Aldar develops the heart of Abu Dhabi’s vision
The sleek, modern luxury of the Yas Acres’ sales centre on Yas Island is a throwback to the glory days of real estate eight or nine years ago. Except there is a very 2016 feel to it all.
The 1,315-villa project’s every detail is shown to prospective buyers on big, interactive screens embedded in the tables around the lounge area. Seen through the window, retro-looking bicycles are a languid feature of the back garden. The parking lot offers a view of the Formula 1 track opposite, which was also built by the Abu Dhabi developer Aldar. There is an unmistakable air of an organisation whose people are confident of where they are headed.
The chief executive Mohammed Al Mubarak articulates this mood with passion and intensity.
“Today we are celebrating a big success for all the teams in Aldar, the sales team [in particular]. I put a lot of pressure on these guys to really sell, to go out there in a tough market, and they have accomplished the mission. There are a lot more missions to come,” he says of the Yas Acres project, without giving any sales figures since it was launched last month.
Mr Al Mubarak also talks with humility about the journey that he and the property company has been on in the years since the boom ended.
“I’ve been part of this Aldar family from day one, so I have seen the good, the bad and the ugly. It has helped me grow as an individual, mature as an individual, it has helped me take all the tools that I need to run an organisation like Aldar,” he says.
He took on the role of chief executive in the summer of 2014, after the merger between Aldar and fellow Abu Dhabi developer Sorouh, a deal that helped to stabilise the local property market at a critical time for the emirate’s entire economy.
In the past three years, the company has undergone a transformation that has doubled revenues and tripled net operating income, going “from a pure property play, Aldar is expected to generate the bulk of its revenue and profitability from a diversified and growing recurring portfolio”, according to Citibank research.
However, it is the return to its roots as a developer that offers the most satisfaction for Mr Al Mubarak. Off-plan launches in the past two years, apart from the Dh6 billion Yas Acres, include Yas Island’s West Yas, Mayan and Ansam schemes and the affordable housing project Meera on Reem Island’s Shams Abu Dhabi as well as others at Al Raha Beach.
“I am a developer here. My DNA is a developer,” says Mr Al Mubarak, waxing lyrical about the company’s broad and rich land bank, which has a conservative book value of about Dh4bn, analysts say.
“Starting with that canvas puts Aldar in a very strong situation. Obviously we do not want to do everything at once. You start losing sense of quality, you start losing sense of time. You don’t really have a finished product like you want it to be. This is where Aldar has really strategised itself over the last couple of years to focus on the developments it really wants to complete as a whole.”
Yet, according to analysts, Aldar’s share price – it is listed on the Abu Dhabi Securities Exchange – attributes no value to its land bank despite Dh3.2bn in off-plan sales between 2014 and 2015 and a steady pipeline of new launches. This is because of an assumption that the local property market could always crash again.
“I set very clear goals to my board [when I became chief executive] on what I am going to achieve, whether it is increasing my recurring revenue, decreasing my debt, making sure I have strong development pipeline, to manage my land bank,” says Mr Al Mubarak, highlighting the company’s enviable track record of delivery.
“Our board really understands that if you really want to do things right you do right everywhere, it’s not just the home, it’s the entire masterplan. Do it right there [and] the product will sell itself.”
To mitigate risk as much as possible, Aldar sets itself high sales targets on projects before it commits any resources to construction.
“I’ll give you an example. With Yas Mall, before we had a crane on site, I created a very clear mechanism from my team that the mall had to be 50 per cent leased. That was in a very tough market if you remember. It was just coming out of the last economic crisis, people didn’t know retail in Abu Dhabi, the Yas [Island] story wasn’t as clear as it is today. In a period of time we got to that 50 per cent leased, the board were 100 per cent behind me, we started construction, and today [after the] first year of mall operations, again when everybody thought it wasn’t going to happen, we have had 20 million visitors.”
Yet the company’s ambitions to return to development did not escape concerns about whether there would be sufficient demand for its projects. “Investors are getting it a lot more now. It goes back again to track record. Today we have Yas Acres; if Yas Acres wasn’t launched the way we said we were going to launch it, if we didn’t launch it with the golf course, with the clubhouse, with the schools, public amenities. If we just launched it as nice houses overlooking the golf course I don’t believe we would have sold the amount of villas we have sold in such a short period of time,” says Mr Al Mubarak.
