Transcription for Aldar PROPERTIES. May 15 th 2018

Transcription

1 Transcription for Aldar PROPERTIES May 15 th 2018

2 Corporate Participants Aldar Properties CFO Aldar Properties CEO Conference Call Participants Aje Rora. Alex King Allan Gaidunko Alok Bid Alok Nawani Angad Dugal Ayoub Ansari Cyril Lincoln Daniel Bekrar. Eithar Alrushaid Elena Ponseca Fahd Iqbal Fannil Jain. Frances Ames Ibrahim Gazi Jagadishwar Pasunoori Jenny Luz Pacheco John David John David John Peter Karim Sherif Kate Carpenter Mansoor Ali Mark Lee Mark Lee Mel Roy Metehan Mete Michael Berk. Mr. Ramin. Mrs. Daeegan. Muneeba Kayani Muneeza Hasan Nitin Mehta Peter Smith Rahul Shah Morgan Stanley Mubadala LHV Asset Managemtn HSBC Ghobash trading & investment The national investor SICO Bahrain ADCB FAB NBK capital Al Ramz capital Credit Suisse JP Morgan Ajeej capital DICO Invest Franklin Templeton S&P Global Bloomberg Financial Bloomberg Financial Thomson Financial EFG Hermes Morgan Stanley Mubadala Factset STAR GISL Waha capital m&g investment ADCB Bank Muscat Morgan Stanley JP Morgan Waha Capital Bloomberg Financial Deutsche Bank

3 Rakesh Agarwal Rakesh Tripathi Rami Abi-Samra Rami Khan Ryad Fadel Sapna Jagtiani Sara Boutros Steve Bramley Sumukhi Vaish Taher Safieddine Tamara Tannir Tareq Hamam. Vijay Harpalani Vijay Lohia Vikas Maheshwari Wasim Juma Yugesh Sutedja. Zeyad El-hawary Zohaib Pervez ADCB Franklin Templeton Goldman Sachs ADCB Amwal Capital Standard&poor's CI capital HSBC Morgan Stanley Citi Group The National investor Waha Capital Altayer group Value Investment Principals Abu Dhabi Capital Group Capital investment ADCB ADCM AL RAYAN investment Presentation Ladies and gentlemen, welcome to Aldar s First Quarter 2018 Financial Results call. I will now hand over to your host, Mr, CFO. Sir, please go ahead. Welcome to the Q Aldar results call. We re very happy to be joined by, our Chief Executive Officer who will take us through a few comments, then we will go directly to Q&A after a few comments from the Chief Executive. Good morning everyone, I hope you had a chance to look over our presentation, which was circulated this morning and is also on our website. I would like to kick off with a quick overview of the first quarter 2018 highlights and our most recent announcements and then open the floor to any questions that you may have. Net profit was up 4% to AED 668 million, supported by infrastructure handovers during the quarter. As we have guided for the last 12 months, we are now entering the final stages of infrastructure handovers to the

4 Government of Abu Dhabi, with only approximately AED 370 million of other income left to be recognised over the coming few periods. Revenue for the quarter was AED 1.5 billion versus AED 1.6 billion in the comparative period. This predominantly reflected lower construction contract revenue from Pivot, our construction company, and there was also significant land sale in Q However, this was partly offset by strong underlying core business performance. Gross profit was AED 715 million in Q1 versus AED 753 million in the first quarter of This principally represented a closing development management fee on a JV project in the first quarter of Our balance sheet position as at the end of the first quarter remains strong with gross cash and debt of AED 4.9 billion and AED 5.6 billion respectively. Post the funding of the acquisition, we will continue to operate well within the debt policy and liquidity remains very strong, following a new AED 5 billion committed undrawn facility arranged in May Turning to our development highlights, the development sales during the quarter were AED 681 million, driven by strong sales at West Yas, Water s Edge, our new launch Reflection, which is another midmarket product that we brought on Reem Island. At CityScape in April, post quarter close, we launched the second development of the year, Alghadeer. We have seen very good demand for this new launch, which addresses an important segment of the market. As we clearly signalled to the market at yearend results, from the fourth quarter of 2017 we are moving into handover mode. This kicked off following the completion of Hadeel and Ansam, which both commenced handover at the end of last year and now are complete. We have just started handovers at Nareel Island and Al Merief developments. These two projects will be followed by West Yas and Meera in Q2 and Q4 of this year. As our dividend policy clearly states, we pay-out development dividends as and when we complete a handover project. This year will see a proportionally higher value of handovers than last year, which should support growth for the development dividend component. With the recent projects under development that form part of the recent asset acquisition and the Emaar JV project, this will support material growth of our development business going forward. On the asset management front, business continues to drive performance and value. In Q1, we saw resilient net operating income performance of AED 396 million versus AED 402 million in the comparative quarter. As the new asset additions, International Tower and Repton School offset some capacity in the existing business. That said, we re managing to maintain margins across the asset management portfolio at 55%.

