Aldar Properties, Abu Dhabi’s largest-listed developer, is exploring investments beyond the emirate as the company posted a 30 per cent decline in third-quarter net profit due to higher costs and one-off items.
“We will continue to pursue investment opportunities and are interested in acquiring warehouse assets, which would support the rise of regional e-commerce,” Aldar’s chief financial officer Greg Fewer said on Thursday.
Net profit attributable to shareholders for the three-month period ending September 30 came in at Dh420 million from the year earlier period, the developer said in a filing to Abu Dhabi Exchange, where its shares are traded. The quarterly earnings matched the average analyst estimates of Dh418.5m compiled by Bloomberg.
Gross profit in the third quarter was Dh581m while revenue climbed 8 per cent in the period to Dh1.5 billion compared to a year ago, the company said.
The decline in profit was due to higher interest costs due to reduction of cash deposits, an increase in debt used for the Tourism Development & Investment Company (TDIC) asset acquisition, and a rise in depreciation charges on additional operating assets acquired as part of the TDIC transaction, the company said.
“We saw a solid performance,” said Mr Fewer. “None of the reasons for the net profit decline were related to the underlying performance of Aldar’s core asset management business.” Depreciation charges are likely to roll into the next quarter, but the core underlying assets are on an upward trajectory, he said.
The year-on-year net profit decline is “not a concern, and in line with our expectations”, added Sara Boutros, a senior real estate analyst at CI Capital bank in Egypt. “Revenue was up 8 per cent but there has been some margin compression on both the gross and net levels on absence of land sales and increased operating costs from the TDIC acquisition.”
During the quarter, Aldar established a Dh20bn property investment unit, Aldar Investments, that will hold recurring revenue assets including 5,000 residential units and 500,000 square metres of retail and commercial space. The subsidiary is intended to create a more efficient operating platform and higher growth opportunities for Aldar.
More than two thirds of the company’s gross profit comes from the “stable, mature” assets held in Aldar Investments, said chief executive Talal Al Dhiyebi. “This is complemented by a development business expected to deliver over 7,000 units from 2018 until 2021, providing a steady pipeline of contracted cash flows that will start contributing to Aldar’s 2018 dividend, in line with our stated dividend policy.”
However, Aldar expects to grow its asset base further over the coming months by securing new investments in the fast-growing logistics sector. The GCC e-commerce market is forecast to grow to $20bn by 2020, presenting real estate investment opportunities in the form of warehouses and data centres both in the UAE and beyond its borders, Mr Fewer said.
“We want to grow our platform into one of the most diversified and scaled portfolios in the region, and there are some exciting opportunities we are exploring.”
In May, Aldar reached an agreement with TDIC to acquire real estate assets worth Dh3.7bn, in one of the largest real estate acquisitions in the country’s history. The developer behind Abu Dhabi's Ferrari World theme park acquired assets located in key destinations in the emirate, with a focus on Saadiyat Island. The 14 operating assets bought from state-controlled TDIC range from hospitality and retail to residential and education. Other assets include prime land plots and some underdevelopment projects on Saadiyat Island.
In March, Aldar and Emaar teamed up to develop Dh30bn of local and international projects. This partnership, together with recent government initiatives to drive tourism and encourage expats to invest, will help Aldar boost income, Mr Fewer said.
There are no plans for further fundraising – Aldar has a $750m sukuk due to mature in December – and Mr Fewer is not worried about possible interest rate hikes by the US Fed. “We’re well hedged”, he said.