Hello everyone and welcome to the Aldar Properties H1 2024 financial results call. My name is Emily and I'll be coordinating your call today. After the presentation, there will be the opportunity for you to ask any questions, which you can do so either by pressing star followed by the number one on your telephone keypad, or alternatively, if you are streaming today's call online, please type your questions into the Q&A chat box. I'll now turn the call over to our host, Chief Financial and Sustainability Officer Faisal Falaknaz. Please go ahead.
[Non-English content] Hello, everybody. Thank you all for joining us on this call to discuss Aldar's financial performance for H1 2024. As the U.A.E. continues to provide a conducive macroeconomic environment for the sector, Aldar has delivered strong year-to-date growth driven by solid demand across all real estate asset classes. Revenue was up 73% year-on-year at AED 10.9 billion, while EBITDA rose 61% to AED 3.9 billion, and net profit increased 57% year-on-year to AED 3.3 billion. Please note that the overall effective tax rate was 4.1% in the first half following introduction of corporate income tax in January. Our two core platforms, Aldar Development and Aldar Investment, have achieved significant scale and diversification over the last three years. In the first half of the year, Aldar Development recorded strong performance driven by ongoing recognition of its sizable revenue backlog, which has reached a record AED 39 billion.
Since the start of the year, the business has been operating at an elevated run rate as it effectively develops and delivers against the growing development project pipeline of the last few years. The platform is well positioned for sustainable growth. We continue to extend our market leadership as the U.A.E.'s leading destination builder, diversifying our target customer segments and product offering as well as building further scale in our home market and internationally through strategic land bank replenishment. Aldar Investment also recorded strong performance driven by organic growth complemented by prior-year acquisitions which are delivering meaningful returns. The business continues to excel as an active asset manager and benefits from a high-quality asset base with strong positioning in the context of a thriving U.A.E. market.
We remain focused on key growth drivers, executing against our develop-to-hold strategy, diversifying and expanding our portfolio through disciplined capital deployment across target markets, and implementing our asset repositioning and optimization strategy. Turning to slide four, Aldar Development sales continued their strong momentum, rising 21% year-on-year to AED 14 billion in the first half, driven by five new project launches and strong inventory sales. EBITDA increased 77% year-on-year to AED 2.2 billion in H1. As mentioned earlier, the business is maintaining an elevated run rate since the start of the year. Acceleration of project delivery resulted in robust cash collection of AED 4.4 billion in the first half, and we expect full year 2024 cash collections to reach between AED 8 billion-AED 9 billion.
Demand has been particularly strong among overseas and expat buyers, with sales to this demographic doubling year-on-year to AED 10.2 billion in the first half, or 79% of total U.A.E. sales. Given trends seen in H1 sales and the profile of upcoming launches, such as Al Fahid in H2, we expect demand to be well-balanced between U.A.E. nationals, resident expats, and overseas buyers in the second half. On the international front, both SODIC and London Square are making strong progress on implementation of their growth strategies. With the economic situation stabilizing in Egypt, SODIC ramped up sales in the second quarter, and the development backlog now stands at AED 4.2 billion with an average duration of 32 months. London Square is laying solid foundations for future growth, having completed the acquisition of seven land plots since the beginning of 2024.
Group development backlog now sits at AED 39 billion, providing strong revenue visibility over the next two to three years. Given the pipeline of new launches, we see group backlog progressively moving towards the AED 50 billion mark. Turning to Aldar Investment on slide five. Disciplined expansion and diversification over the last couple of years delivered revenue and adjusted EBITDA growth of 30% and 20% year-on-year respectively. The platform is executing against its comprehensive develop-to-hold strategy to deliver diversification, scale, and earnings growth. To date, Aldar has committed a total of AED 7.6 billion towards a pipeline of develop-to-hold assets. This includes the initial AED 5 billion in Abu Dhabi that spans the commercial, retail, and hospitality segments, which was announced at the start of the year. The recently announced commercial entry into Dubai with the development of an iconic office tower on Sheikh Zayed Road.