5 One asset I would like to specifically highlight is Yas Mall, which saw temporary decline in occupancy following the renewals process, which led to some units being vacant, resulting in void space and post the first three-year renewal cycle, that saw a rebasing of rent of those renewed tenants. While this resulted in an NOI decline year-on-year, what has been encouraging is that approximately 50% of the void space is already under fit-out or advanced discussions and will support a pickup in NOI as these stores open up in the new future. Last week, we announced one of the largest real estate acquisitions in the UAE, with the acquisition of a number of assets from TDIC. We are extremely excited about what this deal brings to Aldar, providing a platform for growth across both asset management and development management businesses. The AED 1.6 billion operating assets acquired will initially provide incremental net operating income growth of AED 120 million, applying an initial yield on cost of 7.5%. However, we expect to see yield upside as we bring these assets into our efficient platform and unlock future synergies. This acquisition completes our AED 5 billion investment plan, which includes all completed or acquired assets now producing income, a number of projects either under development today, such as the expansion of Al Jimi Mall set for Q4 of this year, as well as the Bridges and Water s Edge both set for completion in 2020, and several further projects that remain at the design stage. The projects under development are currently under construction and set for completion later this year and into next. The acquisition of these unique Saadiyat projects will expand our development pipeline to well over 8,000 units. As at the end of the first quarter, our revenue backlog stood at AED 3.8 billion. Lastly, the acquisition of prime Saadiyat land plots that are complementary to our existing land back will further cement our position as Abu Dhabi s leading real estate champions. Of the 1.1 million square metres of GFA acquired, approximately 50% is destined from the previously announced AED 8 billion Saadiyat Grove joint venture with Emaar. The remaining land plots acquired will significantly benefit from this investment with several further big announcements expected as Saadiyat Island continues to develop under Aldar stewardship. Overall, Q1 has been another solid quarter for Aldar, our strong underlying core business of property development and asset management business demonstrated growth and resilience despite wider challenges that we see in the market. The recent Emaar JV and asset acquisition announcement from TDIC demonstrates that we remain focused on growth and these unique opportunities will support growth of both the asset management and development business over the next few years. The move to a new

6 corporate structure, which I haven t specifically touched on today, is well underway, and this will allow the business to operate more independently and drive greater operational and capital efficiency. The recent AED 3.7 billion acquisition is very much a capital allocation statement to reinvest back into the business and we believe there is significant value within this deal that will support long-term shareholder returns. On that note, I would like to open up the door for any Q&A. Question and Answer Session [ instructions] We have a question from Taher Safieddine from Citigroup. Go ahead. Taher Safieddine Two questions from my side. The first question, if I am looking at the development sales for the quarter, more than 50% are West Yas, so I am just assuming a few Aldar residential off-plan sales have been momentum has been quite weak in Q1. Can you just give us some colour on that, given that West Yas is more of a management fee based project? How do you see this Q1 momentum moving for the full year guidance, which if I am not mistaken, is something around 3 billion in terms of off-plan sales guidance? This is my first question. My second question is on the new TDIC acquisition. Talal, you mentioned 7.5% yield on acquisition cost and room for improvement. Can you just shed some colour in terms of when do you expect this improvement to take place, given that these assets, as we understand are quite mature and they have been operating for some time. Any guidance on that would be helpful. Thank you. In Q1, yes, the majority of the sales were at West Yas, and also Reflection drove a lot of those sales as well. Again, what we see, is the momentum in the market that is the most important thing to note, Q2 was different because we had a massive new launch, which was Alghadeer. It depends on quarter-on-quarter what new product we bring to the market. Obviously, we re at the tail end of a thousand-villa development at West Yas, and is

