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Hello and welcome to another episode of the All Thoughts podcast. I'm Tracy Alloway.
And I'm Joe Wisenthal.
Joe, Obviously, there's a lot going on right now in the Gulf. One of the things that's been happening is that Iran, of course, has been sending drones across the sea and over to the UAE and hitting various energy infrastructure assets. But it's also been hitting some non energy infrastructure assets such as hotels, you know, consulates, residences.
Right of course, you know we've seen, for example, the various strikes. We're going to talk about Dubai specifically in this episode. The interesting thing about Dubai, as we know is there's been a lot of people who've moved there, lots and lots of money, to say the least. But part of the appeal there is here's an island of stability, not just an island. And this is what the part that enters me not technically an island, not technically an island,
and not just an island of stability. Within the context of the Middle East. There is this growing perception all around the world, particularly in rich countries where people don't like what's going on with taxes, where they don't like feel safe about the trajectory of politics in these countries, et cetera. This sort of ongoing feeling of deterioration of
various flavors where they're from. And it's like, you know what, I want to live in a country that has low crime, a high level of stability, and sort of you know, to be crude, escape the failing West. Exit as they say, in sort of the idea of exit, loyalty and voice and so forth.
Right.
So this is really interesting because in addition to styling itself as this sort of island proverbial island of stability, that's true, but they've also styled themselves as and I'm stealing this from the guests that I will introduce in just a minute or two, but they've styled themselves as the capital of capital. Right. So, here is this region that has an enormous amount of money from oil wealth, and a lot of that money has been flowing into not just real estate in the region itself, but real
estate externally in the West. We know that there are big sovereign wealth funds in the Middle East and they invest in all sorts of things. Lately, there's been a lot of private debt investment, which is an interesting one given the concerns around private lending at the moment. They've invested in famously US treasuries. Tech stocks like the UAE Saudi Arabia are huge, huge forces when it comes to
tech valuations at the moment. And so when you kind of start connecting all of these things together, you have to ask what does the situation in Iran actually mean, not just for the idea of Dubai and Abu Dhabi as this sort of expat paradise, but also as this locus of an enormous amount of money that tends to flow around.
The world absolutely and again like this is a place where those with means, those with like lots of money are feeling like this is this is arguably the future. This is where I want to set up shop. Ray Zalio has a family office that's in the UAE and so forth. And you know, historically there have been these places, these places where capital wants to be either have a literal or sort of figurative footprint. Switzerland of course long time in that category. Singapore perhaps similar, but you have
people in the West. You have a lot of people in the UK and you're like, you know what, this is where I'm going. This is my bet on the future, right, I'm betting my future, the future of my money, the future of my business somehow to be domiciled figuratively or literally in Dubai, the UAE, et cetera.
There's also something that the UAE in particular has done, which is it's achieved this sort of diplomatic or strategic ambiguity. Yeah, I guess you could say where it's a place where everyone from the US to Russia and to some extent Iran can do business right. So there's a big question over whether that continues at all. Anyway, we do, in
fact have the perfect guest. I actually think this is a really good way to look at the sort of interconnection of global capital and some of the gray market stuff that happens in the UAE is through property and commercial property in particular.
Totally, And you know, I just want to say, this is not the first time, you know, we've talked about the UA. Certainly we've talked about the golf, but it's even prior to the last few weeks. In my mind, I've thought I want to do more on this topic, specifically in England. It's a very big deal. It's a very big part of the sort of news and politics. How many of their wealthy have left over the years to go to the UAE and so forth. I wonder
to some extent the UAE. And I'm not the first person to make this observation, but like the you know, if you imagine this place with an extraordinary amount of abundant natural resources, et cetera, a world in which there is an extreme and it makes a miracle look very pale in comparison, an extreme gap between the haves and the have nots, et cetera. Sometimes I think about, like,
you know, is the future of the world? Essentially, do buy a five where you have this very tiny slice of people who are just insanely wealthy kind of you know, to use the popular parlance, a permanent underclass within the same thing, a place where there a lot of these successful people are like something you talk a lot about, which is is the future of the economy, just like
people who look really good and so forth. No for real, Yeah, and you know, we know that it's a home to a lot of influencer is taking photos in front of iconic hotels on man made beaches, et cetera. I have this feeling that there is a version of the world that looks like the UAE, for better or worse. So I've just been thinking, both literally and sort of metaphorically, we need to understand these dynamics of the UAE better.
It's funny because when I was an Abu Dhabi and people asked me what it was like living there, I used to say, it's like living in Texas in the sense that you spend a lot of time in the shopping mall, you spend a lot of time in your car, and it's hot all the time, and you don't really see that many people out on the street. Now I kind of think, well, you know, maybe Abu Dhabi is the blueprint for some places in Texas. But anyway, you know what.
I just say, you know what it looks like is it looks like Miami. And if you've spent any time, like on North Collins Avenue and some of the architecture and hotels, etc.
There.