This alone is a commitment of AED 1.6 billion. I will share further details on this announcement later in the call. The AED 1 billion commitment in logistics across Abu Dhabi and Dubai to develop build-to-suit facilities, drive expansion of existing assets, and develop a logistics park through a partnership with DP World, which I will also share further detail later on the call. The D-Hold strategy complements Aldar's ongoing strategic expansion, repositioning, and optimization initiatives, which comprise the following. A retail redevelopment program for Al Hamra Mall in Ras Al Khaimah, which has now been completed, Al Jimi Mall in Al Ain, which we expect to conclude by the end of next year.
A hospitality transformation program where we will be conducting major refurbishment work on some of our hospitality assets to capitalize on the growing demand for premium hospitality experiences in Abu Dhabi amid the rapid expansion of the leisure and tourism sector. This redevelopment work will ultimately drive higher future income and align with our resort destination focus. Finally, with greenfield expansions in Aldar Education business, with two new schools opening at the start of the 2024/2025 academic year, as well as a third school in the following year. On slide seven, you will see further detail on each segment within Aldar Investment. The investment properties portfolio continues to perform very well, supported by active asset management and a successful leasing strategy driving higher occupancy rates. Adjusted EBITDA for Investment Properties increased 19% year-on-year to AED 852 million in H1 with occupancy at 94% across the portfolio.
The Commercial portfolio stands out with H1 adjusted EBITDA increasing 35% year-on-year partly supported by a one-off gain from the strategic disposal of a legacy asset in the first quarter of the year. Excluding this one-off gain, the portfolio adjusted EBITDA was up 17%, while the overall Investment Properties adjusted EBITDA was up 12% year-on-year. Continuing on commercial, amidst strong demand for premium Grade A office space, rental rates have increased and occupancy across portfolio now stands at 97%. Al Maryah Tower, which opened in March this year, is operating at 83% occupancy. In retail, Yas Mall has reinforced its status as the premier retail and entertainment destination in Abu Dhabi with occupancy of 95%, tenant sales rising 8% year-on-year, and a 16% increase in footfall in the first half of the year.
The hospitality and leisure portfolio experienced a slight decrease in adjusted EBITDA due to a one-off income recognized a year earlier. Excluding this, adjusted EBITDA was up 8% year-on-year, with occupancy at 73% and RevPAR up 10% year-on-year. Aldar Education has recorded a 25% year-on-year increase in adjusted EBITDA to AED 116 million in H1. Enrollments were up 27% in the first half, at Aldar-owned and operated schools. Meanwhile, Aldar Estate's adjusted EBITDA surged 160% year-on-year to AED 155 million in H1 following transformational M&A activity last year. The business now manages 158,000 units and holds contracts valued at over AED 1.9 billion. On slide eight, you will see some details on the recent announcements we have made in July. As part of our previously announced AED 1 billion logistics commitment, we have signed a strategic agreement with DP World.
The agreement will see Aldar develop a Grade A LEED-certified logistics park spanning 144,000 sq m in GLA within National Industries Park in Dubai. Catering to the strong demand we continue to see, the logistics park will comprise three buildings that can be modified to become single or multi-tenanted facilities, offering flexibility for third-party logistics, e-commerce, and retail tenants. You will also have seen our recent announcement on Aldar's entry into the Dubai commercial real estate market. We see this as an exciting opportunity that complements Aldar's growing presence and growing brand in the Emirate of Dubai. We have acquired an exceptional plot of land on Sheikh Zayed Road adjacent to the DIFC to develop a Grade A office tower incorporating a luxury boutique hotel and branded apartments. The tower will have a leasable area of 88,000 sq m and is scheduled for completion at the end of 2027.
In addition, Aldar has also completed the acquisition of 6 Falak, a fully occupied Grade A office building in Dubai Internet City. Together, these two strategic commercial investments involve a total commitment of AED 1.8 billion and add to our growing offering in the Emirate of Dubai. Moving to slide number nine, you will find our key balance sheet metrics. Aldar maintains a conservative leverage profile with strong liquidity. As of the end of July, the company had AED 3.6 billion in free cash and AED 7.6 billion in undrawn credit facilities. We continue to actively manage our liabilities to achieve strategic and financial objectives. This year, Aldar has secured AED 3 billion in senior unsecured financing. The five-year revolving credit facilities have improved liquidity and extended the average debt maturity to 5.4 years.