7 now approaching completion of the first few clusters. We have definitely seen a momentum uptick. Every project operates on a slightly different curve. We still think that the overall sales number that we achieved in Q1 and what we have done quarter to date in the second quarter puts us in a good position to maintain our overall sales guidance of AED 3.7 billion for the year. It requires a lot of hard work, but that is what the team has set out to do. Taher Safieddine Sorry to interrupt, the 3.7 is purely Aldar developments, excluding West Yas? No, 3.7 is the full sales guidance, that includes West Yas, includes the Aldar developments, it includes land plot sales. Our sales guidance that we always provide includes all of those amounts. Taher Safieddine Can we get colour excluding West Yas, given that this project is more or less coming to an end, so ideally you wouldn t expect maybe more sales on that? No, we still have a couple hundred units left in West Yas that are yet to be complete, so West Yas is approximately around 80% complete out of a thousand villas and they are high-ticket items as well. You are talking about an average of just under AED 5 million per ticket. With a company the size of Aldar, you're juggling between all of the properties that you have there in the market, including your completed ones, land plots at Nareel, development land plots and the new launches and phases that we do across the portfolio. You see different pockets of demand and you need to be able to respond to those pockets very, very quickly. In the investor pack, we provide some breakdown and we are happy to discuss with you further where we see future demand, but we are focusing a lot on the mid income segment, and that is what we have continued to launch over the last few quarters. On TDIC, yes, these assets are complete. Definition of maturity is a relatively subjective word and we see opportunity to improve, so we have acquired these at 7.5%. We would hope to see anywhere between basis points at least improvement on that in the next 6-18 months. We think the asset management capability that Aldar brings, the efficiency of our platform -

8 whether from a revenue generation perspective or from a cost base perspective in terms of the wider portfolio that we manage - we will continue to see value in that. That is why we re very, very excited about that, and it spreads out just the overall Aldar story in terms of assets that we control in various pockets out there, especially in a key destination such as Saadiyat that is still benefitting from massive Government spending. We saw the impact of the Louvre Abu Dhabi brought to Abu Dhabi late last year, how that put Abu Dhabi on the map. The expectation is that the Sheikh Zayed Museum is in imminent stages of construction award and then that will be followed by the Guggenheim Abu Dhabi, but we have seen government reaffirm its commitment to develop those three museums which will be adding a lot of value to that destination, which will impact land value, which will impact demand for your school business, which will impact demand for the district cooling assets that we purchased and demand for residential product on that island, that is also very strategically located to Abu Dhabi. We re very optimistic about what that brings. Taher Safieddine Just one final follow-up question, speaking of the asset management business, clearly, now the 5 billion investment plan has been implemented. There is a clear dividend policy, there is a clear debt policy for this segment. Is it safe to assume that you are at maybe the final stages before spinning off this asset, taking it into an IPO, some value creation to shareholders at this stage? Can you give us some colour? It depends, again, and we discussed some of this at our investor day when some of you, I hope most of you were there, again, it depends on value creation. If value creation is just extracting the proceeds of an IPO and giving them back, that is one thing, or if it is reflecting the true value of some of these things, which we believe today, not every part of our business is reflecting its true value, and that sum of the parts is not reflecting in the overall valuation. Again, we look at what is out there today in the market with the recent announcements and stuff from some of our other peers and we look at how the sum of the parts works over there, and how it worked in the good days and how it works when the markets are slightly softer, like how they are today. Based on that, we will decide at the right time what we do. Today, we re getting ready. By changing our capital structure both from an internal

9 organisation perspective, but also from a capital perspective, is unlocking capital for us and it is making us one step ready to do any kind of corporate activity, whether it is an IPO, whether it is M&A, whether it is kind of value thing. We re open to all ideas and what we do at the right time to drive shareholder value. Greg, anything you want to add. I wouldn t add anything to that, other than that the only thing governing this decision for us is maximising value for our shareholders. Expect us to be looking at IPOs when the market [popped] and you want to buy low, sell high. As Talal said, in the meantime, it is preparing how we present our assets to the market to take advantage of any value adding reorganisation as it presents itself, but the governing principle is value creation, not other factors. Our next question is from Vijay Harpalani from Altayer Group. Please go ahead. Vijay Harpalani I have just got one question with reference to the segment revenue breakdown. So we are seeing adjacent businesses, if you could highlight the key drivers of lower revenue in these businesses please. Thank you. On the adjacent business side, as Talal had alluded to, the primary revenue decline was coming from our construction subsidiary, Pivot. The other segments in that group are performing relatively well, between the property management business and in particular our academies business, which is our schools business, which is showing growth. Just to be clear as well on that business, revenue is one thing, what you need to understand is that the construction industry is facing huge amounts of challenges and is going through massive amounts of competition. Currently, what we see in the market even with our recent awards, and we just had a recent award in Q1 of AED 1.3 billion, we are really seeing very, very fierce competition when it comes to contractors. There is work out there but that