When I've looked at some of the recent photos, including unfortunately one of the hotels that got hit, I was like, this could be like this could be a building that went up two years ago in like somewhere in Miami Beach. So so much to discuss, all right.
Rather than us spending more time discussing this, we do, in fact have the perfect guests, someone who's been on the podcast before talking about real estate for the ultra wealthy, and someone who has personal connections to Dubai as well. We're going to be speaking with Hitten Stani. He is the founder of ten thirty one Media and publisher of the Promote. So, Hitten, thanks so much for coming back on the podcast.
Hey, good to be here.
Would you agree with that framing? How do you think about you know, Dubai's reputation in the world in recent years.
I think for the most part it's correct, I would add to it. So, not only is it styled itself as a safe haven to do business, I think where it has probably gone further than any country in the modern era is cherry picking the kind of society that an ultra rich person would think about too. So there's one thing to be in Singapore and say all right, make your money here, But we have a Singaporean society that is very specific right in ubbe Dubai etc. It's
almost like a build your own bear kind of society. Okay, you're a wealthy person, come here. The only rule is don't mess with our politics. You're never getting involved in anything related to any sort of democratic debate. Outside of that. You want to live a decadent lifestyle, we have everything.
Set up for you.
You want to live a pious lifestyle, it's all set up too. We will guarantee you safety, and that's obviously the big asterisk why we're talking today. Will guarantee you safety, will guarantee you an incredibly pro business environment, and you can kind of stitch together this existence. I think there is no other place in the world that has this mix between the decadent and kind of the family friendly life that the UA government has very very concernedly created
for the well healed globally. And I think Tracy had made a point about sort of all these nationalities coming together in this diplomatic xanadu. It's been true forever.
Yeah, it always reminded me a little bit of like Casablanca, you know, all these years the day around, Yeah, exactly.
I don't know what people do there. I don't know if people work, I don't know if anyone actually does work. The only thing, you know, I see the Instagram photos, et cetera. But like, talk to us about the scale of the influx, particularly among the global elite, and to what degree is it a real phenomenon. You see people talk about this on Twitter of like a certain type of people who's kind of given up on the West
and they're willing to take that trade off. I bet a lot of them if you'd asked them, they're like, yeah, democracy is good, et cetera like that, but they're like, you know what, I look at Western democracy and it really does not look that good. It only looks in one direction. I'm worried about communists taking over and taking my money. I'm worried about all this, and Dubai looks like this, you know, oasis and how big has that trend to ground?
Sure, So there's two ways to think about it. One is what you're talking about, which is sort of the chavvy, right, the chav chavvy British influencer.
Made a bunch of money because they were early to Solana and yeah.
Yeah, I saw someone shoot up outside my house on a very nice street in the UK. I'm sick of this, I'm going to go over to Dubai twenty four to seven son no taxes, blah blah blah. That is obviously one component.
Of four seven son. I'm pretty sure.
I mean, except when there's like a dust storm, they pretty much do.
Okay, Okay, I'll have to figure out the astronomy of that one, but keep going.
Well, they do cloud seating too, so they can mess with.
The weather and ways they Okay think amazing.
There is that cohort of sort of disgruntled let's say, upper middle class to wealthy people from places like the UK et cetera. That's one class, and I think that is culturally much more significant than it is financially significant. Okay, the other class, and I think the inflection point that is probably the most logical to take is the Russian
invasion of Ukraine. Right around early twenty twenty two. There was this unbelievable influx of people from let's call it Russian Republic for just to make it a little easier kind of that area of the world. All this money flowed in, and now you look at parts of Dubai that have been transformed by let's call it Russian wealth. Right there are parts of Dubai that look exactly like Sunny Isles Beach in Miami, which is Russian wealth, Russian dominated.
That's the tongue you hear in the streets, and the culture of it has been turned on its head very dramatically and very rapidly. So unlike other places, Dubai is very I'm going to pull up some numbers now. So the city Dubai specifically is home to about three point eight million people at the moment. I think when I was growing up there in the nineties that was number was probably close to two million, and it's expected to surge by to five point eight million by twenty forty.
So you're talking about adding two million people to the city in what fifteen years or so, Right, that's gonna.
Be a I'm already imagining what that means for traffic.
I mean, it's traffic there is now kind of a parody of itself, Like there is no way to gauge what's going on. The metros are you know, in full capacity, but it's always terrible, right, So they do have all these infrastructure problems similar to what Miami is going through now. But I think the difference in in the Ua in general is the government is really on it. They're really trying to create large scale solutions to a lot of the problems that we have there. Right so be a
traffic they're building roads every single day. The joke is that people like my dad who grew up there are actually the worst drivers there because they try to go by gut and they can't because there's always a new flyover, our new intersection, et cetera. But they're doing that the infrastructure, they're doing the cloud seating for the weather, They're trying
so many different social experiments for cohesion. There's a lot going on, and I haven't seen a government as kind of on it, which is why where we are today is it's such a big question mark.
