it needs.

In terms of leadership, Mohammed Al Mubarak (profile available in the Shadow Governance Store) was handpicked by MbZ to lead the development of Yas Island and has done so via his positions at Aldar, where he is now CEO. In an interview given to Arabian Business (09.10.2015), Mohammed recalls a helicopter ride he took with the Crown Prince over a then-empty landmass a decade ago where MbZ explained his vision for the island. Ever since, Mohammed has been issuing contracts and courting investors into Yas on the order of Abu Dhabi’s political elite.

As Chairman of Miral Asset Management, Farah Experiences, and the Abu Dhabi Tourism and Culture Authority, it is certainly not incorrect to refer to Mohammed as “Mr. Yas”. He oversees the signing of partnerships with prospective clients and is among the influential figures who sit at the intersection of business and politics. On a related note, the Al Mubarak appear to be a favoured family of the Crown Prince, as three of the four family members hold positions of prominence in the UAE.

For example, Mohammed’s siblings are also among Abu Dhabi’s elite operating under the auspices of MbZ. His brother Khaldoon is perhaps the most influential of the lot as CEO of Mubadala, Chairman of Manchester City Football Club, and a board member at First Abu Dhabi Bank. Razan, their sister, is Secretary General of the Environmental Agency and sits on several public bodies including the Abu Dhabi Food Control Authority and Federal Authority for Nuclear Regulation.

The case of Yas Island is illustrative of how MbZ created a stomping ground for a company and project of his choosing. In many ways, this is the Crown Prince’s personal venture and a flagship development in what the future of Abu Dhabi is set to look like under his sole authority following President Khalifa.

As this strategy continues unabated, with Saadiyat and Lulu island next set to undergo massive development on a par with Yas, investors must pay attention to the individuals and companies that are selected for work. They will likely be chosen from among MbZ’s inner group and resources will only be distributed according to the Crown Prince’s patronage circle.