The Abu Dhabi Financial Group, an alternative investment company with US$3 billion in assets, plans to make more acquisitions in financial services and expand its debt portfolio by two-thirds, its chief executive said.
The group will make at least one acquisition this year, after concluding in March a 45 per cent stake in the Abu Dhabi brokerage firm First Gulf Financial Services from FGB for an undisclosed sum.
“In 2013-2014, everyone was playing hard to get,” said Jassim Alseddiqi, the chief executive. “Today sitting on the sidelines, you can pick and choose the assets you want whether on the real estate side or financial services side. So we will be making an acquisition, which might be a series of many other acquisitions.”
ADFG thrives on downturns, snapping up assets at attractive prices, financing abandoned property projects and providing alternative financing to those shunned by banks.
Accordingly, the group’s debt portfolio, which is only 18 months old, will swell to Dh5bn by the end of this year from Dh3bn today.
“We do well when there is a slowdown globally and locally,” said Mr Alseddiqi. “We are not very active at times where there is a boom, because we are experienced in special situations.”
These special situations include taking on debt of various forms: asset-backed financing, distressed finance, structured finance and high-yield debt. The group extends funds to a slew of investors that may not be able to get loans from banks.
“The non-banking financial services sector has still room for it to grow,” said Mr Alseddiqi.
The group also provides “last mile” financing to property projects in Dubai and Abu Dhabi that have fallen on hard times. It has funnelled Dh500 million into such property projects in the UAE and abroad.
Mr Alseddiqi said the return on such investments versus the risk was “much better than other opportunities in the market”.
Investing in such projects and debt financing has paid off for the group, which has on average achieved an internal rate of return of 22 per cent annually over the past five years.
This is coupled with more than a 30 per cent increase in revenue each year over the same period.
ADFG expects this performance to continue over the next few years as the economy’s growth slows down and the property market cools.
The group has also invested in luxury property developments in central London worth about £1.8bn. The group has sold a third of units at its No 1 Palace Street development overlooking Buckingham Palace, which is due for completion in the first quarter of 2018. Nearby, construction at New Scotland Yard, which it is also backing, will start next year, with expected completion in 2021.
The company is also eyeing projects in Miami, New York and Los Angeles and is waiting for a downturn in the US property market. Miami is particularly attractive due to its combination of leisure and business travel.
The group is also spending €500m (Dh2.04bn) on investments in Eastern Europe over the next four years, including the development of 5 million square feet of land in Bulgaria and projects in Montenegro.
Eastern Europe has attractive pricing and great hospitality potential, said Mr Alseddiqi.
China is on the group’s radar screen, as well.
“We might be interested in looking at China and we are waiting on the sidelines to see what happens,” said Mr Alseddiqi.
“We think there is going to be a weakness over the next few months or years and we are positioning ourselves to enter the Chinese market in financial services or real estate.”
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