In May, Aldar issued a second $500 million 10-year green sukuk and tendered to buy back the 2025 sukuk. The issue, which achieved the tightest credit spreads ever priced by Aldar, supports our sustainability goals and also helps to extend our maturity profile. Furthermore, in Q2, Aldar refinanced London Square's debt with a new larger unsecured loan at more favorable rates and conditions. Looking ahead, Aldar plans to invest further in income-generating assets and new growth sectors while maintaining a disciplined approach to capital deployment to ensure value and strategic alignment. Turning to sustainability highlights on slide number 10, as you know, Aldar took the strategic decision to commit to achieve net zero by 2050, and we are focused on making steady progress towards this ambition. We are also driving improved energy use across new developments.
Aldar received the highest sustainable urban design rating in Abu Dhabi, the Estidama Pearl 5 for The Sustainable City in Yas Island, and all developments launched in H1 achieved Pearl 3 rating. Meanwhile, the Athlon development in Dubai was awarded the U.A.E.'s first LEED Platinum certification for community plan and design. I would like to conclude on slide 11, where we reiterate our guidance for full year 2024 guidance, which we had revised at the end of Q1. Our strong trajectory this year means we are very much on track to meet guidance for adjusted EBITDA in the range of AED 6.2 billion-AED 6.5 billion. For Development, our guidance is for sales of between AED 29 billion and AED 31 billion and EBITDA of AED 4.1 billion-AED 4.3 billion. For Aldar Investment, our guidance for adjusted EBITDA is in the range of AED 2.3 billion-AED 2.5 billion.
With that, we would like to conclude the presentation and open the floor to questions. Thank you.
Thank you. As a reminder, if you would like to ask a question today, please do so now by pressing star followed by the number one on your telephone keypad, or alternatively by typing your question into the Q&A chat box, which can be found on today's slides. Our first question today comes from the line of Steve Bramley-Jackson with HSBC. Please go ahead, your line is now open.
Thank you very much. Good afternoon. Good set of figures. Well done. I've just got a few questions, if I may. The first, your property development gross margins they seem a little light compared to what we were expecting. Indeed, I think perhaps, Faisal, based on what you've been guiding towards previously, what should we think about the sort of gross margin trajectory of the development business? That's my first question. Would you like me to ask them individually or give you all the questions in one go?
Let me jump right into it. Last year we had a decent amount of land sales that came in that are very margin accretive. Land sales typically have margins around, you know, 60%, 70%, 80%+. Year- to- date, we've had very limited plot sales or land sales, but those, you know, should expect to pick up towards the latter end of the year. Like you said, the guidance is probably in line with where our guidance is at. However, we are very focused as a group not only to improve our top line by constantly pushing our prices at every launch. You look at our recent Dubai launches, the one we did back in May, Athlon followed by the apartments, recently, we pushed prices by around 5%-10% compared to the previous ones.
That should help accrete the margins going forward, but most importantly, we're very focused on optimizing our cost. We are very, very laser-focused on making sure that we maximize our margins without obviously affecting the customer experience in the end.
Yeah, yeah. All right. Thank you. Thank you. That helps. My second question was on the tower and the hotel development which is on the edge of the DIFC. I was curious, but I see you've clarified it in the presentation. I wondered whether it was a development contract, but you, I think, state that you actually bought the plot. One thing I was curious about is I have one of the architects that's been working on the scheme, but I didn't know who was doing it. Have you actually owned the site for quite a while, or did you wait to take ownership, you know, once you get the planning? Can you just give us a little bit of a sense as to whether you've had the site for a period, or indeed whether you've got other sites actually already under your control in Dubai? Thank you.
We bought the plot last year and we disclosed it in the financial statements. I think we bought it for around AED 270 million. We believe that cost basis today is very attractive for a very prime plot such as that. It is facing Sheikh Zayed Road and facing the DIFC on the other side. I would guess that if we put it out in the market today, we can probably sell it for twice the price, but we're not traders. You know, we think this is going to be a very prime offering in the onshore market, this is not free zone.
