Hello and welcome everyone to the Aldar Properties Q1 2025 financial results. My name is Becky and I'll be your operator today. During the presentation, you can register a question by pressing star followed by one on your keypad. If you have joined us online, you can submit a text question via the Q&A button on your browser. I will now hand over to your host, Faisal Falaknaz, Group Financial and Sustainability Officer, to begin. Please go ahead.
[Non-English content]. Hi, everybody. Thank you for joining us today to discuss Aldar's performance for the first quarter. We have achieved strong momentum coming into this year as we embark on our new 2030 strategy to drive further transformative growth. We continue to deliver cross-platform growth driven by a number of key factors. One, the successful launch of new projects in the U.A.E., strong sales of existing inventory, ongoing recognition of the development revenue backlog supported by solid progress on key developments, and increased contributions from our recurring income portfolio supported by organic expansion and recent acquisitions. In Q1, group revenue increased 39% year-on-year to AED 7.8 billion, while EBITDA grew 36% to AED 2.5 billion with a run rate in line with our 2025 guidance. Net profit after tax for the quarter increased 22% year-on-year to AED 1.9 billion.
Please note that in 2024, the U.A.E. introduced a 9% general corporate income tax rate, and on the 1st of January , 2025, the U.A.E. adopted a 15% domestic minimum top-up tax. Aldar's effective tax rate for the quarter was 12.6% versus 4.1% in Q1 last year. Aldar Development has continued to experience strong demand for both new and existing developments in the U.A.E., particularly from overseas buyers and resident expats. Meanwhile, our strategic investments in Egypt and the United Kingdom are also performing well with strong sales growth year-on-year. Growth development sales increased 42% year-on-year to AED 8.9 billion, which is on track to meet our full-year guidance of AED 36 billion-AED 39 billion. Meanwhile, our total backlog has grown to AED 55.7 billion, providing strong visibility on revenue over the next two to three years.
Aldar Investment, which has grown to AED 46 billion in assets under management, reported a 10% increase in adjusted EBITDA to AED 764 million. Worth noting that excluding the one-off gains on commercial disposals in Q1 2024 and divestment of residential strata units, adjusted EBITDA rose 20%. Notably, the Masdar assets jointly owned by Aldar as part of the Mubadala partnership are already contributing to the bottom line. We continue to leverage the strengths of both the development and the investment platforms to implement our develop-to-hold strategy. The D-Hold pipeline now stands at AED 13.3 billion, with current projections scheduled to be completed from this year through at the end of 2028. Turning to slide four, for a more detailed look at Aldar Development, the platform continues to deliver robust performance while broadening its product offerings and customer base, supported by an expanded international sales network.
Group sales rose 42% to AED 8.2 billion, maintaining a high and sustainable run rate with growth predominantly driven by sales of existing inventory and new launches in the U.A.E. Revenue increased 46% year-over-year to AED 5.7 billion, with EBITDA up 50% to AED 1.8 billion. We launched two projects in the U.A.E., Manarat Living III on Saadiyat Island and The Wilds in Dubai, which is the first development under our JV with Dubai Holding. Both of these launches performed strongly, and we have continued to see strong interest in recent weeks since quarter end, which speaks to the sustained demand for our inventory and product offering as a whole. We are equally excited about our upcoming Fahid Island, which is due to be launched in phases in the coming months.
As a reminder, the full master plan with a total land bank of 3.4 million square meter comprises over 6,000 residential units spanning apartments, townhouses, and ultra-luxury beach and mangrove villas. Meanwhile, in Egypt, SODIC achieved a 135% year-on-year increase in total sales to AED 228 million, and the company's revenue backlog has now reached AED 6.3 billion. This is supported by strong cross-selling into the U.A.E. market. London Square sales were up 160% to AED 263 million, with the backlog rising to AED 2.6 billion. Furthermore, in Q1, the company acquired one new land plot and launched one new project, Nine Elms ‘Ascenta Collection’ . Turning to slide five, you will see further details on U.A.E. sales specifically.
What I will highlight here is that during the first quarter, we saw further uptick in the trend of rising demand from resident expatriates and overseas buyers, reflecting the appeal of the U.A.E. as a lifestyle and investment destination. In the first quarter, resident expats accounted for 57% of total sales, with overseas buyers representing 30%, collectively totaling 87% of the U.A.E. sales. To an extent, this is a reflection of the product mix as well as the success of our enhanced international sales network. Turning to slide number six, Aldar Investment, which has evolved into a diversified platform of significant scale, achieved broad-based growth in the first quarter. In Q1, revenue increased 15% to AED 1.9 billion and adjusted EBITDA rose 10% to AED 764 million. As I mentioned earlier, excluding one-off gains on disposals in Q1 2024 and divestments of strata units, adjusted EBITDA rose 20% year-on-year.