10 is at extremely low margins, and as we know, the construction business is quite a risky business. We need to choose whether from a strategic perspective, where the majority owner in this entity, how aggressive we want to be in what is an extremely competitive market and what makes sense for our shareholders in terms of winning that business, versus the associated risks that we re taking based on the prices that we are seeing, which are extremely competitive. Compared to the other businesses like our schools and other things that are actually growing quite healthily in terms of our number of students and also, obviously, last year we took over the Adnoc schools, that is also a source of growth within our school business. Our next question is from Yugesh Sutedja from ADCB. Please go ahead. Yugesh Sutedja My first question is on Yas Mall occupancy. You mentioned that you are looking to fill the vacant space, but can we get some timeline on when this would be fulfilled and by what time we expect occupancy to ramp up. Is it one quarter, two quarters or just roughly the idea on that? My second question is on recent acquisition from TDIC. As you mentioned, there is room for yields to move up to about %, but still this would be more or less the value or the yields at which investors would be willing value Aldar s recurring assets. How are we to justify that it will add value to the shareholders, or what are we missing here in terms of rationale to acquire the assets at more or less market prevailing rates. My third question is on raw land bank acquisition from TDIC. The company has added new land to already existing larger land bank which you already have, and considering that this will be more of a high end project, do you believe that it can boost your pre-sales, considering you have focused more on mid-income projects recently and that has fared well in the challenging property market of Abu Dhabi? If yes, what would be your guidance in terms of pre-sales increase or your development pipeline or launch pace increase going forward? I will answer questions number one and three and then Greg will answer the second question. On Yas Mall, just to shed some more light. One, we are in our renewal process, but also as we understand our customers better, we

11 leased this mall six or seven years ago and then opened three and a half years ago and today we have a much better understanding of who our customer is, what segments within that are working and which segments are slightly more challenging. Fashion, globally, is challenging for various reasons, including the rise of ecommerce and other things compared to some of the other segments. We re seeing, again, very, very strong demand in F&B at Yas Mall. We had under 10% of our overall GLA was marked up for F&B, today we see opportunities to take that up to approximately 15-20%. We saw particular segments that were performing well, but they were under-serviced, such as homes and certain segments within kids wear. What we are doing right now in Yas Mall is again over 50% of the space that has come back; we have influenced to try and change to reach the optimal mix considering all the future retail schemes that are coming up in Abu Dhabi and where we want to position ourselves. The good news is that we are seeing increases in footfall period to period; however, again, spending in some of those segments is not as strong as it was in the previous two years. We re hoping there is going to be a ramp up of occupancy over the next two to three quarters. Some of those spaces are large format spaces that need to be also reconfigured. We still think that at 90%, it is quite a healthy level, but we hope to stabilise between the 90 and 95% by the end of the year. I just wanted to explain the science behind what we re doing at Yas Mall, if you're interested. On the third point in terms of land bank, in every destination including Saadiyat as premium and as iconic as the destination is, you need to cater for many different parts of the segment. Yes, there will be parts of Saadiyat that are in the premium segment; however, there will have to also be different products at different affordability levels over there. It is a destination that is in demand. We have had some great success stories with some of the completed developments that are there, that are some of the most highly sought communities, such as Saadiyat beach villas and Saadiyat beach residences that were built and completed before, and we see lots of opportunities with similar products over there. We are updating our development pipeline. We do believe that this is going to support growth in our off-plan sales business. We are re-doing our strategic development pipeline and we will be able to guide on our future growth in this area in the coming period. For the meantime, we are maintaining our sales guidance for the year at 3.7 billion.