What have you seen just in terms of property prices in Dubai in recent years. So you mentioned the influx of Russians my you know, anecdotally, I still have friends in Dubai. They were saying that all the rents basically went up for residential because you had this huge population jump. But I'm curious also what happened with commercial property prices.
I think a lot of the sort of the explosion of growth in Dubai can be seen can be seen in land prices. Land prices are up by a factor for four forty to seventy percent, And this all stems from the super luxury boom that Dubai has seen. I think the last time we talked a year or change ago, I was telling you about the superprime luxury market in Dubai, which is globally defined by night Frank as sales of ten million dollars or more. Dubai is leading the charts
for a long time. I think in Q three they had north of two billion dollars of sales just in the super prime category. So by volume they are they have the most transactions of any market in the world in this category.
Right.
So, because developers can get and this is something we that is mirrored in Manhattan for the longest time. Because developers can get that kind of pricing for condos and homes, they then go and buy more and more land. They do some land banking, and because land has become so expensive now, they're going and getting some exotic financing for it. So, Tracy, you probably remember covering Sukuk and all the Islamic bond stuff that is blowing up now in the real estate market.
So I think you guys had a stat. Bloomberg got a stat that dollar bond in sukkook issuance has grown more than twelvefold to six billion dollars since twenty twenty one.
Wow. When I'm in Miami and I love Miami, I've never been to Dubai, but I love Miami. I'm going to be sort of diplomatic in my words here about when I'm in Miami, I get this feeling that it is a very diverse on paper city.
Right.
You have your Russians, you have your other Eastern Europeans, you have your Ironans, effect you have your Israelis, you have your various multi obviously Latin Americans of various sorts, et cetera. There is this nominal diversity in terms of the type of person who comes there, and yet everyone sort of merges into the same guy, if you know what I mean. They sort of dressed the same, they
drive this cars, they kind of talk the same. There is this sort of I would say, ethnically ambiguous Miami guy. They end up all kind of looking the same, et cetera. They have the same vibe. Is it sort of true in Dubai? Do you have this sort of nominally diverse population, but then when they're there, they suddenly fuse into Dubai. Guy, do you know what I'm saying?
Hundred percent? Get it? Okay, this is yeah, one hundred percent.
So a friend of mine recently went to what's known as a watch party, okay, where it's a bunch of guys who just sport their ice on the wrist, right, and and that that is exactly when you go into a party like that, you will see people had every nationality bound by just the love of that.
I yes, yes they have this, yes.
The masquerading love whatever you want.
Yeah, there is this kind of Dubai type right, because in a city where roots are not really a thing for a lot of people, the external factors be more and more important. The car I remember vividly. I was out with friends for shisha and we were heading from from I missed the shisha so much. It's probably, yeah, probably better for us that we don't smoke it all
the time now. But I remember going from a sort of a pedestrian sheiesha place to a nicer sisha place right so old part of town to new part of town, et cetera. I remember this friend. We went home to switch cars. That's the only reason we went this place. We went to the garage, we did not go inside. We switched cars, and then we went back out. This is a very common thing that has always been a
part of Dubai. The difference between what you talked about, Joe and what happens in Dubai is it's not necessarily a melting pot. It really is like it is it is. It is a collection of ethnic enclaves, right, and the only thing they have in common is that they live in Dubai. You can spend your entire life sort of ghettoized in your with your type of people. Interesting, and I think with so much influx that has only become more accentuated now. It would be silly to say, oh, yeah,
you only see your type. I have friends from all over the world. Anyone who lives in Dubai has had that privilege too, right, Like you can kind of tap into any culture you want. Yeah, but you can also stay very fixated in yours.
Let's say there's also a lot of racial stratification maybe that's the right word, where you know, if you go into a fancy restaurant, a lot of the people who are like sat down will either be Amoradi or white, and all the servers and waiters are going to come from Nepal or India. Like that happen. It's very noticeable.
Yeah, I think I think Tracy, a lot of that has changed quite a bit, right, I think so much money coming in from all parts of the world, including South Asia, that that hierarchy that used to be so preced there is very much diluted a little bit.
So you will go to.
The top restaurant or top club and you will kind of a United Nations type of vibe.
Now, talk to us about what you're hearing just on the ground in Dubai at the moment, because the information flow is a little bit tricky. The UAE controls the information that not only circulates domestically but also circulates externally. So while we have seen some videos of drones hitting various buildings, it's not entirely clear. We're getting a really good sense of the situation there. What are you hearing from friends and family on the ground.
So overwhelmingly the messages that things are okay in life is moving on. I think anyone you talk to in the region has a certain the information flow problem that you kind of alluded to. That is very much a thing. Most people are getting their news and information from social media nowadays.
Social media is.
Very tightly controlled in the UA and in the region in general, so a lot of us who are have Dubai sort of close to their hearts from the outside end up seeing kind of more than we more than the people back home do.
Now.
