Cash-rich Aldar weighs up buying opportunities

The company had Dh2.5bn of free cash and Dh4bn of available credit as of September 30

A robot carries out temperature checks of shoppers at Aldar Properties' Yas Mall. The developer has extended about Dh190m to retail tenants and schools customers since the onset of Covid-19. Victor BeShow more

Aldar Properties, the UAE’s biggest listed real estate company by market value, aims to capitalise on subdued valuations in the real estate market by assessing potential acquisition targets.

The developer, which had Dh2.5 billion of free cash and Dh4bn of undrawn credit facilities at the end of September, is in a strong financial position to make purchases, the company’s chief financial officer, Greg Fewer, said.

“If you look historically through our history here in the Abu Dhabi real estate sector, times of crisis and dislocation always give rise to opportunities for corporate action or combination,” Mr Fewer told reporters on Thursday.

“We believe on the asset management side, we’re the most efficient operator and owner of real estate in our region ... when you’re a landlord, cost of capital is one of your most important attributes and we have the lowest cost of capital.”

Mr Fewer declined to give details on acquisition targets but said they would be "large and diversified in terms of the kind of assets that we have competency to manage and therefore acquire".

Aldar Properties reported an 8 per cent increase in third quarter net profit on Wednesday evening to Dh416 million as revenue jumped 30 per cent on the prior-year period to Dh2.1bn.

The company attributed growth to a record quarter for its development management arm, which doubled sales to Dh1.3bn, and record levels of development sales.

“We sold the greatest number of houses by volume in this quarter than we have in the past and that’s really what drives value in the Aldar Development business – it’s our core home building business,” Mr Fewer said.

About 10 per cent of the group’s profit came from managing Dh5bn of assets on behalf of the government under a deal announced last year. That is expected to increase following an agreement last month to manage a further Dh30bn of assets, including the Riyadh City and Baniyas North housing projects.

Revenue from the new agreement will accrue from the first quarter of next year, Mr Fewer said, and will lead to the proportion of group profits from the development management arm increasing to 15 per cent of the total, from 8 per cent currently.

The group’s asset management portfolio “held firm” during the quarter, with occupancy at commercial, retail and residential properties standing at 87 per cent. Net operating income for Aldar’s asset management arm was 3.5 per cent lower at Dh383m.

“The impact from Covid measures on hospitality and retail assets has been offset by a stable commercial and residential property portfolio and growth in our adjacent businesses,” Mr Fewer said, referring to the company’s property management arm Provis, facilities manager Khidmah and its Aldar Academies education arm, whose combined gross profit grew 5 per cent on the prior year during the quarter.

Aldar has extended about Dh190m of support measures to customers since the onset of Covid-19, mainly to customers in its retail and education arms.

“We’re almost fully deployed on that Dh190m at this point but with the improved footfall in our malls, we’re really starting to see some positive trading taking place,” Mr Fewer said.

When asked if support would be extended, he said the developer would carry out a “needs-based assessment".

Aldar’s third quarter net income was “roughly in line” with expectations, EFG Hermes analysts said in a note on Thursday.

“Contracted sales came in at an impressive Dh1.2bn, up 7.4 per cent year-on-year, and for the first time in recent history surpassing Dubai’s market leader, Emaar Development, during the quarter,” the analysts said.