12 Then just in terms of the second question which is a question on yield, so we re very happy with the portfolio of assets we re bringing in at 7.5% yield. What you need to do is, you're making an observation about our current NOI dividend by the book values. You really need to decompose the NOIs and the yields into the various asset classes. For example, our retail asset class, your yield in that asset class is in the low-7s, let's say. Hotels, for example, which is relatively depressed right now from an ADR standpoint, those yields are in the 5s, even, when you're looking at acquiring assets in this space. To get a portfolio at 7.5 and I also refer back to even our own office acquisitions that we have made recently, they were underwriting it around that same range, we re very pleased with that, and to be able to fold those into an existing asset management portfolio, where Talal has mentioned before, we see good synergy opportunities to enhance them even further. For example, we are now the owner of basically all three golf courses in Abu Dhabi. We went from one golf course to all three golf courses. We have acquired a portfolio of two hotels, which used to be owned by an owner that had two hotels, and now we have folded those into a portfolio of nine hotels, and we have been very successful in the past at extracting procurement synergies from the management of a portfolio of hotels and those fold in, into these new assets. We re also acquiring district cooling assets, which are highly attractive utility-style recurring revenue assets, with long-term government off-takes attributable to those. We have a very strict underwriting investment policy. We have got strict WACC guidelines, WACC not being the same as yield, and we underwrite each asset class and each asset that we purchase to ensure accretion. Our next question is from Ayoub Ansari from SICO Bahrain. Please go ahead. Ayoub Ansari I have a few questions. First one relates to your investment property portfolio. I understand that there has been some pressure on retail rentals, talking specifically about Yas Mall, could we have a ballpark idea what would be the decline in year-on-year rentals and per square feet. If not, you can't tell me the exact, I want just a directional, is it down 5%, is it down 10%, that is my first part. Secondly, if I exclude the International Tower in 4Q17, what sort of rental decline or NOI decline would we have seen in the office segment? Those two relates to the investment property. My second question relates to your real estate business. It is kind of a broad question, but could you give us an idea of, in your view, right now what is

13 the actual housing unit demand in Abu Dhabi and where does the supply stand and how do you see the supply/demand mismatch? Thank you. The first question on Yas Mall and I think just a simple answer to that question. You would be thinking about pricing declines in the mid to high single digits across the portfolio there. As Talal mentioned, the occupancy down-tick we think is temporary, sort of like an F1 race where we have moved out some tenants, we re quickly refitting out and we re going to move new ones in, and I think importantly what we re seeing and we mentioned this on the last call through this renewal cycle, in what is otherwise a retail market that has some headwinds, the large retail families and the groups that manage these portfolios are continually revalidating Yas Mall as the key destination in Abu Dhabi. When we move people out, we re moving people right back in again. In the next three, four months, we will see this occupancy level uptick, albeit with mid to high single digit revenue declines owing to rent renewals. In terms of the commercial portfolio, we haven t really had that many renewals in terms of that portfolio, so in terms of the accretion that came from International Tower, it is about million of rent that came from that. We also added Repton School, but by and large, the renewals there in the rates are relatively flat. Your final question related to the housing market in terms of supply and demand. I think the predominant thing to think about from supply/demand for Abu Dhabi is first the supply side and it is a very tight market. Two years ago on these calls we were describing Aldar and our launch cycle, we were hoping to be a third or less even of the market. I think what we found in the last 24 months that we are actually the dominant single deliverer of real estate in Abu Dhabi. Overall supply, whilst we have had great success in our off-plan sales, we have seen a very muted supply side coming from other developers, and most notably our largest competitor being TDIC, who we have acquired a lot of land from. I think that s the first major point from it and in terms of there's 240,000 homes, let s say, in the overall market. We looked at 1,500 to that supply every year and as Talal said our guidances remain steady in terms of what we see coming into that. The other comment I'd make on demand is there's two things really helping us. One is a demographic shift, which is this idea of local populations, a very useful local population and number of residents per household trending

14 down, which means more houses required, as young Emiratis in their 20s and 30s move out of their homes into standalone homes, and we've really seen that in terms of how the titles are being printed at West Yas and some of our other new developments. The other point to make is on dilapidation. I think in your overall calculus on new housing formation and what normal trends like population growth or demographic shifts like the one I just described or is the dilapidation and the requirement for new housing coming from dilapidation. A lot of the main stock in Abu Dhabi was built in the late 90s, early 2000s from a lot of B and C grade contractors, and we re seeing when we bring well planned mass communities into the market, the people running with their feet into our developments is quite high, because these existing stocks our stock is far superior to it. Overall, whilst people might talk about demand being a bit muted, I think the supply is very, very tight and we re increasing market share and increasing our dominant position in the market. Our next question comes from Jagadishwar Pasunoori, Franklin Templeton. Please go ahead. Jagadishwar Pasunoori I have two questions. This Al Jimi Mall extension is going to be commissioned in Q4 18. I was wondering I mean, actually you have started leasing that extension and how much have you leased so far? That s one question. Second question is I think your cash went down by almost AED 2 billion. Can you give me what was the major reason behind that? I think you paid dividends and then other reasons. Thank you. So on Al Jimi Mall, the works are more than 90% complete and the leasing is actually quite strong with almost 85% leased. All the main anchors and the big boxes so there's a retail park behind Al Jimi Mall with some big furniture boxes and so on, those have all been leased. I was there earlier today and the majority of those anchors, including the cinema and the big boxes, and some of the line stores, not all of them, have started setting up, so we re hopefully on track for an opening in Q4 of this year with hopefully the majority of those stores trading. Greg will take your second.