There have been certain things, right there was an attack on the airport that was major news. The government in Dubai duscent or the government in the UE, sends out alerts and all that, that's the kind of thing that they see. But in general, and I think this is going to be a broader part of our conversation, and not to make a desert pun here, but the UE has to project an image of an oasis of common stability.
Right.
I like to say that New York is a great city any day of the week, any weather, at all times. Los Angeles has to be on its best best weather behavior at all times, and there is a similar analogy.
To be made at the UAE.
The whole game does not work unless it feels safe. That is the number one thing that the government talks about that is the number one thing that investors taut in their materials. When you're soliciting investment for the UAE or convincing someone to move your business to the UE, safety is the number one thing. And again we don't know how bad this is. I think I'd like to make an example from another neighbor of the UAE, the
Kutthery Energy minister. Did you guys see that comment? I mean that is absolutely stunning.
Oh what do you say?
So the Iranians struck an LNG facility.
In Kuthar and about the repair time, No, this is.
About he said that it took out seventeen percent of Cutter's expert capacity. That is a stunning revelation to make. I think this guy, his name is Sad the Cabby, I think he is a little bit more outspoken than I've seen other government ministers. But he said they might have to invoke force majure contracts on experts to certain countries.
Right.
That is the kind of thing that should give people pause. Right, And we're going to talk about this in a second. But a lot of these countries, the UE, in particular Katar, Saudi Arabia, Kuwait are big, big investors in the global landscape.
You mentioned a l Right, you go into the nice restaurant, and maybe at this point it does have sort of the clientele has this United Nations feel, But as Tracy mentioned, maybe the waiter is from Nepal or somewhere else in South Asia, et cetera. Again, there's this meme in that the world is gonna entering what they call, you know, the global permanent under class. You have to buy this cryptocurrency because this is your lottery ticket out of the
global permanent underclass. You have to whatever Ai sort of are talked about in the same language as crypto in that respect. From inside of Dubai, that waiter or the child of that waiter, is there this sense that they will always be part of that permanent underclass, and that there is no relationship in a sort of societal fabric between the life of that waiter and the life of everyone that they're serving in that restaurant.
Yeah, I think that that's very true the Horatio Alger stories and I tend to be the person who's come in and made the life for themselves, right, the scrap the entrepreneur who came at thirty years old with nothing and now owns a bunch of yachts. That is the kind of story you do not typically see social mobility
within the city. Right, So if you are part of what you described as the social underclass, you tend to stay in that role until you leave, and you will always leave, right, that's the other part of it.
Yeah, and just you know, on your point about business as usual. One of the things that I like to do to sort of get some perspective on an area is go to Instagram and see what the latest photos from that area are. And it's sort of like I've always found that to just be a nice way of like figuring out, like what is the vibe of this,
what's going on? It's still to this day if you look at if you try to pull up any location in Dubai, particularly an outdoor location, there's a good chance that the only photos you're going to see are You're going to see a lot of butts in that photo, right, You're going to see photos of women in bikinis with the bourgeak khalifa in the background, or some artificial island chain in the background, etc. In terms of the information coming out, it is almost no different than I believe
what gets posted on social media is almost no different than it would have been, say, a month ago.
Yeah, I think your strategy works better in the country where there is a broader sort of a more free press, etc.
Right.
One of the and you guys have probably seen the flood of op eds coming out. I think the Wall Street Journal bureau chief back there wrote a very very spirited piece in defense of the country because it's a very easy place to take shots at, right, And we've probably taken a couple here in this episode. It's a very easy place to take shots at because a lot of people are judging the bargain from the American lens, or let's call it the lens of the depraved West.
That is not the bargain.
They don't care about, you, Joe, And to be honest, what they care about is like a wealthy person who does not care so much about the sort of the broader Western ideals and only cares about the Western ideal of capitalism, and then they will provide all the other things we talked about, safety, high quality of life in one sense.
Et cetera.
So that's very much the case. I think that we tend to be as people who've been in the West for a long time tend to be more concerned that we don't get to see the truth as much as they don't seem to care as much. What do people really care about? Just having a safe, chill place to live, and the UA does that better than pretty much anyone.
Yeah, but I mean there is a tension here at the moment where you could argue that if you're a citizen on the ground, like you would like to be more informed about missiles flying around. I know they have an alert system, but also since you mentioned Instagram, I'm
now thinking about geotagging. We know that a lot of the location services in Dubai and Abu Dhabi aren't working at the moment because they're getting jammed because they don't want Iranian drones to know where they're going and vice versa. So like there is this informational problem and informational control problem. But I just want to talk for a second about where golf money has actually been flowing externally in the world, because this has been a big story but still an
underappreciated one. I think.
I think it's just a lotifying story of the investment escape of the last ten years.
Yeah, yeah, Okay, talk to us about.
It, Okay, So just broadly GCC sovereigns collectively, so it's called them the Big four of the Big five managed close to six trillion dollars in AUM. That represents more than forty percent of the global sovereign wealth fund total, right, and increasingly so. I think in the nineties they were probably mostly focused on fixed income, right, US bonds being
a big part of the equation. I think starting in the two thousands and definitely in the twenty twenties, they've been flowing towards let's call it more exotic cults.