This is where Aldar begins to show the future course that property developers will increasingly chart as they hunt out higher and more secure returns. The mission, to use Mr Al Mubarak’s phrase, does not begin or end with the home, office or shop. The focus is on the buyer; the individual person; their hopes and dreams.
“A lot of buyers on Yas Island are first-time buyers and end users, which is something very special for us,” he says. “There are [also] investors, long-term investors, not looking to flip, but to complete, for yield because they believe in the dream of Yas Island.”
Because of this, Aldar has given more focus than perhaps expected on elements beyond the home that go into living that dream but do not directly add to the bottom line.
“We have done things differently at West Yas. We have built the amenities before building the homes. From day one that you move into your home you will have schools, retail, a clinic, public parks, a mosque. We have launched two phases of that, we are going to launch phase three and four in the next couple of months,” he says.
Mr Al Mubarak wants Aldar to be an integral part of the life journey; from a first home to an ultimate dream home. That includes educating a child from Foundation Stage 1 to graduation at their Aldar Academies schools, which feature in many of its projects. It hopes to be with you when you buy your child’s first toy at its malls.
“We take you through that voyage and it is exciting for us to be part of that voyage. It is important for us to take you through that voyage,” he says.
This long-term, sustainable approach extends to its duty of care to the wider ecosystem of which it is part. It will soon announce a new lifestyle project for Reem Island, which Aldar hopes will benefit everyone in Abu Dhabi, raising property values in the area and helping its rival developers, too.
“We will be announcing a major attraction on that island that’s going to benefit all the residents of that island and the city of Abu Dhabi,” says Mr Al Mubarak, declining to give more details.
“That is a part of our thank-you to the city, the Government of Abu Dhabi and the residents of Reem Island.”
This approach has also motivated the company’s desire to help the Government to improve regulation of Abu Dhabi’s property sector. New legislation that took effect at the start of this year was drafted with input from the property industry.
The law includes the establishment of a real estate register, provides for owner associations and requires developers to set up escrow accounts for off-plan projects. Mr Al Mubarak gives the Government a lot of credit for encouraging this dialogue which, after a longer than expected process, ultimately has provided much greater protection for investors and benefited Aldar.
“It has given a certain trust in the Abu Dhabi real estate market and a certain trust in Aldar,” he says.
The maturing of both the market and Aldar has been critical in building up this trust, he says.
“The last economic crisis really helped everyone mature. Now is the right time to invest.”
The current economic slowdown in the region and the softening of the property market in the UAE, triggered by the lull in oil prices, does not concern him too much.
“I like to use the word efficiency. I think times like this make you a lot more efficient, make you a lot more focused. I’m sure it is the same with the Government.”
He is grateful for everything that the Government of Abu Dhabi has given the company. Support during the crisis, when billions of dirhams of assets were sold to the Government, including the F1 track, helped to stave off any lasting damage and gave Aldar the chance to turn itself around.
“But I don’t want to rely on the Government. At the end of the day I am a publicly traded company. I have shareholders. I don’t want to go to them and say my biggest revenue comes from managing projects for the Government. They don’t want to see that. They want to see me take the calculated risk and coming back to them with some big returns on their investments,” he says.
That the Government is committed to completing its major infrastructure projects such as the Louvre Abu Dhabi and the airport’s Midfield Terminal expansion will, however, ensure that the flow of lucrative management projects remains steady beyond its visible pipeline of about two years currently.
“We are working closely with Musanada and some of the other government entities at an early stage and we are deciding together; ‘is this a project that is worthwhile?’ ‘Is this a project that has to start in 2018, 2019 or 2020?’ It is a collective understanding and based on these decisions there is going to be projects launched in the near future,” says Mr Al Mubarak.
And what of that future?
“I think Aldar has the building blocks to be a world-class developer, to compete with some of the best, the Westfields of this world, the Relateds of this world,” he says.
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