15 On the cash, you're correct, we paid the dividends in the first quarter, historically just for timing reasons that cash is always left in the second quarter; I think this is the first time we've actually made the dividend payment inside the first quarter, so that would explain the reductions. You also would have noticed our debt went down from the end of the year to the end of the quarter. Again, we re just managing cash. We run with very strong cash balances and we had an opportunity to prepay one of our loans early, which we took advantage of, and there was also some of our third party managed funds where we sent profits to the owners of those assets, so you would have seen the cash reduce as a result of that. Also, you would have seen a reduction in our payables, which is a corresponding reduction for that third party managed money when it was forwarded onto them, so those were the three main movements this quarter. Jagadishwar Pasunoori My main concern was like whether you paid any advances or anything for the TDIC assets in the 1Q. No. We have a follow up question from Ayoub Ansari, SICO Bahrain. Please go ahead. Ayoub Ansari I just have a follow-up question, Greg, regarding your analysis of the Abu Dhabi market and Oman. I was just wondering, I'm assuming that UAE nationals would be a bit part of this upcoming demand, so in your view, how leveraged is the UAE national? Does he have the capacity to buy villas worth AED 2-5 million? Secondly, as a real estate community, are you in any way advocating some sort of relaxation in mortgage rules with banks? So I ll just take these questions. On West Yas, when we originally started selling at West Yas, it was originally only open to UAE nationals and then we opened it to expats. Until today, maybe 75-80% of those sales are to UAE nationals. The asset ticket price of AED million. Al Merief, which was a land plot of AED 2-3 million, 281 plots, 800 million GDV, that was sold

16 exclusively to UAE nationals. Nareel also today almost AED 1.3 billion worth of sales across 92 plots has all been to UAE nationals, as well as on various projects, they range anywhere between, depending on a project, 30-50% of our sales goes to UAE nationals, so very, very strong demand from UAE nationals and very strong capacity to buy at all levels within that, including the more affordable stuff, so we also saw a lot of newcomers, younger UAE nationals in the early parts of their career who just saved enough to buy properties in projects like The Bridges and West Yas, and we know that information because those are first-time UAE national buyers from us. From a mortgage perspective as well, I mean we re working with a lot of mortgage providers right now to come up with and we think that s a sector of the market that requires a bit of evolution from where it s been over the last few years, which has been relatively stagnant, so there is definitely a lot of opportunity with all of these handovers, so we re very aggressively working with a lot of our partners at the conventional and Islamic banks, and others we also obviously own a stake in one of those mortgage companies as one of our adjacent businesses to really try and beef up that market and maybe work and lobby the Government on easing regulations when it comes to home buyers, especially the non-nationals. We have a follow up question from Muneeba Kayani, Morgan Stanley. Please go ahead. Muneeba Kayani On the TDIC acquisition of assets, for the projects under development, how much of them are sold already? That s my first question. Secondly, given that you're paying for the land, what sort of growth margins can we expect from the development of those land plots? Thirdly, given Q1 sales for the development business, how do you expect to make your full year guidance, given that we re entering the slower summer months? Thank you. So in terms of the TDIC PUP, so the question on margins, percentage sold, so it s about, let s say, 50% sold between the two big ones, Jawaher and Mamsha. In terms of the land and obviously we will update that once we conclude the transaction, which will happen over the summer, and then those projects will feed into our normal guidance tables. In terms of land, so we are acquiring some land. These are premium properties, so typically when you're valuing these kinds of lands, when you pay some cash to them,