Our growth this quarter was primarily driven by the strong performance of our investment properties portfolio, a series of strategic acquisitions over the past two years and the addition of Masdar City assets. Consequently, our platform assets under management has increased to AED 46 billion. We are also very encouraged by the growing earnings contribution from Aldar Estates and Aldar Education, which I will talk about a little bit later. On slide seven, you will see further details on each asset class within the investment properties portfolio. The portfolio continues to benefit from near-full occupancy at an average of 96% across all asset classes, which is pushing up rental rates. Adjusted EBITDA for the portfolio increased 13% year-on-year to AED 498 million, supported by the addition of Masdar City assets comprising commercial and residential properties.
These assets contributed revenues totaling AED 69 million, with an adjusted EBITDA contribution of AED 58 million in Q1. Commercial adjusted EBITDA increased by 1% to AED 212 million, influenced by disposals and the related one-off gains in the first quarter of 2024. Excluding these, the commercial portfolio's adjusted EBITDA increased 36%, driven by the strong contributions from Masdar City assets and overperformance from organic portfolio, while demand for Grade A office space continued to fuel rental growth. Portfolio occupancy held strong at 98%, with ADGM towers now 99% occupied and Masdar commercial assets at 100%. In light of the tight supply, we remain focused on execution of the D-Hold pipeline to meet sustained demand. Residential adjusted EBITDA rose by 43% on strong contributions from Masdar City assets, and rental rate improvement amid 98% occupancy across the portfolio.
When adjusted for the divestments of strata units both this quarter and in Q1 2024, the portfolio's adjusted EBITDA rose by 49%. Further, growth is anticipated through the D-Hold pipeline, including the Expo City JV and the recycling of strata sales income into high-yielding income-generating assets. Retail adjusted EBITDA increased 11%. Driven by high leasing rates, total occupancy stands at 90% amid ongoing redevelopment of Al Jimi Mall expected to complete in the second half of the year. Yas Mall continues to lead with 98% occupancy, a 14% growth in tenant sales and a 16% increase in footfall. We continue to make very good progress on the JV with Mubadala to create a AED 9 billion retail platform holding Yas Mall and The Galleria Luxury Collection, with completion expected in the second half of this year. Logistics adjusted EBITDA rose by 12%.
Our portfolio, which is 91% occupied, recently completed an expansion of Abu Dhabi Business Hub last quarter. Excluding that expansion, occupancy stood at 96%. In the near term, additional scale will be driven by the develop-to-hold pipeline and DP World partnership, while long-term growth will be anchored by Al Falah Logistics Hub through the Mubadala JV. You will find an update on Hospitality & Leisure, Aldar Education, and Aldar Estates on Slide number eight. Hospitality & Leisure, while achieving 71% occupancy in Q1, saw a moderate decline in earnings. This reflects the temporary impact of Aldar's AED 1.5 billion transformation program, which involves several assets being partially or fully offline for upgrades and repositioning. Performance remains robust with RevPAR stable and average daily rates up 10% year-on-year. Looking at Aldar Education and Aldar Estates, both platforms have scaled up considerably and are making solid contributions to Aldar's performance.
Aldar Education EBITDA increased 13% driven by strong organic growth with 13% enrollment increase in owned and operated schools with a 3% fee increase across most operated schools. Total enrollment has reached approximately 37,000 students with further scale expected from the opening of both Muna British Academy and Yasmina American School in the 2025-2026 academic year. Meanwhile, Aldar Estates EBITDA increased 27% on a 19% rise in revenue, driven by synergies and organic growth in facilities management and integrated community services portfolios. For Aldar Estates, this is the first quarter with a true like-for-like comparison of performance given the transformational M&A activity that took place at the end of 2023. Moving to Slide number nine and our key balance sheet metrics. Over the past few months, we have taken a counter-cyclical approach to enhancing our funding and liquidity profile.
Our aim, to reinforce Aldar's financial resilience and provide a significant capital cushion in support of our growth strategy. This included execution of four landmark transactions at PJSC and AIP level in the first quarter, totaling AED 16.3 billion. These include, one, a AED 9 billion sustainability-linked revolving credit facility, which is the largest sustainability-linked syndicated deal by a real estate company in the Middle East. Two , a $1 billion hybrid capital issuance, which attracted robust demand from a wide range of regional and international investors. Three, a $500 million private hybrid cut build note issuance with Apollo, which replaces the land JV as part of Apollo's initial 2022 investment in Aldar. Four, a $ 500 million senior green sukuk issuance at AIP level, representing Aldar's third issuance as part of its AED $2 billion Trust Certificate Issuance Programme.
