After sustaining a pressure due to slowing economy during the last two years, the property market in the United Arab Emirates was unable to show any remarkable increase in profits. Asset values and rentals has remained depressed before the first quarter of the recent year. It was Aldar Properties optimism and trust over the sales of under construction properties, which have finally, enable them to see a significant rise in the profits.
Aldar Properties is Abu Dhabi’s largest property developer, which also has signed-up a contract with Emaar Properties during the first quarter of 2018. The company aim is to regain the buyer’s trust and drag them to gain purchase or invest in under construction projects. Unlike to other property developers in UAE, Aldar Property is expecting positive outcomes from a recent collaboration with Emaar.
Greg Fewer, Chief Financial Officer of Aldar, showed full confidence over the market potential. He confidently states that; “We continue to see an active and healthy off-plan market. He further quoted on a media call that addition of the recent acquisition of some assets in Abu Dhabi will increase company earnings.
What was the pattern of rising profit?
Despite taking strategically essential decisions regarding the sales of under construction project, revenues remained virtually flat at the start of the first quarter and didn’t exceed from Dhs 1.50bn, which is less than Dhs 1.58bn a year ago. However, later a significant gain of Dhs30.3m from a local joint venture of the cooling district has lifted up the net profits of Dhs 669.5m in the next three months of the first quarter, which is ending at March 31, 2018. According to Aldar, the recent rise in profit earning is equivalent to the total rise of 5% until the end of first quarter.
What are the critical drivers for the rise in profits?
Key drivers, which attributed this significant rise of 5% in gross profits, include strong off-plan sales. In addition to profits delivered by standard off-plan sales, amount of Dh133m was also handed over by government infrastructure project and one-off gain is obtained from 50% stake of Aldar and a joint venture of Tabreed in cooling assets on Reem Island.
Abu Dhabi based developer expect further financial gains over the coming quarters upon the completion of the planned development of Abu Dhabi’s Tourism Development & Investment Company with a with a worth of Dh3.7bn is completed in summer. Moreover, in collaboration with Emaar, UAE biggest listed real estate company, Aldar is also working on the projects of Dh30bn in UAE.
Other projects, which include, the Eastern Mangroves complex, Cranleigh School Abu Dhabi and Saadiyat Grove will be acquired from TDIC. These projects are expected to deliver the additional annual income of Dh120m and gross revenue of Dh2.5bn. Chief financial officer also showed his gratitude on this accretive acquisition.
Besides these project acquisitions, Aldar asset management portfolio consists of residential, retail, office and hospitality properties, which has delivered a steady net operating income of Dh396m. To further confirm the significant rise in profit, a senior analyst Aub Ansari has compared and documented that net earnings of Aldar have grown from the profits (Dh593m) of Bahrain-based investment bank SICO.
Endnote: These observations indicate that property developers in UAE should prepare themselves to participate and survive in the healthy property market.