Aldar Properties profits surged 42 per cent in the third quarter, helped by the soon-to-be-opened Yas Mall.
Net profit for the three months to the end of September rose to Dh579.6 million from Dh407.5 million a year earlier as the Abu Dhabi developer benefited from a growing rental portfolio and a valuation gain on the long-awaited 235,000 square metre shopping centre due to open next week.
Aldar said the mall would generate more than Dh4m of net operating income a year in base rent for the company, which would equate to basic rents of about Dh1,750 per sq metre.
It added that the mall could vastly improve on that and compete with trophy Dubai malls such as Mall of the Emirates and the Dubai Mall, which are estimated to achieve turnover rents of about Dh6,000 per sq metre if the mall traded well.
“We guarantee we will make these base rents but there is an upside too,” said Greg Fewer, Aldar’s chief financial officer. The ultimate rent will really be a function of how successful the retailers are.”
Aldar’s profit came on the back of a 17 per cent rise to Dh1.37 billion in revenue for the period as the company sold its B2 Tower on Marina Square to the Dubai-based MAG Group and Fortune 5 Investments. It also handed over flats on its recently completed The Gate Towers.
Aldar said that “almost all” of the Dh349.4m gain on its investment properties in the quarter came from revaluing what will soon be the UAE’s second largest shopping mall as a recurring revenue asset rather than as a property development.
The company said that it had already boosted its income from its recurring revenues portfolio of hotels and leased flats, shops and offices by 12 per cent to stand at Dh526m for the quarter as the company completed leasing of its rental flats at Gate Towers on Reem Island and at its Al Rayanna scheme on the Abu Dhabi mainland.
The company reported that the portfolio was generating recurring net operating profit of about Dh1bn a year, which it expected to increase to between Dh1.5bn and Dh1.6bn once the mall opens.
Aldar said that it had handed over 360 flats during the quarter – 202 of which were in the company’s B2 Tower, which it completed during the global financial crisis but remained empty until it was sold off in bulk in September.
The company said that it was currently engaged in 23 development projects, some of which would be launched during the coming quarters.
“You may see recurring revenues exceed development revenue for the short term and then as we deliver new units you will see that reverse, it is cyclical,” Mr Fewer said.
“Aldar is pursuing the right strategy at the moment for the Abu Dhabi market,” said Sebastien Henin, the head of asset management at the Abu Dhabi-based The Global Investor. “If you think back five years or so, this is exactly a copy-paste of the strategy Emaar used when the Dubai market was suffering from the global financial crisis. The plan to boost recurring revenues and only develop small real estate projects is sensible in the Abu Dhabi market which can suffer from lots of bad years in a row.”
Separately Aldar also announced that a week after it had started leasing out the 474 luxury apartments at the World Trade Centre, it had secured tenants for more than half of them. The project was originally developed by Aldar but was sold to the government in 2011 during the global financial crisis with Aldar retained as development manager on the scheme.