In the process, Moody's reaffirmed Aldar's Baa2 credit rating with a stable outlook, while AIP's Baa1 rating was affirmed also with a stable outlook. We have maintained a conservative leverage and high interest coverage profile while enhancing our liquidity position, which stood at AED 29.5 billion at the end of March, comprising AED 10.2 billion in free and unrestricted cash and AED 19.3 billion in committed undrawn facilities. The average senior debt maturity has been extended to six years with no substantial refinancing required over the next three years. Looking ahead, we continue to maintain a disciplined approach to capital deployment to ensure value and strategic alignment. Turning to sustainability highlights on slide 10 and 11, I would encourage you to view our latest sustainability report for 2024, which was published in March.
The report includes an updated sustainability framework as well as detailed commitments and targets, including energy and water usage and construction waste targets. We also outline how Aldar continues to build greener, more sustainable places, meeting global standards such as LEED, Estidama, and Fitwel our new developments. Our strong progress and commitment to ESG is reflected in industry-leading ratings. We have maintained our low-risk ESG rating from Sustainalytics with a score of 15.8, and we hold the top spot in the GCC and the top quartile globally in the Dow Jones Sustainability Index. In line with the U.A.E.'s Year of Community in 2025, Aldar will be rolling out a number of initiatives to play a key role in the nation's socio-economic development. These initiatives will build on Aldar's existing stream of initiatives across community development, inclusion, education, and humanitarian efforts.
I would like to conclude with slide number 12 and a reminder of our guidance for full- year 2025, which remains unchanged given the strong visibility on development revenue recognition and recurring income streams for Aldar Group. We are targeting an EBITDA of between AED 10.4 billion and AED 10.8 billion for 2025, representing an uplift of at least 35% versus 2024. In light of our strong start to the year, we maintain guidance for group development sales of between AED 36 billion and AED 39 billion, with Aldar Development targeting EBITDA of AED 6.6 billion-AED 7 billion. For Aldar Investment, our 2025 guidance is adjusted EBITDA of AED 3.2 billion-AED 3.3 billion, driven by strong operational performance and the newly added Masdar assets and further transfer of D-Hold assets. I would like to conclude to briefly addressing the global uncertainty stemming from external events in recent weeks.
So far, we have not experienced any direct impact on our businesses. As ever, we will continue to closely monitor market dynamics and any signs of evolving sentiments. As a reminder, Aldar has proven extremely resilient through market cycles due to its financial strength, effective management of capital and risk, and a strategy that has driven significant scale and diversification. Historically, the U.A.E. has proven to be a safe haven for capital and business and a preferred destination to live and work. The country's strong macroeconomic fundamentals provide a conducive environment for Aldar to continue executing on its growth strategy. With that, we conclude the presentation and open the floor for questions. Thank you.
Thank you. If you wish to ask a question, please press star followed by one on your telephone keypad now. If for any reason you want to remove your question from the queue, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. If you have joined us online, you can submit a text question via the Q&A button on your browser. Our first question comes from Taher Safieddine from JP Morgan. Your line is now open. Please go ahead.
Hi, Faisal. It's Taher from JP Morgan. Again, congrats on a solid set of results for the quarter. There's maybe two questions from my side, if I may. The first one is just on the development. Again, a solid, you know, pre-off-plan sales print during the quarter. The question is really related to the Dubai portion. This is the third launch within the DH JV, and our understanding is that this is the last one. So, are there any plans or visibility on what is next for your, you know, Dubai venture? Clearly, it has been a strong success with the three major launches. Maybe if you can just give us some clarity on that and linking to it, is the guidance of AED 36 billion-AED 39 billion assumed that you acquire further land in Dubai and you launch through the course of the year? That would be my first question.
On Dubai, Taher, by the way, thank you for the kind thoughts. The Wilds was a very successful launch. We were not only able to sell AED 5.5 billion in a matter of a few days, we were also pushing prices up and I think to iterate what you said, we've been very successful at building a quite successful franchise in the Dubai market even though we've only been there for the past two to three years. Across those three master plans, we've completely sold out of Haven. We still have some apartment product which we need to launch on Athlon. So, Verdes, which launched on Haven, is almost completely sold. We have the new apartment product that is going to come on Athlon, the second master plan. Then you've probably seen the ads around the roads.