Right there, crypto.
They're massively invested in venture capital, and at the highest highest level they are obviously incredibly large real estate investors, both as lp SO limited partners in deals, but also increasingly in what's known as GP staking, which is when you buy a piece of a black rock let's say, right,
and the PIF who oh yeah. So when PNC sold a fourteen billion dollar steak in black rock around in the pandemic at some point, the buyers were Mobabla Kia which is Kuwait, Qia which is Cutar, and PIF, which is sud Right, So they are all over the tentacles are so incredibly well spread into all aspects of the
global economy, especially in the United States. And I think one question that I have, and I'm sure a lot of people have as this conflict drags on, is will that bigot stop or at least tighten up, right, because I think you wrote about it in your newsletter recently. Petro dollars are essentially what creates this this giant pool of money, right and right now, Let's say hopefully the
conflict ends in the next couple weeks. If that is the case, the UA can very quickly get out of this hole, because it probably has the best functioning government in the modern era. If this goes on for months
and longer, then you have to have those questions. I mean, I think it would be really interesting to talk to a fund manager right now and see what kind of conversations they're having with pif Mahbadla and the likes, because those conversations, and we like to say, investors like certainty and this ain't it right?
Okay? There have been the hits to some energy infrastructure, like why does it change? How much do you perceive that this story of lots of money coming in because people carry it in their pockets and then lots of money going out because it enters these huge funds that are funding everything from me AI to infrastructure to all kinds of things. So far in this war, is there anything that disrupts the trajectory of that model?
So far in this war, there hasn't been anything that shows like, hey, this is good, the party's going to stop. But I think the cut Thery example that I pointed to is the first one. I said, Wow, they're talking about seventeen percent of export capacity.
That is very serious.
At some point, if not already, Qia has to be brought into the room and say okay, let's assess the situation.
Right, I would.
Imagine this would come up, and then there are these long term beds. I think you had one of my favorite song at some point, ziadaoud to talk about, Oh yeah.
He's so good, he's incredible.
They're going to get him on a gun and just for listeners, he's our colleague here at Bloomberg. Guy, he's in Bloomberg Economics, right, and so yes, we're going to try and have him on ace app.
He's incredible. I think I first heard of about him on Sultano Kosami's cultural much less, which really fun thing that he used to do that and he's restarting.
But anyway, you.
Guys had talked to yeah about the UA's thirty five billion dollar investment into kind of the Egyptian coastal development, et cetera. Right, Yes, those kind of bets are where I would say, okay, what is That's just sort of a commitment made to doing things in the future, right, It's it's like a thirty five billion dollar number that's probably going to be over a couple of decades or so.
When you make those kind of claims, or you make that kind of commitment and you see all the stuff happening with your own in your own home, maybe there's some talk of redeployment, holding back, et cetera. I think those are the big things. A lot of the other money we're talking about, and we'll talk about private credit in a minute, has already been committed, deployed, et cetera. Right, But the scale of the UE's specifically's investment in this let's call it the frontiers of the new economy, I
don't think is fully appreciated. I mean MGX, which is a state owned state controlled Shake thenun controls this giant, sprawling web of at least a one and a half trillion dollar pool money, the various fund stitched together from ubbleb It is in everything, It's absolutely in everything. And again this is again in question of how long the conflict will go on. I'm not an expert on that, but if this drags on for a bit, there has to be some reckoning with how that money is flying.
If we actually see an exodus from Dubai, and.
In terms of population, In.
Terms of population and anecdotally I certainly have seen people leaving in recent weeks. It's hard to tell if they're going to leave forever or if they're just planning on departing during the worst of the conflict. But if we were to see an exodus from Dubai, and presumably real estate prices would be impact from that, that could be the line of entry where you start to get more pressure on government finances.
Right, yeah, I think more than any other city probably in the world, debuys in the sentiment business right, the sentiment business. Right, their primary sources of revenue are real estate, tourism, and commerce. Right, those are the three and those are all sentiment based industries. In fact, I don't think I've seen I haven't heard personally of any departures in the way that I remember in the first Golf War in the nineties there was a flood of people that left.
I think that, if anything, the UA is kind of being more tested now than back then. But I think they've done a really good job of creating long term incentives this time around for people to stick around. Things like the Golden Visa, which is very similar to the EB five visa or the Trump Gold Card. It's kind of modeled on the Golden Visa, things like property rights, a more robust legal system. They've put all those things together. Now, if people do leave, what does that look like? First
of all, real estate prices. People have been talking about a correction in the UA for a long time. If people start leaving, that is certainly going to be on the table, right And then the kind of the back infrastructure of financing a lot of these projects will be tested, the bond market, the Islamic financing market, et cetera. That's when things will start getting shaky. And again, one of the things.
That is.