17 you're expecting, depending on if it s middle income or more luxurious sort of 25% margin ballpark on those, sometimes higher. In terms of the question on guidance, we had 681 million in sales in the first quarter. We re not changing the guidance at this point. I mean, that doesn t include any of the sales that we've had at Al Ghadeer, so we had an extra launch there. We re concluding West Yas, so always easier and we have a lot of customers who prefer to purchase once developments are finished, so we have those units that are concluding and finishing, and people can move right in, so this also helps in terms of sales. We have a pipeline. We have a robust pipeline. There are some headwinds in the market, but we re seeing demand for Abu Dhabi real estate and for our developments, and we re very excited to be bringing the Saadiyat destination into the land bank, which comes with it a lot of opportunities, a lot of investors who are interested, and we certainly expect more good news to come from the Government in terms of other project announcements that will help those sales. Muneeba Kayani So you expect your launch activity to pick up in the second half of the year? Well, we have a programme of launches, yes, we do. We have another question from Rahul Shah, Deutsche Bank. Please go ahead. Rahul Shah A couple of questions if I may. First of all, just on the NOI growth for this year, do you still reiterate that the growth will be slight digit? Yes, so the same assets, yes, we re guiding the same, but of course we've just added to it 120 million of annualised NOI from TDIC, and we structured this, so we should be recording these revenues immediately upon completion, which we expect to happen at the end of Q2. Rahul Shah

18 The follow-up question is on TDIC, and TDIC being owned by the Government, I guess a lot of investors are just questioning the yield level of these two acquisitions and if I understand where the 120 million NOI has been done at 7.5% cap rate, which is slightly below the market, which is roughly 8%, during the investor day, and correct me if I'm wrong, but what I understood is that Aldar being the largest asset owner in Abu Dhabi got some pricing power able to buy assets at lower prices, I would say, or able to increase occupancy efficiency of the assets etc, which could lead to roughly 8-10% yield. Did I misunderstand what you said or this is what you expect going forward, and during this call I understood that you just expect 75 basis points above what you did just a couple of weeks back, just if you can help me to understand? Yes, I mean, look, in terms of markets, we could sit back and wait for 8% yields to come and not deploy any capital and, again, I just go back to our commentary on the previous answer, I think you need to take our portfolio and split it up and look at where assets actually transact. I mean, our retail portfolio is low 7s, our hotel portfolio mostly because of depressed NOIs is actually like a 5% yield right now and you don t have any sellers in Abu Dhabi, not any sellers. I mean, we waited patiently for 24 months to buy two office buildings at mid-7s. We re very happy with those and so we re very happy to be putting on a portfolio of hotel assets, leisure assets in the form of these golf courses, residential assets, and district cooling assets at a blended yield of 7.5% with operational synergies still to come for investors. Again, the district cooling assets are extremely attractive, low yields on this in terms of long-term Government offtakes with no market risk attached to them. As a portfolio, it absolutely sailed through all our individual asset class underwritings and with upside to come. Rahul Shah Yes, so my question is more on the upside, so what you are telling me is that the upside will come from the fact that you are the largest asset owner and you are able to bring more efficiency on the assets, but what I understood from I'm sure I'm not the only one, but tell me if it is the case, but during the investor day that 8-10% cap rate and today this transaction with the Government is below this level. So I'm not the only one anyway, so investors are just questioning if Aldar is not buying assets from the Government at no upside, so this way perhaps you can help us to understand what was this deal and what will be the next deal on the profitability for Aldar shareholders.

19 Yes and I think I'd stand by the comments that I made. We re very happy at 7.5% and we re happy with the upside that will take us above 8, and these are strong yields. This is a AA economy, dollar-linked, 8% real estate; we re very happy with those and I'd fill our portfolio all day long with that. These are accretive Rahul Shah Okay, so the upside for you will come from the operational leverage and efficiency from Aldar more. Is that what you mean? And also managing these assets better. Rahul Shah Yes, this is what I'm saying [All talking] Yes, both on the revenue and on the costs, we look at these opportunities today, we re buying them at a certain yield and we think it s quite decent given where the market is today, and we see opportunities to grow these assets, both by introducing our new management structure and efficiency, and also when the markets pick up as well, as we think we re buying them at relatively attractive prices given what these assets are and we re happy to provide more details. We have a follow up question from Yugesh Sutedja, ADCB. Please go ahead. Yugesh Sutedja Actually on the construction projects acquired from TDIC, I just want to understand for sold portion or that portion which is already constructed, so this acquisition is based on add-on basis, that is Aldar will be liable for completing the construction and whatever remaining sales is there, Aldar will get the cash or on existing part, which is already sold, you will have rights and liabilities associated with that?