We're launching our mansion product on The Wilds, we still have apartments there which we still need to launch as well. So, we have about, I'd say, AED 7 billion-AED 8 billion of additional product that we can sell across those master plans. And yes, the Dubai market is a very important market for us in terms of maintaining that diversification and being able to sustain that sales run rate. We're not going to pack our bags and leave Dubai, there's very strong ambition to strategically replenish the land in that market. In terms of whether more land is required to achieve our sales target in Dubai, then probably not, no. So, we've already sold AED 5.5 billion on Wilds, and we have more product coming throughout the year. And then obviously, we continue to launch on Saadiyat and Yas, we have our existing inventory, we're launching Al Fahid.
We have a busy launch calendar coming up for the remainder of the year. Any land replenishment in Dubai will probably trickle into next year, not this year.
Okay, all right, that's clear and so, j ust my second question is again on the overall guidance, within the guidance for FY 2025, there is a AED 3 billion-AED 4 billion M&A deployment and AED 3 billion-AED 4 billion D-Hold CapEx. In Q1, it has been relatively quiet on the M&A deployment. Can you just maybe give us some more clarity on how should we think about this AED 3 billion-AED 4 billion M&A deployment? And my following question is, can you achieve your EBITDA guidance without this M&A deployment? I'm talking about this AED 10.4 billion-AED 10.8 billion f or the year.
So, maybe before I jump to deployment, just to give an update, we're making very good progress with Mubadala on the retail joint venture. Now that will not be a capital deployment, but it's a transaction nevertheless. It's a merger of Yas Mall and The Galleria Lux , strategically very important for us and the Emirate of Abu Dhabi. And you're right, we still have not had any material transactions happen and I keep highlighting the discipline that we have. Nevertheless, we have a very good pipeline on hand. There's probably, I would say, in the next quarter transactions in the range of hopefully AED 500 million-AED 1 billion that could come through that we are very close to closing. And then, we still need a significant deployment to come in throughout the next of the year.
Whether we need that full deployment to meet our guidance, not necessarily because I think organically the portfolio is performing better than what we had expected. So, I think it's a little bit still early to say but what does matter is I think we have very strong conviction about us being able to meet this guidance overall.
Okay, that's clear. I'll leave it to others, then I'll come back in the queue. Thank you.
Thank you. Our next question comes from Mohamad Haidar from Arqaam Capital. Your line is now open. Please go ahead.
Hi, Faisal. Mohamad Haidar from Arqaam Capital. You previously mentioned that you will focus on increasing prices in Abu Dhabi specifically and if we look at the average unit price you sold in Q1, it's higher than last year. Is this also still a focus for 2025? And is the market helping? Is it accepting the higher prices across the board? Thank you.
I think it's not just us wanting to increase prices. I think there's just very strong pent-up demand for the unique product and destinations that we have. I think Manarat Living III is a very good example where we immediately sold out AED 1 billion even though prices were probably pushed up at least by 10%. And I've always been highlighting that Abu Dhabi is coming from a very different baseline, and so we really think there's significant upside both in terms of volume and price.
Okay, understood. Thank you, Faisal.
Thank you.
Thank you. Our next question comes from Harsh Mehta from Goldman Sachs. The line is now open. Please go ahead.
Hi, Faisal. Congratulations on the results, and thank you for taking this question. The first question, I just want to clarify, you mentioned you had AED 5.5 billion of sales in a matter of few days in Dubai. Is that a part of the AED 8.4 billion of pre-sales in U.A.E. that was reported for the first quarter?
No, some of it is carrying forward to Q2. So, we only book the sales when the SPA has been fully completed. We now do digital SPA signatures. All of them have been booked now, but some of them have carried forward to Q2. I think around, you'll find it in the back of the deck, around AED 3 billion or so was booked in Q1, you already have the additional that's going to come through in Q2.
Got it. In the financials, we could see the Masdar Green REIT and the Dune Logistics JV is, you know, pretty much completed and part of your financials. The other two JVs with regard to the mall and the luxury development, is there any kind of timeline in terms of when should we expect those to close out?
Before end of Q2, hopefully.
Got it.
But it's happening.
Any update on. Perfect. And Any update on the private credit front? I remember in the full year financials you disclosed you've invested roughly $500 million of the committed $ 1.5 billion.
