Abu Dhabi-based Etihad is also considering raising its stake above the 24 percent it has held since 2013.
1MDB is the subject of corruption and money-laundering investigations in at least six countries.
ADNH’s is only seeking to buy the hotel buildings and not Emaar’s schools or clinics.
Authorities in the United Arab Emirates have issued arrest warrants for the founder of private equity firm Abraaj and another executive for issuing a cheque without sufficient funds.
Air Arabia, a Dubai-listed low-cost carrier, said this week it had a $336-million exposure to Abraaj. Shares in the airline plunged because of its links to the company.
Japan’s Softbank Group will participate in the fund as a strategic investor via its subsidiary, SIMI US Holdings I, Inc, a statement from Mubadala said.
The business, Falcon Private Bank, is under investigation in Switzerland for allegedly failing to prevent suspected money laundering linked to 1MDB, the scandal-hit Malaysian state fund.
The dollar-denominated will become the first sovereign bond to be listed on the Abu Dhabi Securities Exchange (ADX) when the planned listing takes place.
Dubai-based Abraaj is considering selling some or all of the unit following a row with four investors.
Two other senior executives are also reportedly preparing to leave the investment firm. Abraaj is also learnt to be considering a round of job cuts.