20 Yes, basically, the way it s structured is we are stepping into the role of developer, so all the cash outflows that have been paid to date are paid and we just pick up the ball from where the projects are and run forward, including collecting all the final payments on handover, so that s the obligation to oversee the contractor and to see them through the completion and the opportunities to conclude sales and collect final payments from all existing customers. Yugesh Sutedja Okay and also on the 50% sold part, can you give us some idea how much is already collected or can we assume typically that as projects are towards end of completion and assuming similar payment plans you have or there are some different payment structures for that part? So we re just guiding for now. I mean, I think if anyone could drive to the site and see that Jawaher is near completion and Mamsha is about halfway done, but we will update once we conclude the transaction, those two projects will slide into our development summary slide where the full sales and progress completion will be outlined, but this for now gives you a good sphere on ballpark on what to expect. We have a follow up question from Jagadishwar Pasunoori, Franklin Templeton. Please go ahead. Jagadishwar Pasunoori I have a couple of questions on this handover of development properties. You had payment plans like , 60-40, so your buyers had to pay 40% or 50% at the end of the handing over of these development projects, so I was wondering whatever you handed over in the last quarter or two last quarters, were the payment plans apply to this and they ve paid the rest of this 40% or 50%? Did you have to extend it to a payment over the next two years or something? Can you please explain? No, I think they were as per the payment plans that were contracted and we don t do the handover, except when the payment is made, unless there

21 was you know, again, so we haven't done any post-handover schemes for Ansam and Hadeel, again those handovers are now done, those full amounts have now been collected in full as per the payment plan and people have moved in or leased their units, so it s in line with whatever we've advised in the past, and we will see those in our cash balances as such. And we ll update the market next quarter on the next series to come, which is Nareel and Merief, and then later in the quarter, Meera. Our next question comes from Zohaib Pervez, Al Rayan Investments. Please go ahead. Zohaib Pervez Firstly, I want to thank you for the transparency on the IB segment; you have given the breakdown I guess for the first time, so thank you for that. Secondly, I just wanted to know that the development sales segment reported a gross margin of about 52%, which is relatively high compared to the last three quarters. Is it just from land sales? Yes, so as we conclude projects and we re finishing Al Merief from a construction standpoint this quarter and getting ready for handover, what you'd typically find is that at the end if you have some contingency that you haven't spent or other things, you'll release that and so that s what's taken place this quarter that s helped margins. Zohaib Pervez For Merief, which is not a land project, right? Correct it is a land project. Zohaib Pervez Also, in West Yas, and correct me if I'm wrong, but on this project you only earn fees. You don t include your revenues and the gross margins, correct?

22 We do record revenues, like in the sense that so there are fee revenues that come through; we make 5% on construction and we make another so all in we make around 7% profit on cost on this one. Zohaib Pervez And on these units that were already you know, the projects that were handed over, numbers of units were not sold, so that is in your inventory? Correct. Zohaib Pervez So can we have an idea of how much inventory you have compared for the units and the land? Sorry, compared to what do you mean compared to? Zohaib Pervez For example, Ansam, it was 94% sold when it was handed over, so about 6%, which would be a few units, so those units probably go into your inventory, which are available for sale, right? Correct, so on Ansam there is about 70 million of inventories, let s say about 100 million between Ansam and Hadeel. Zohaib Pervez Thank you and if we could have a further breakdown on the adjacent part also, that would be really great. Thank you, noted.

23 Our next question comes from Tareq Hamam, Waha Capital. Please go ahead. Tareq Hamam Congratulations on the results. I was just wondering if you could briefly comment on the remaining few segments, the commercial and hospitality space. They seem like they ve been going through a bit of a rough patch, so if you could sort of give us some colour on the like-for-like and the commercial space, without the acquisition, and your thoughts on hospitality, that would be helpful. Thank you. Sure, so starting with hospitality, we continue to outperform the rest of the market in terms of occupancy there, so we re running at 85% occupancy, which we re very happy with from a market standpoint, and it s been a recurring theme going back I don t know how many quarters about the Abu Dhabi market as a whole and in terms of its soft ADR environment, so that remains, but I think our performance within this market I think is actually quite strong. It s one of our good points. In terms of commercial, we've had relatively stable occupancy there as well, running at 91% and a lot of the customers there are on long-term commercial tenants on longer-term leases, so slightly less churn than elsewhere in the portfolio or that we indeed have seen recently in the retail portfolio with the first cycle of Yas Mall renewals. International Tower, just to add one more point to that, I mean deliberately we acquired that at about 68% occupied and it s always been part of our strategy to once it s in the portfolio work it into our leasing network and start to fill it up, and we hope to be bringing some positive news to people in the coming quarters on our progress there. [No further questions] Thank you very much everybody for dialling in and we look forward to the Q2 call later in the summer. Thanks.