No, it's not AED 1.5 billion I think and I need to refresh my memory. It's the total commitment from all three partners. We represent 30% of that commitment assuming it was $1 .5 billion or $ 1 billion, and we initially bought into an existing portfolio which was about $ 100 million. Then we probably invested up to date no more than $ 50 million. That portfolio honestly is doing extremely well, and if I remind you, it's focused on top quality, top locations, senior lending with returns somewhere between 12%-15%. The walls on those loans are no more than two years, so you have quick recycling that happens. So, it's mainly managed by Ares, which is the GP. So, it doesn't really take significant time from us.
We just sit on the investment committee, and we learn, you know, how they underwrite those credit investments, and we have a vote as well. No major updates on that front, to be honest, and it doesn't represent a significant portion of the business, and you'll see that income trickling into other income on the P&L line.
Got it. That is it. Thank you so much.
Thank you. As a reminder, if you wish to ask a question, please press star followed by one on your telephone keypad now. You can submit a text question by the Q&A button on your browser. Our next question comes from Rawan Shaker from SICO and says, what percentage of 2025 U.A.E. sales are expected from Dubai?
I would say probably 20%-25%.
Thank you. The next question reads, with increasing proportion of expats in the sales mix, is there any change in the payment plans? What is the current down payment installment percentage? What are the projects in pipeline in Abu Dhabi and Dubai? Which segment is the current focus?
I'd say our average payment plans today are somewhere between 60%-70% during construction with the remaining at handover. We don't do any post-handover payment plans. I think we're generally happy where our payment plans are. There continues to be strength in the market, then maybe we push them up slightly, but I'd say we're at a very good sweet spot. Those payment plans are front-loaded, so the buyer typically pays at least 20%-30% during the first year, which is very important for us. Again, it's all about disciplined growth. We can reduce our payment plans and sell faster but for us it's about having a backlog that can sustain any downturn in the cycle. So, we will maintain that discipline going forward. And then sorry, the second leg of the question was?
We have—
What are the next?
What are the projects in the pipeline?
I already spoke about the projects in Dubai when I answered the question from Taher, I think. And then, Abu Dhabi will continue launching on Saadiyat and Yas. Saadiyat, we just launched our final building on Mamsha Gardens, which is just behind Mamsha Beach. And then again, the most exciting one is Fahid, which we've started doing a lot of destination building all a round both Abu Dhabi and Dubai.
Thank you. The next question comes from Boudewijn Schoon from Aegon and reads, can you say more on the origin and objectives/motivation of the overseas buyers of resi developments? Which companies? Are these pure investors or do they use the resi units? Is there rental yield? Do they buy multiple units? Could you also elaborate on the residential expats, why is that growing more sharply?
Why is an easy question to answer because the U.A.E. is one of the best places to live and work in despite all the global turmoil. I think as usual the U.A.E. will continue benefiting from, you know, the continuous migration of population here and capital. You have the best-in-class infrastructure, you have the best living standards, you have the best healthcare, you have the best education, and I can continue going on. So, why is very easy to answer. It's difficult to say if those investors, the overseas investors, are buying to live or to invest because we still haven't handed over those properties. But we do ask them when they buy, and I'd say probably 40%-50% say they're actually going to live in it, but we'll just have to wait and see.
On the resident expat side, the point I always highlight is every time we launch, 80% of our sales is coming from new customers. We continue to acquire new customers year-on-year either overseas or resident expats. Resident expats who are becoming first home buyers for the first time because those people are very settled in this country and they decide, you know what, I need to buy a house and that trend will continue happening going forward. And then maybe, one important note to highlight on the overseas. Chinese, for example, it took us a full year last year to cross AED 1 billion in sales to Chinese. This quarter, this first quarter only, we've already crossed AED 1 billion for China. So, demand is coming from all across the globe.
Thank you. Our next question reads, this is split into two questions. So, I have number one is development management projects. What is causing the substantial gross margin decline in this segment to 23.9% in Q1 2025 versus 42.4% in Q1 2024 and 31.1% in FY 2024? Is management still comfortable with their FY 2025 EBITDA guidance of AED 800 million-AED 900 million? What is a more sustainable growth/EBITDA margin profile for this business moving forward?
So, it is important to understand the difference in the mix. We have the cost-plus, which is where we spend AED 100 million on behalf of the government and then we take a fee, so it is pre-funded by them, and then on that fee we make an 80% margin. And then you have the fixed-price projects, which is the Balghaiylam. On the fixed price, we recognize, so this is an accounting difference, we recognize the revenue from an absolute basis. We almost make almost twice in profit. So, if I was making AED 5 million of profit on the AED 100 million, and I'm saying here back of the envelope, we almost make AED 10 million on the AED 100 million in the case of the fixed price project, while it has a 10% margin in theory, it's actually more profitable from an absolute basis.