However, in close proximity to the free zone for corporate tenants, Grade A blue chip corporate tenants to occupy a state-of-the-art facility that's going to have very efficient floor plates, high sustainability credentials, and more importantly, it's a live-work offering where the luxury hotel and branded residence is a very limited component but complementary to the overall offering. There's going to be a boutique luxury hotel at the top, and you see that in the picture of the tower that we put out. You're looking at keys somewhere between 150-200 keys between the branded residence and the luxury hotel component, which is going to have obviously an extensive F&B offering as well. We think this is going to be one of the most exciting commercial office offerings to Dubai when it comes online in 2027.
We're expecting to make yields, if not in the high single- digits, probably in the low double- digits, most likely.
Right. That's return on investment, is it?
The yield on cost, yes.
Yield on cost. Exactly . Absolutely. Just my last question, a bit of a modeling question really, but you still appear to be doing very well on your tax rate, sort of half the going rate in the U.A.E., and yet one of your peers is paying a substantially higher tax rate. Will this, when I say normalize, will it move towards the sort of, you know, the normal tax rate by the end of the year, or for some reason are you able to keep your tax cost at sort of half the going rate.
Steve, there are two things that are playing into this. Number one is depreciation deduction, which doesn't appear on the financial statements, but for tax purposes we get to take depreciation deduction. The second thing is the transition rules for fair value of land. The land today on the books sits at cost, but for tax purposes, we get to take it on the cost of goods sales at fair value, which reduces our tax bill as well.
That's why you see an effective tax rate that is lower than the statutory tax rate of 9%.
Yeah, yeah.
Sorry, the last one is, the last one, Steve, apologies, is wherever we operate in free zones, so ADGM, we do not pay a corporate income tax there. That's also driving the tax rate down.
Right, right, of course. Faisal, that's very helpful. Thank you. Thank you very much.
Thank you, Steve.
Our next question comes from Mohamad Haidar with Arqaam Capital. Please go ahead.
Hi, Faisal. Congratulations on the results and thank you for sharing the information on what's been handed over in terms of units and what's been sold. Starting with that point and knowing that you still have land exceeding 9.5 million square meters or gross floor area, can you help us understand how many units can this remaining land produce like in the next five or seven years in both Abu Dhabi and Dubai? That's my first question. Please.
That's a very theoretical question because it depends on, you know, master planning all that land bank, which obviously we haven't done it for all the land bank. Rest assured, with the current run rate that we're selling at, which is somewhere between AED 25 billion-AED 30 billion, we have land that will keep us going for the next decade at least. Dubai is another story, obviously, because in Dubai we have to compete for land. The three master plans that we have in Dubai Holding had a GDV potential of north of AED 25 billion. To date, I think we've sold somewhere between AED 7 billion-AED 8 billion on those already, so we still have some room to go, at least for the next one to two years. We are therefore focused on continuing to replenish land in Dubai, which is a core part of our capital allocation strategy.
But then in Abu Dhabi, we have a very strong competitive advantage obviously given our positioning in the market to be able to procure land, you know, through various ways. In Abu Dhabi we're not worried, but in Dubai we obviously have to compete for that land.
That's very clear, Faisal. Thank you. Moving to Aldar Investments, we have AED 7.8 billion of committed CapEx on develop-to-hold. As a general philosophy, should we always expect Aldar to spend another AED 5 billion-AED 6 billion on new acquisitions regardless of what's announced? Do you have this like as a general philosophy or you will like scale back a bit on investments with what you have currently on hand?
Our capital allocation bucket has a few major components. The first one which we spoke about is land replenishment. The second is develop-to-hold, which is the AED 7.6 billion that you refer to. The third is repositioning, which is, you know, not significant in nature. The third is recurring income. The AED 5 billion that we've guided to the market is on the recurring income side of things, and it doesn't mean that every year we'll be spending AED 5 billion. Like, we do a cash flow forecasting in terms of how much available cash we have after having done our business plan in terms of how much capital we want to allocate across the various divisions. We remain committed as of now to deploy this AED 5 billion on top of the AED 7.6 billion.
