Abu Dhabi's holding company ADQ and Aldar Properties signed an agreement under which the emirate's biggest listed developer will take over the development and management of government capital projects valued at Dh30 billion.
Aldar will assume management of the government projects before the end of 2020, ensuring that all existing projects, which are due for delivery over the next five years, will continue to be developed, the two entities said in a joint statement on Sunday.
"The transaction, which is fully aligned with our business development strategy, will significantly support future profit growth," Talal Al Dhiyebi, chief executive of Aldar Properties, said.
The pact is part of the Abu Dhabi Executive Committee's directives for the development of a public-private partnership (PPP) framework to implement capital projects in the emirate with the aim of backing the real estate sector.
The projects include Riyadh City, Baniyas North and projects in Al Ain and Al Dhafra regions, amounting to more than 25,000 land plots and villas for UAE nationals and associated infrastructure.
Aldar will also have management oversight of projects undertaken by ADQ's Abu Dhabi General Services Company, or Musanada.
Musanada, which is responsible for developing much of the emirate’s public infrastructure, currently has a pipeline of projects including education, healthcare, infrastructure and social services buildings. It also has a facilities management arm to run them.
"The agreement marks significant progress toward the delivery of major infrastructure and national housing schemes across the emirate. Importantly, it aligns commercial and strategic operations in the sector," Mohamed Hassan Al Suwaidi, chief executive of ADQ, said.
Aldar, under its In-Country Value’ programme (‘ICV’), will make sure that the majority of contracts are prioritised towards local contractors, consultants, suppliers – including small and medium enterprises – to reinvest into the local economy, the developer said.
In August, Aldar reported a 2 per cent jump in its second-quarter net profit as the company recorded higher revenue, despite restrictions to contain the spread of Covid-19. Net profit attributable to owners of the company for the three months ending June 30 rose to Dh484 million. Revenue climbed 21 per cent to Dh2bn during the period driven by “robust demand for its prime developments and infrastructure-enabled land”.
Governments in the Gulf region are increasingly turning to the PPP model, which can help finance major infrastructure and utilities projects. Many of them are developing legal frameworks to regulate PPP projects, which are expected to improve transparency and attract investment.
Earlier this year, the Abu Dhabi government said it plans to issue tenders worth Dh10bn under a PPP model to boost infrastructure investment in the emirate.
The tenders are part of an initiative dedicated to increasing the use of PPPs and encouraging private sector involvement through the Dh50bn Ghadan 21 initiative.