So, you shouldn't look at margins in the case of project management. You should look at the absolute project growth. So, what is the sustainable margin? Again, if you have the split then I would say 80% for the cost-plus and then maybe somewhere between 10%-15% on the fixed price. Are we changing guidance? No. We are a little bit slower in terms of value of work done for the first quarter of the year, but we expect to significantly catch up in the remaining quarters.
Thank you.
Then there is a tax question. No, you can read. Go ahead.
Sorry. Does management see its Q1 2025 effective tax rate of 12.6% to be sustainable moving forward? What is management's guidance on the same?
So, we have done a full tax impact assessment. Maybe this is a good opportunity to explain why the effective tax rate has gone up. So, the first biggest contributor to the tax expense going up is we no longer benefit from the transitionary tax rules, which is called MD 120, where we could previously expense our cost of land at book value, sorry, at fair value, we now have to expense the land at book value, which in our case is sitting at a significantly low- cost basis. So, that has caused an increase in the tax expense. The other one, which is not as material, is previously we were not required to pay taxes on our real estate that sits in the free zone in ADGM, for example. This also goes away under the DMTT rules or Pillar 2.
And then the last thing is the statutory tax rate obviously changes from 9%- 15%. However, with the DMTT rules, there are some substance-based exemptions that are allowed based on how much PP&E and SG&A you have in your home country. Which is allowing our effective tax rate to go down. So, I'd say we're still working through it and, you know, there's still some clarifications that need to be done in the future and the U.A.E. generally again takes a very pro-business approach so we'll have to see how this evolves but for the time being I'd say this is pretty much close to where it has to be.
Thank you. Our next question comes from Nikhil Mishra from Al Ramz. The line is now open. Please go ahead.
Yes. Congratulations on a good set of numbers and having this presentation. Just a quick question on Al Fahid Island. So, how much of your projected sales for this year are likely to come from this particular project, and when should we expect the first launch of this particular project? Thank you.
Very good question, we don't usually give that kind of guidance, I'll skip that, but t he plan is to launch in the second half of the year, and that's progressing quite well.
All right. Bye-bye. Thank you.
Thank you. As a reminder, to ask your question, please press star followed by one on your telephone keypad, or you can submit a text question via the Q&A button on your browser. Our next question comes from Harsh Mehta from Goldman Sachs. Your line is now open. Please go ahead.
Thank you. Hi Faisal. Maybe one follow-up question. When we compare most of the line items, you know, that have been reported for the first quarter with the full- year guidance that you had shared earlier this year, it seems you're pretty much at the lower end of the guidance. In fact, in case of property development business, it's towards the high end of the guidance on EBITDA. Last year, we did—
You'll have to show me your math. I don't know how you're getting to that with just one quarter earnings .
Sure. No, no. I just wanted to kind of add to it. What I was going to ask you is that last year what we noticed was, you know, every subsequent quarter was very strong. Eventually we did also, you know, see that you had upgraded the full-year guidance on certain line items. So, my question was more so that you're already at the lower end of the guidance and hoping that the subsequent quarters are stronger, should we assume that the guidance—
How am I at the lower side of the guidance? I don't understand.
Right. For example, when I look at, you know, not the CapEx number, but for example, the EBITDA number on the Aldar Properties at AED 2.5 billion for the first quarter, and if I were to just kind of annualize it, you know, it would be around AED 10 billion. I know annualization doesn't work and that was my question.
This is the first flag, like it's not annualized, right? So, if you look at the development business, the run rate of the value of work in hand is going to build up throughout the year, right? It's not going to be annualized because we're going to continue awarding, construction progress is going to continue picking up, you're going to have new assets coming online like Yas Place, you're going to have new acquisitions. You're going to have the Al Jimi Mall open up at the end of the year, I think that's where you're missing it because you're annualizing. This first quarter does not include fair value gain. You have, we do fair value assessments half year, end of year. There's a lot of factors that annualization misses.
Correct. That was my point that, you know, we have noticed historically that subsequent quarters are generally stronger. We've also seen, you know, Aldar upgrading its full- year guidance probably towards first half. So, is it fair to assume that, you know, the given guidance is probably conservative, and you'd probably be, you know, beating the guidance or even on the top end of the range? That was pretty much my question. Honestly, I agree with what you just mentioned, and that's what we kind of view it as well.
If I would have said we are updating our guidance if we were going to beat the guidance, right? So, we are maintaining our guidance and saying we are confident that we will deliver on this guidance, and if anything changes throughout the year, we'll come back and revert but t here's full confidence around this guidance.