The AED 7.6 billion will be invested over the next three to four years because it takes time to build up that D-Hold portfolio. We've been telling the market that we're making good progress in terms of investing this AED 5 billion, and again, we remain to be very, very optimistic that we will invest it. It just takes time to get those deals properly priced and negotiated to be in a good position to close. We've had a very good track record in terms of the returns we've made on our acquisitions over the past two, three years . We're very focused on making sure that we maintain that track record and don't get carried away with just deploying capital and destroying shareholder value over the long term.
It's all clear, Faisal. Thank you.
Our next question comes from Taher Safieddine with JPMorgan. Please go ahead.
Hi, good afternoon, Faisal. It's Taher from JPMorgan. Maybe a few questions from my side. Congrats on a very solid set of numbers. On the development front, just how are we looking at, you know, level of demand absorption rates in Abu Dhabi and Dubai? Maybe you can share also some color on recent launches in Abu Dhabi. That would be helpful just to understand, you know, the market dynamics. Where are we on that? I think just to follow up, at the level that we're talking about today of AED 20 billion, AED 25 billion in the U.A.E. excluding London Square and SODIC. Do you think this is sustainable into next year, or how should we think about the more sustainable rate when it comes to off-plan sales? That would be mainly my first question on the development front.
Development demand. What's interesting is that during the first half of the year, we had five launches, whereas last year we had 10 launches. Yet this year, our sales were up more than 20%. We've been very focused on making sure that we don't build up a lot of inventory, and by inventory, just so that everybody is clear, it's not ready inventory, it's just off-plan inventory that builds up every time you do a new launch. Again, despite having half the number of launches, we were still able to sell significantly well. I'd say the demand in Abu Dhabi continues to be strong, and you have other players today that are competing for that liquidity in Abu Dhabi. You had the Hudayriyat launch, for example, by Q Holding. The market, I would say, is maturing. It's a very positive sign.
It continues to attract the resident expat and international buyers, which as you see made up 79% of our buyer base in the first half. We see that momentum continuing going forward. In H2, we'll have a much busier calendar when it comes to launches. In Dubai, I would say the demand also continues to be strong. You guys know the numbers better, but H1 numbers in Dubai are stronger than they were last year. We tested a new product in Dubai, which was apartments. We've never sold apartments in Dubai, and we were able to sell extremely well, more than AED 1 billion. In a product that you could argue is extremely competitive. We remain to be also very positively optimistic about the prospects in Dubai. On the run rate, we did AED 24 billion in the U.A.E. last year.
With the current guidance that we have in place, you can extrapolate and say that we'll probably be doing AED 27 billion-AED 28 billion in the U.A.E. this year, which is a healthy rate of growth. In terms of guidance for next year, it is very difficult to give that guidance at this point. I think what is better is for us after we announce Q4 results, we'll have a better direction in terms of where the market is, what is our calendar in terms of launches and the products that we have. Like I always say, we will always capitalize on the strength of the market. As long as the market remains strong, we will dominate and try to capture as much as we can through the product offering that we have readily available.
Okay, very clear. Just to confirm, Al Fahid Island and the third launch in Dubai, the third plot with Dubai Holding, these are going to be H2 events?
Al Fahid is going to be an H2 event. Dubai, we are working very hard to get it launched before the end of the year. If we don't, it might slip into Q1.
Okay. All right. Okay. Very clear. Okay. Just moving to the recurring portfolio, just a few questions. Just on this recent announcement for the commercial office? I mean, just help us understand why go onshore when, you know, I mean, the competitive advantage today is, you know, all this FDI and, you know, new companies opening shop in the U.A.E., in Dubai. I mean, how are you thinking about, you know, competing with the likes of DIFC if you're not offering this offshore licensing, which is what really matters at this stage? What makes you that confident that you're going to be able to deliver, you know, a solid, you know, economics on this Grade A office space despite it being onshore?