Dubai has got a very, very very robust private market's economy now, but at some point or the other there is some government involvement in that, right, either by backstopping or being an LP and many things, etc. I don't know, I think, Tracy, I don't know where AMARS stands now, but at some point it was very much an arm of the state.
Now, yeah, yes, I think that's fair.
Yeah, so I think we'll be if we do see an actual exodus or an outflux, then there's a lot of questions to be asked about the stability of that market. And again, this is an absolutely insane market. So things have been selling off plan. There are stories out there about eight hundred million dollars worth of product selling in
a single day. Right, that is a momentum driven like I need to get in while this market is still semi affordable, and by semi affordable, I think one of our the reason we connected in the first place is that you have to look at the ultra luxury market in the world as a collection of properties as opposed to compare them to local comps. Right, and at that level, if you look at it from that level, the Dubai,
Weleve et cetera. Are still a relative bargain, right, So this all really is contingent on it maintaining its demand from very wealthy people, and safety is obviously that that X factor and all of that.
You could make the argument that the UAE has the best functioning government in the world. And I think this is very important because, particularly in the West, that is not a comment that will be uttered in a million years in the United States, in the UK and France, in Europe, et cetera. I mean, the idea of a functioning government feels almost like what's that? Those words don't even go together anymore. Could you explain a little bit,
you know, how that works. We often think that governments, particularly non democracies, are riven with corruption and have no accountability and so forth, and there are all kinds of reasons on paper to think that that would be impossible. How would you describe the sort of organizing principle of the government such that it doesn't it doesn't collapse whatever it is. What is it about how it's structured where actually public sector is taken very seriously and effective.
Okay, it's a heavy question, but let's try. Right.
There's two elements to this. One is a functioning society, in which things just seem to work, and the UE government has done, probably again an incredible job of doing that. You want to set up a business, you can do it. You want to make money, it's yours. No one takes it away from you. This has always been true.
Et cetera.
Right, if a crime happens, it is handled very quickly. That's one part of it, right, that's the actual tangible on the ground. They build roads all the time. You can see the progress. There's never a pothole inside. You will never see any vagrants, you will never see any violent crime, et cetera. So that is the as a person living here that makes half a million dollars a year and expects a certain quality of life, the government is giving me that quality of life. That's one part
of it. The other part of it is a little more state crafty, right, which is the illusion that is created that this is the best government in the world, the illusion that is created that this is the safest place in the world, and then is repeated and amplified by everyone who lives there, because that's part of the deal.
Right, you go there.
Anyone, and again they do an incredible job of creating that society everyone from athletes to actors to footballers, et cetera, will throw in a plug for Dubai randomly, seemingly randomly in any conversation they have, And I think part of this is because there's gratitude, and part of it is because it seems like that's part of the deal.
Let's go back to private credit for a second, because this is one of the reasons we really wanted to talk to you, because a lot of that money, you know, direct lending, has found its way into your world in various ways. It's hard to gauge how active or how big the GCC presence in that market has been, but what's your sense of it.
I think it's it's been fairly large and only growing. And I think a good example to look at as something like Mabadla, Right. Mabudla is one of the more prominent. I think it's three hundred and fifty billion dollars ish aum, but is incredibly aggressive in the credit space. They recently did a full takeover Fortress, which is a big player in commercial real estate credit. They have been and I think we talked about this in your in your newsletter
as well. Abdew in general has been getting very much into the debt game, not only directly by purchasing companies like Fortress, but also by being an anchor LP in a lot of the private credit funds that we see.
Right, So.
Blackrock and I think this all comes back to a trend that we like to call aum gobbling. Right, So you cannot there's no such thing as a good mid sized fund anymore. Everyone's got to be Brookefield, or everyone's got to be Blackstone, and so Sixth Street. I think Fortress, this co CEO made the statement, which is like, for us to stay relevant, we need to keep growing assets. It's not enough to run the book that.
We have and do it well. We just have to keep gobbling up other parts of things.
So if you had a dedicated fund, let's say you had a senior housing and affordable housing fund, and you're doing very well, you have two billion dollars you're running, you're incredibly good at that. Eventually the call comes in from a Fortress or a Sixth Street, etc.
And you're picked up.
To make these kind of things happen, you need an incredible amount of liquidity slash capital, and all roads lead to able when it comes to that kind of thing right. So Bloomberg had an amazing article about how to meet the World's one and a half trillion dollar man. I think it was called, and it was about Shike Tachnun and his entire web of companies and amazing that.
Kind of figure.
And once you're in with someone like the Shee or one of his deputies, you have access to kind of unlimited amount of capital. Larry Fink is in what I would venture to guess every month, Ray Daallyio. There's that iconic shot of him and the Condura sitting there at the table with all the movers and shakers. They have sort of infiltrated every aspect of private credit when it
comes to real estate. The name keeps coming up, and if the name doesn't come up directly, it comes up as a backer of a lot of these.
Companies that we talked about.
