CEO interview: Aldar Properties to expedite projects as Abu Dhabi real estate recovers

Talal Al Dhiyebi believes that Abu Dhabi's residential property market has now bottomed out

  
Talal Al Dhiyebi CEO Aldar Properties.

Talal Al Dhiyebi CEO Aldar Properties.

Aldar Properties / Handout via Zawya

Aldar Properties aims to resume project launches in late 2020 on the back of strong sales of its residential inventory, chief executive Talal Al Dhiyebi told Zawya this week.

The government-backed Abu Dhabi–based firm halted project launches this year amid the coronavirus pandemic, but its earnings have proven robust, with second-quarter profit rising 2.7 percent year-on-year to 483.4 million dirhams as revenue increased and costs fell.

“We’re relatively confident, subject to the COVID-19 situation remaining [under] control, of launching something before the end of the year and then a pipeline of launches next year,” Dhiyebi said in an exclusive interview with Zawya.

“We’ve been selling more and clearing more inventory than we ever had in the past. Based on what we see today, we’ve brought forward our plans by 3–4 months to launch something potentially in the November–December period this year that will continue to focus on our key destinations of Yas and Saadiyat as we try to target the affordability mismatch in the market.”

Volatile equity markets and near-zero interest rates have helped persuade investors to up their exposure to real estate, while apartment owner-occupiers in Abu Dhabi are increasingly interested in upgrading to townhouses or villas, Dhiyebi added.

“Even if my yields are at 5–6 percent, that’s really good in a zero-interest rate environment, and I could get an affordable mortgage, especially with the sales support packages we’ve been launching,” he said.

The Bridges by Aldar Properties. Image courtesy Aldar Properties.

Aldar provided 190 million dirhams ($51.8 million) of support to its clients across its property development and asset management businesses, granting rent relief and easing rental terms for retailers while waiving administration fees at all its divisions.

For residential property buyers and tenants, Aldar adjusted payment plans for off-plan buyers, allowed some tenants to break their leases early without incurring penalties, and subsidised a home finance package in partnership with Abu Dhabi banks to help buyers get mortgages. The company also gave a 20 percent discount on fees at its schools.

“For us, it’s about doing the right thing at the right time for the right people. If we need to do more, everyone can be sure that we will do more,” said Dhiyebi.

Construction on Aldar’s under-development projects has not halted during the pandemic, but Dhiyebi acknowledged work had been disrupted as social distancing measures were enforced.

Aldar began handing over units on four key projects this year. These include Mamsha Al Saadiyat and Jawaher on Saadiyat Island, Reem Island’s The Bridges and Yas Acres on Yas Island.

A 5-billion-dirham contract to build residential housing, a media zone and infrastructure for Abu Dhabi’s government is 40–50 percent complete, said Dhiyebi. “We’re looking to develop more projects on behalf of the government in the future.”

Moody’s believes the pandemic will have a less severe effect on Abu Dhabi’s real-estate companies than on their Dubai counterparts, with a lesser imbalance between supply and demand likely to lead to smaller price declines over the next 12–18 months.

Waters Edge by Aldar Properties. Image courtesy Aldar Properties.

Moody’s noted in a July report that Aldar Properties derives less than 5 percent of its sales from non-residents, and it predicted Abu Dhabi can better absorb future supply, which represents around 9 percent of the existing supply. In Dubai, that figure is 21 percent.

Nonetheless, Abu Dhabi’s residential property prices have fallen about 28 percent since a peak in mid-2014, Moody’s stated, citing REIDIN data.

Dhiyebi believes that Abu Dhabi’s residential property market has now bottomed out. “There are pockets of rental corrections in Reem Island and in other areas, but we have seen a surge in demand for both premium and affordable living in areas such as Yas and Saadiyat. I remain optimistic about the market fundamentals in Abu Dhabi. The economy remains strong.”

Aldar’s half-year net profit fell 23.4 percent to 783.5 million dirhams losses on the revaluation of investment properties more than doubled. More encouragingly for the company, its half-year property development gross profit grew 27 percent to 690 million dirhams.

Half-year gross revenue rose 10 percent to 3.76 billion dirhams, of which 45.6 percent came from property development and sales, 9.5 percent from development management, 21.3 percent from investment properties, and 4.8 percent from hospitality and leisure.

Aldar owns around four-fifths of the approximate 25 billion dirhams of assets under its management. It will invest in warehousing and logistics, Dhiyebi said.

He predicts Abu Dhabi’s hospitality sector will take longer to recover than retail due to travel restrictions. “We’ll see less business travel, which means the corporate segment will change.”

When Aldar reopened its malls in April, footfall was around 70 percent below the levels of the previous year. Since then, malls have grown steadily busier, with August 2020 recording a footfall 3–5 percent above that in previous year, as Abu Dhabi residents remained in the emirate rather than travelling abroad during the summer. “People are now feeling safer to go out,” Dhiyebi added.

(Reporting by Matt Smith; editing by Seban Scaria)

(seban.scaria@refinitiv.com)

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© ZAWYA 2020

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