I think that's the exact competitive advantage. One, the DIFC is relatively more expensive, probably 60%, 70%, 80% more expensive on a per square meter basis. The point about why didn't we go with free zone, it's a matter of availability. If we could, we would, but obviously, right, we cannot get access to that. We would love to have exposure to both. It's all about diversification. As a landlord, I'd like to offer my tenants onshore, you know, non-free zone licensed office spaces and free zone office license spaces. The compelling part of this asset is that you have a lot of tenants, corporate tenants who have to service tenants in the DIFC that do not have to pay expensive office rents in the DIFC. They can be in very close proximity and service that area.
I think the road connectivity, the connectivity to the DIFC, the specifications of that asset, we are very confident will make it very highly sought after. If you look more micro into the onshore market in Dubai, that's a very thriving commercial office market today. However, I think a lot of that market is becoming quite dated. Therefore, you have to become more micro about it. Location and quality of asset is going to make this stand out.
Okay. All right, clear. Just the final question on the recurring portfolio. Just on the existing, I mean, just if I take a look at the assets, you've clearly put a lot of money and CapEx in the commercial space. You've also now announced a significant uptake when it comes to logistics, right, with a new plan. I just feel that maybe retail or actually residential is a bit left behind. I think looking at the numbers also, I mean, the momentum from a P&L perspective has been quite weak on the residential leasing when you compare it to the other parts of the portfolio within the recurring segment. Is there anything you can highlight? First of all, are you happy with the performance of the residential portfolio within Aldar's recurring segment, or you think this deserves also maybe more investments to come through?
I just want to hear your thoughts on that.
I absolutely agree with you. I think this was a missed opportunity from our side. We were very focused on selling residential because from a feasibility point of view, it made a lot more sense to sell it than to lease it. I think we are catching up now. Our residential portfolio is fairly dated. It requires some refurbishment, but we are working and we'll be announcing in the right time a decent pipeline of residential product that is going to come into the recurring income portfolio. I think last we spoke, we said that we'd be looking to add between acquisitions and between develop-to-hold, we'd be looking to add somewhere between 3,000-4,000 units of additional residential units into the mix.
The leasing mix. Okay.
The leasing mix. Yes. It's done well. To conclude, the portfolio has done well. It's defensive. It's stable but has probably not participated in the run that the market has had on the residential side given, you know, how dated that portfolio is.
Okay. All right. Very clear. Okay. Thank you very much.
The next question comes from Harsh Mehta with Goldman Sachs. Please go ahead. Your line is open.
Hi, Faisal. Thank you very much for the presentation. Just a few questions. The first one is on the property development side. You've already kind of explained a lot. I just want to understand for the second half, you know, is it possible to share a breakdown between Dubai versus Abu Dhabi on the presale's numbers? When you mentioned that 79% of your buyers are today international buyers, is it very similar between Abu Dhabi and Dubai, or is it skewed given that Dubai, you know, as a percent of proportion of total sales is increasing. That's the first [crosstalk]
Sorry, Harsh, can you repeat the second question please? Apologies.
Yeah, you've mentioned that roughly 79% of your buyers are international buyers now, expats plus investors. I was just hoping to know, is it getting skewed because of the Dubai launches, or are you seeing similar kind of proportion both in Dubai and Abu Dhabi?
Okay, the first question, Harsh, if you look at slide number 19 in the deck, you'll be able to see the split between the projects. You'll be able to tell how much is in Dubai and how much is in Abu Dhabi. AED 3.1 billion came from Athlon, then you have Al Marjan, which was AED 1.8 billion. Sorry, I missed Haven by Aldar , that's another AED 850 million. You can figure out the split between Dubai, RAK, and Abu Dhabi there. The second question is, yes, you probably have a point.
The 79% is partly skewed by one, Dubai has significantly more overseas and resident expats. The launches that we had this year in Abu Dhabi were in the Grove, which also, Nobu, for example, The Source, which also are generally skewed more to the international and overseas buyer front. Lastly, Ras Al Khaimah as well, which is why if you noticed in my introduction, I said that we expect this to start moderating somewhat. We continue launching towards the second half of the year, especially with Al Fahid and Yas, for example.