AI Infrastructure PIF, I believe is the anchor investor in Blackstone I'm sorry, and PIF is the anchor investor in Blackstone's Infrastructure Fund, which is their quote lends into the AI boom. MGX is a partner in this really stop and start government project the US government called Stargate with open Ai etc. It's had a bit of a mixed run. But MGX is an anchor investor in that. MGX is also an investor with Microsoft and Blackrock in that giant
AI venture. Right, so there's just the odds that UBW or one of the Middle Easterns is involved when it comes to these big infrastructure bets.
Is very high.
The Golf States didn't ask for this war, at least the vast majority talk to us about sort of regional politics. And obviously, you know, we know that it may have been his first foreign visit. Right taking the presidency, Trump quickly went to the golf and you know even at the sword dance.
The iconic sword dance thing.
Oh yeah, the orb yes, yeah, but still the same same deal. You get this impression that like Trump has golf tastes, oh right.
That I mean even even before all this, right, he his brand was actually so the way that people in New York think of the Trump brand is tacky luxury, tacky luxury.
Right in the golf, it's thought of his luxury luxury.
Yeah right, It's it's always been there. There's sympatico in so many ways. Uh, from kind of having incredible control over their societies, which is something that our president has has always kind of aspired to, right, and some would say he's doing pretty well on that front. But there's always been that kind of sympatico between Donald Trump and the golf leaders. Uh, there has been friction on the front recently, though.
Well, this is what I'm trying, This is what I'm getting at, Like, could that change again, massive damage to their domestic economies for a war that they certainly didn't ask for. Is there any prospect of in the wake of this, whenever that ends, some slightly new trajectory between the US and the Gulf.
Impossible to tell if the war drags on, but for now, I don't think so. I think they've been pretty in lockstep with pretty in lockstep with the US's policy on this. Right, There's there's been reports, and this is above my pay grade and above my beat, but there's been reports that Saudi was very much pushing for this this.
Yeah, as the one exception, you sort of get the impression that Saudi was also one of.
Right, and then then the country over correct. The GCC countries often don't see to I, especially on Iran. Right, there's there's a fair amount of friction between the two powerhouses, the UA and Saudi arab on a lot.
Of geopolitical issues.
They're they're brothers, but kind of not right as well, and there's a lot of rivalry in general for capital and the joke I think even when Tracy lived there was probably you you lived in Dubai and you would go consultant WW sorry, in Saudi for four days a week. That's not so much the thing anymore. Sally's been pushing people to live there and you know, upon threat of losing business, et cetera. But I think back to this fracture or potential fracture between the US government and the GCC.
We haven't seen anything from government level friction yet. We have seen, though, a couple of very influential businessmen, Kalfelptur, who was a big developer player in the in the UAE, had had put out a letter kind of excoriating Trump for starting this conflict at the best of at the behest of Israel, right, and this was a this was a big, big deal for a statesman level businessman in
the UA to talk about this. The letter was at some point redacted, right, and then and then Hoaptor sat down with the Washington Post and did this incredibly entertaining interview about you know, it's more about kind of the cohesion for the long term, et cetera. It doesn't agree with the war, but I think in general pissing off your American allies at this point is not good, et cetera, et cetera. So we have seen some of that. Now again, Joe,
your question is really about how long this lasts. For now, they can kind of keep things going. But if this is a month's long conflict or longer, God forbid, then then there might be a little bit more of a fracture.
Right.
Just on that note, what are you watching in terms of, I guess, gauging the overall health of the Dubai property market, but also the overall health or circulation of that oil money in the wider property space.
So in the first one about the overall health of the Dubai property market, I think one thing you want to pay attention to is if any planned or announced projects, if they are kind of continuing on the timeline that they talked about. Again, a lot of these depend kind of like Miami's economy on pre sales, right, they get commitments and then they go build the thing and the views. I mean, these things get more and more fantastical. Tracy, this is very much for you.
There is one. I'm gonna pull it up. Hang on.
There's a tower that's coming up which is called Aiwa, which is twenty one story resident a twenty one story residential tower designed to look like the Hallelujah Mountains from the Avatar movies.
All right, that's going Why do you say that once for me?
Because you love this stuff, You've always won I do.
I do, like I wouldn't want to live there, but I like hearing about it for sure.
There are doing a lot of interesting innovations with engineering and design. They're doing Manhattan like skinny super talls now as well. So they have a tower coming up that's a seventeen to one ratio, which is the kind of skinny pencil tower that you would see on Billionaire's row. But on billionaire's row land is such a crazy constraint in Dubai. It hasn't really been until Yeah, that's.
Wild to think that they're doing that now, that like, that's that's how far it's gone.
Well, I think it's I think it's a little bit of both. I think it is one a financial constraint that they're trying to solve for and the other like, hey, if this is you know, this is all the rage in New York, then why not do it here with with the government or with the sorry with the UE. It's hard to tell when it's being done for sort of financial prudence and when it's being done because someone else somewhere else did it.