Got it. Thank you.
Thank you. Our next question comes from Taher Safieddine from JP Morgan. Your line is now open. Please go ahead.
Yes. Hi, Faisal. Just maybe one more, a bit more maybe detailed question, if I may. Just looking at the investment properties, commercial, residential, and retail, clearly occupancy is at a very healthy level. So, just speaking organically without any, you know, new M&A, or contribution from acquisitions, but just organically, is it fair to assume that the upside in commercial and resi should come through from rental rate revisions given that, you know, both assets are today at around 98% occupancy? Is that, you know, this is the first part of the question, just trying to think how should we look at organic growth for these two segments?
So, Taher, yes, absolutely. Reversion to ERV is absolutely a theme. So, I think rents in the last quarter were up like 7% year-on-year on the new leases that we've done, and that will continue. We still have some vacancies we need to fill. That's predominantly, yes, I'd say rental reversion will be a main theme to the organic growth for the commercial and the residential portfolio. On the residential portfolio, we've been pushing rents up by almost 5%, which is the rental cap here in Abu Dhabi as well.
Okay, all right. Then just moving maybe quickly to the two other, you know, interesting assets which we don't talk about a lot, which is Aldar Education and Aldar Estates. I mean, these continue to outperform, if that's the right way to look at it, in terms of revenue generation and in terms of EBITDA. Just maybe help me understand, is Aldar Education now fair to assume this is more mature assets or you still see room for further growth when it comes to EBITDA margins? And the reason I'm asking this is because the capacity utilization is still at 70%. Clearly there is room for that. So, just maybe just help me understand, you know, how should we think about Aldar Education, you know, over the next two years? Is it still going to be a high-growth asset or you think it's coming closer to maturity as a business?
Super high-growth asset. I think our utilization today is in the low 70s. We added 1,750 students I think in the last academic year, 13% year-on-year growth in enrollment, 6% was excluding the new school that we opened in Noya. We're opening up two new schools as I noted. The margin, I'd say this is not a margin play, I think we're trading at quite healthy margins. So, as you add more enrollments, your costs will have to go up slightly as well. So, maybe there's a little bit, 1%, 2%, 3% margin accretion, but I wouldn't say significantly. There's surely very good growth potential on the top line, both organically on the existing capacity and especially on the greenfield capacity. Going forward, we've given the market an indication of around how many students we're targeting to reach in the next two to three years and that's more than 60,000—
Okay.
Yeah, yeah. There's significant room for growth going forward, absolutely.
Okay, all right and just sorry, the final question. As Aldar Estates, I mean, again this business has been in a super hyper growth phase. There has been a lot of M&A as you mentioned. In 2023, now we're moving into a like-for-like picture. So, c an you just maybe also share with us similarly on that? Is that the run rate we should be happy with in terms of high teens on the revenues? And do you see any room for margin expansion? And the reason I'm asking is because it has quite different subsegments. Property management looks like a high-margin business compared to maybe facilities management and the community service. So, maybe just a bit of color from your side would be helpful on that.
Margin expansion is a little bit difficult to answer given, you know, it depends on which business grows faster than the other I'd say this business will also grow at double digits on the back of a lot of captive business that they get from the group, either from the development business when it comes to owner associations with all the new residential communities that are coming up. They're doing a lot of district management work across Abu Dhabi. They're managing the commercial and residential portfolio of AIP, landscaping, security, like all that captive businesses, majority FM, majority going to Aldar Estates. Then those guys have a decent business to third parties including the government. Again, which continues to invest on both CapEx and OpEx programs across the ecosystem. So, no, I'd say this is still not stabilized. There's still room for further growth.
Okay. Very clear. Thank you.
Thank you. Our next question comes from Alister Hough from Invesco. Your line is now open. Please go ahead.
Hi, Alister here from Invesco. Thanks for the presentation today and the great results. Very impressed with the continuation of the presales growth and momentum in the U.A.E. Just a quick question with regards to sort of market. It's probably more so in Dubai than necessarily in Abu Dhabi, but typically when presales get to a certain level of GDP they normally peak- out, and I understand the dynamics with, in terms of people moving to Dubai, it could be an exceptional situation, but I think total pre-sales values as a percent of the GDP is close to 300%-400% now of Dubai, which is quite high. Just wondering what your thoughts are around that, if that's maybe a cause for concern in terms of an overheating market, or do you think it can carry on? Thank you.
