x Abu Dhabi, UAESunday 21 January 2018

Aldar looks to cut borrowing costs

Year on year net profits at Aldar Properties nearly doubled in the third quarter of 2013 as the company benefited from an improvement in the Abu Dhabi real estate market and its recent merger but revenues slumped.

Abu Dhabi house builder Aldar recorded a 98 per cent rise in net profits for the third quarter, however revenues fell. Ravindranath.K / The National
Abu Dhabi house builder Aldar recorded a 98 per cent rise in net profits for the third quarter, however revenues fell. Ravindranath.K / The National

Aldar expects to slash its borrowing costs as it prepares to refinance Dh11.3 billion coming due over the next year and return to the development market.

The capital’s largest listed housebuilder said yesterday that it is in talks with banks to bring down its cost of borrowing, which is as high as 10.75 per cent on bonds maturing next May.

That could shave more than US$67 million off annual repayments on its $1.25bn bond alone if it reduces by half. But it is expected to fall even more.

Aldar has already agreed two loans worth a total of Dh4bn to refinance existing debt with an average margin of 1.3 per cent above the base rate.

In a telephone interview with The National, the chief financial officer Greg Fewer added that the company, which sold off key assets to the Abu Dhabi Government during the global financial crisis, was now hopeful of securing better deals on all of its due debt.

Last month the credit rating agencies Moody’s and Standard & Poor’s both upgraded Aldar’s main credit rating.

“We have already secured unprecedented upgrades from the ratings agencies and we are now busy establishing new credentials in keeping with strong credit,” Mr Fewer said. “As we share our business plan with the banks and with a little bit of elbow grease we are pushing these rates lower and lower.”

Mr Fewer said that Aldar currently has a team of 25 professionals on its property development team tasked with finding new opportunities and that the developer would return to development “imminently”.

“We are definitely going to start building again. The team is out there looking at retail, commercial and residential opportunities,” he said.

“However, you won’t see us doing what we’ve done in the past and building one size fits all schemes of say 5,000 units like Al Raha Beach and the City of Lights. The new developments that are coming up will be very focused on latent demand and will be much smaller – perhaps 300 to 700 units.”

In its third quarter financial results published yesterday – its first full set of financial results since its merger with Abu Dhabi rival Sorouh in June – Aldar reported that year-on-year net profits nearly doubled, rising 98 per cent to Dh407.5m.

Aldar said improved profitability came from finding synergies as a result of the merger as well as an improvement in recurring revenue streams from the company’s leasing portfolio of hotels, shops, flats and schools.

However, the profit increase came on the back of a 37 per cent slide in revenues from Dh1.6bn last year to Dh1.2bn this year as the number of handovers of completed properties continued to slow and sales to the Government dried up.

Aldar said that revenues during the quarter came from the sale of a plot of land on Yas Island, the ongoing handover of serviced land at Al Raha Beach East, the handover of flats at its Tala Tower scheme and fees from development and construction revenues. It said that the fall in profits could be accounted for by the fact that last year’s numbers were boosted by the handover of “significant” numbers of flats and land plots at its Al Raha Beach scheme.

Earlier this week the property company Jones Lang LaSalle reported that after dropping during the global financial crisis, house prices in the investment areas of Abu Dhabi rose 5 per cent over the three months to the end of September 2013 after having risen 5 per cent the previous quarter and 8 per cent at the start of the year.

“These are very positive results for Aldar,” said Nabil Farhat, a partner at Abu Dhabi-based Al Fajer Securities. “Now that profitability has improved we expect to see revenues starting to increase in future as the company delivers 7,000 apartments over the next 12 months and as it returns to development. For property companies, revenue streams are always lumpy but we expect to see this smooth out as Aldar diversifies its revenues.”