What has been the strategy I mean, okay, the ultra rich going moving to moving to the golf, moving to the GCC states. How active is the push buy to get just the merely rich or the sort of you know, as they would say, the mass affluent, et cetera. Has there been a push to sort of like make more people around the world aware of the fact that they can move to Dubai and cut their tax bill and live a much more comfortable life and better weather.
I would say it's almost a strategic imperative of the government.
It is such a big initiative to get not just your Ray Dalios of the world, which is much more of a personal relationship banking relationship, but to get those families that are down for this lifestyle to come over when you enter the Dubai Airport now, which is one of the busiest airports in the world, you will see these giant, absolutely giant interactive ads about all ethnicities used to see typically you would see white people in these ads. Right now, I just went a couple months ago or
a month ago. You're seeing Usbeks, You're seeing Canadians, you know, and it says specifically Canadians, this is your Dubai usbex, this is your Dubai, et cetera. They are pushing this beyond and I wouldn't be surprised if there's like an arm of the government dedicated just to what you're talking about and just.
Going back to thinking about, you know, warning signs of trouble ahead. What are you looking for in that global capital space.
A lot of these conversations happen behind closed doors, but I think one of the things that we're doing is talking to fund managers and seeing if there's any kind of hesitance expressed by these LPs right whether it's in snaking conversations or backing funds. That's that's probably where you're going to see the most pressure, which is not now, and in fundraising, not now is as good as no right.
So if you start seeing those conversations where God knows Brookfield is going to raise another distressed credit fund, and the conversations with Lubble Ubby or with Saudi, etc. Get a little bit more, a little bit more wishy washy, that is something definitely to look out for, right, because without without ongoing constant moment him, this doesn't work and the scale of capital needed. I think a great example
is that of God. If that electronic arts LBO deal was going on now, the EA Sports formerly EA Sports Electronic Arts. It was a fifty five billion dollar LBO, which I believe is the largest in history. It was broken randomly by Jared Frickin. Kushner right and PIF wrote a twenty nine billion dollar equity check into this transaction to take I think majority control of EA. Would that deal have happened in this environment, I venture to say it would have taken a little bit long down.
All right, Hitten, We're going to have to leave it there. But this has been a fantastic conversation. Thank you so much for coming back from myos.
Really appreciate it, my pleasure.
Thank you, Tracy, Thanks Joe, Joe.
Obviously a lot that stood out from that conversation. But one of the things I was thinking was that sort of flywheel dynamic that Hitten was talking about towards the end,
and also just the interrelatedness of all of this. So I think that one of the difficulties is if you're a sovereign wealth fund in Abu Dhabi or Dubai at the moment, and you've invested a lot in private credit, a lot in tech those areas, even independently of what's happening in the golf, there are concerns around that at the moment, right, And then if you think that, well, maybe the UAE won't be able to sell as much oil as it has in the past, or maybe some
of that tax and tourism revenue is going to start going down because there are drone strikes in various cities, that's I think where you start to get the potential for some real weakness.
Yeah, I mean you just think, like, how much does it really take to change the trajectory, and does it you know, could it be as simple as a meaningful down shift. I'd say the war ends fairly soon, but you know what if you had a year or two in the wake of it, where there was a significant decrease in the amount of capital flowing into the region relative to what's expected. What are the ripple effects of that?
And again, you know, it's hard to get really good information from what you said in the beginning, and I think this is really key. I do think it's hard to tell from the outside world. Like you see plenty of pictures where it all sort of looks the same, but you don't really know about the truth of that. And I think right now, in this moment, there are probably plenty of people it's like, you know what, I like the idea of moving from England, and I think
it's really big. It's it's actually like our government doesn't pay attention to anything big going on domestically or whatever. I know that this is a very big part of UK politics right now, the flight of the well off
who they're already under a tremendous fiscal strain. And if you have money and you don't like the fact that half of your money is going to the government and all of these sort of pathologies and dysfunctions that we see in the UK, it has become an extremely popular option to just DeCamp to Dubai.
But this is the other thing if you're targeting, if you're trying to attract an extremely wealthy mobile population into your city. The converse of that is that they can leave right like if for whatever reason they don't feel safe, or they just think, like, you know what, now's the time for a really long vacation somewhere else in the world, they can go.
And I really think that again, you know this meme the globe, there's going to be a point where there's this global permanent underclass, which is a phrase, and I do feel as though Dubai is ground zero for this phenomenon where you have an extremely rich, well off part of the society that has access to every luxury experience that you could possibly think of, and then there's this layer of people that will never ascend to that despite
living in the same country. It does not seem like a place where you could quote work your way up.
Yeah, I have to say, you know, Hitten mentioned also the sort of like UAE legends, like the Horatio Algis of the UAE. I still remember A big one was this Indian guy called b. R.
Shetty.
Does that name ring about?
Oh?
So he built this huge medical company called NMC and then it turned out to be a massive fraud. But he was like the guy that people would point to as you know, you can make it here anyway, we can keep going on.
Position is just the past. Yeah, I love talking to him.
All right, shall we leave it there.
Let's leave it there.
This has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
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