So, I don't have the numbers off the top of my head, but I'd be very surprised, Alister, about that statement that sales are 300%-400% of GDP in Dubai because Dubai's GDP to my recollection is at least $ 200 or $250 and prime off-plan sales excluding secondary transactions were around $50, $ 60, $70. I've never seen that comparison. Maybe.
It should be total sales value, maybe not.
That's a little bit too sophisticated for me to be honest. The way we look at it is you have existing supply and you have future demand. We project how much the population is going to grow for the next few years which many market analysts estimate to be at least 2%-3%. On that basis, again, Dubai is very different to Abu Dhabi. Abu Dhabi has a much bigger GDP, if that's the benchmark to look at, and has 1/6 of the sales that Dubai has. I'm not sure how to comment about this metric.
Okay. Thank you. I'll keep looking into it because it's normally quite a good metric for looking at overheating markets. It's definitely Dubai that's more overheating probably than Abu Dhabi. That's a good tip. Maybe just a bit more on the cap rates that you use for your valuations.
Yes.
Obviously, different parts of the world have different systems and methods. Some are more aggressive lowering them and increasing them. Yours tend to be reasonably stable. Certainly, on the residential leasing part, I mean, those cap rates are pretty attractive, and do you see they're going to continue to trend down because they are materially higher than other parts of the world for such quality assets? Thank you.
So, we are conflicted about this because we love buying assets at 7%-8% yield and having, you know, a cost of debt that is sub-5% today and expected to go down. You're right, for a AA economy having cap rates that have this much credit spreads to sovereign just doesn't make sense. That's been our thesis for quite some time. Eventually they have to compress, which means capital values will go up but u ntil they do compress, I hope we can buy as much assets as we can before that happens.
Yeah, good luck with that. It's definitely a good spread. And maybe just one quick last question. A lot of real estate companies are looking at data centers. Is that something you've looked at or explored, or is there already established players in the market that you can't compete with, or what's the situation with data centers and your company?
Yeah, it's not an easy one for us. We've looked at it, especially with data centers. It's not only about the real estate. It's about the Opco, about the operating and technical experience that comes with it. In the U.A.E., you have the likes of, you know, the telcos, the G42s, you have some private players that have been successful like Gulf Data Hub, which was partially acquired by KKR, but very niche operators, tightly controlled. So, not something that we're actively focusing on today. Is this something we'd consider in the future if available without those barriers to entry? Then yes probably, but nothing in the immediate timeline.
Okay, thank you very much. Thank you.
Thank you.
Thank you. Our next question reads, how should we expect leverage to evolve moving forward?
Leverage should evolve in line with our debt policy, and the number one priority for us is to maintain our investment-grade credit rating, and that is something that we will never compromise and m aybe a good time to highlight the benefits of that credit rating, we issued lately our Sukuks, which had a spread of 110 basis points to treasuries, and maybe you've seen in the markets today some issuers that issued more than 400 basis points to treasuries. Now, not comparing like- for- like because it's slightly different business, but nevertheless the investment-grade status pays off. And on the hybrids that we issued was also a testament and a benchmark that we set in the market. Our hybrids were just over 200 basis points over treasuries, and that spread between senior and subordinated is unprecedented for us.
Other than you guys, the equity investors being, you know, hopefully behind us and supportive about the equity story, I think the credit investors are also voting in favor of Aldar, and we appreciate that acknowledgment, and we will continue maintaining the discipline to maintain this going forward.
Thank you. Our next question comes from Neha Tuli from Alpha Dhabi Holding and reads, what is your view on rental yields and capital appreciation trends for the next 6-12 months?
If I had a crystal ball, I would tell you, but unfortunately, I don't. I'd say in general, we are very optimistic about the fundamentals of the business. We expect strong growth. What that growth is going to be, only God knows.
Thank you. Our next question comes from Indarpreet Singh from SICO and reads, would there be some seasonality in Aldar Estates' earnings? Trying to understand the sequential drop in revenues and gross profits.
Very good question. I assume you're referring to the drop from Q4 to Q1. There is some seasonality in the sense that there are some capital projects that dropped off from Q4 into Q1. There is a lot of spending especially from the government side that happens towards the end of the year because they want to consume those budgets. Before the new calendar year starts. So, from Q1 onwards, you're going to see that run rates starting to go up but if you compare it like- for- like, Q1 to Q1, then you'll see there's good year- on- year growth.
Thank you. We currently have no further questions, so I'll hand back to Faisal for closing remarks.
Thank you, everybody, for your support and for taking the time with us today. We look forward to seeing you again in the next quarter with another set of positive results, [Non-English content].
This concludes today's call.
Thank you.
Thank you for joining us. You may now disconnect your lines.