Got it very clear. Thank you so much. The second question I had was on the fair value gains that were reported in your first half results. If you could just help us understand what assets have seen this fair value gain and what's driving the gains. Is it occupancy or lease rentals that are improving and driving these fair value gains?
I'll tell you the top three. ADGM, which is doing extremely well, not only the occupancy side but rental rates. The second one is Al Maryah, which is doing extremely well because it was non-operational last year and now it's 83% occupied with heads of terms that is very quickly going to take it to over 90%. The last one is Yas Mall.
All right, clear. Just one last question. You know, in the slide where you mentioned LTVs and your targets, obviously that's improving on the investment property side, and I'd assume the absolute loan or debt amount is still the same, but it's the value of the asset, that underlying asset that's growing. On the property development side, against your guidance to a target of 25%, you're almost at 22% now. How are you seeing, you know, in terms of the incremental requirement for debt on the property development side and how to kind of, you know, manage it given you have plans for CapEx and investments over the next few years, both between Dubai and Abu Dhabi?
One thing that has come in recently is the access to escrow accounts. You'll notice that we have significantly more unrestricted cash today. That's due to the fact that we can post bank guarantees like RERA allows in Dubai, which we previously didn't have in Abu Dhabi. That's going to significantly lower our capital requirements, which we previously have had to fund ourselves for the first 20%. I think in general the increased LTV on the development front is a sign of the elevated activity that is picking up with the backlog growing. We are very focused on maintaining the LTVs within the guardrails that we have. You know, we do not plan on exceeding them, but we are looking at alternative sources of funding that will also help us drive this growth that is coming over the future.
Thank you.
Our next question is a text question. We have a few questions from Nida Iqbal Siddiqi from Morgan Stanley. The first question from Nida asks, can you comment on the outlook for demand for new sales in 2H 2025 in U.A.E.? Are there any signs of a stabilization/slowdown in new sales in U.A.E.? Do you see the trend sustainable over the next 12 months?
The outlook, I think our guidance is the best reference that our outlook remains to be extremely positive. We closed last year at AED 27 billion almost for the group, which is expected to grow to AED 29 billion-AED 31 billion for the year. Stabilization, again, difficult to answer, but all the signs point to the market just becoming stronger. The population continues growing. We are opening up a new school in Yas in September, and the pre-registrations on that school has been incredible. The commercial office performance, our retail footfall sales, it is just all the signs are extremely positive, which are correlated with more people coming to the country and demanding more real estate. I think from our side, we remain optimistic. In terms of guidance for next year, we would come back in during Q4 results and give our view on that.
The next question from Nida asks, in Investment Properties, your Aldar Estates segment continues to surprise to the upside. How should we think about the key drivers for this segment?
Nida, this is driven by the merger with Eltizam that happened back in July. If adjusted for a like-for-like basis, the business is probably growing 20%, 30%, I would say, just from the top of my head, but we can confirm later with the team. Organically, the business continues to grow very strongly, but the triple-digit growth is mainly driven by that merger effect.
Thank you. Our final question from Nida asks, you have been recently announcing expansion into Dubai with commercial and logistics space. Should we expect more of such announcements?
Absolutely. Dubai is a very core market for us. When those opportunities come, we'll be announcing them to the market immediately.
Thank you. Our next question comes from Nikhil Mishra with Al Ramz, who says, thank you for the presentation. Regarding the commercial portfolio, can you please provide some color on the current average cap rates and how do you see those evolving over the next couple of years? Your thoughts on that, please.
I'd say the range of commercial office cap rates are somewhere between 6.5%-7.5%, depending on the quality of the asset. I think ICD Brookfield, for example, traded 6.5%, if not lower. ADGM, our asset, is trading below 7%. Where do I see rates going over the long term? I do expect those cap rates to start contracting as more institutional money starts flowing into the market. That's part of the upside story that we always highlight.
Thank you. Our next question comes from Basma AlGhonaim with Hassana Investment Company, who asks, on cash collections, has there been any changes to payment terms? On land replenishment, how much is land purchases expected to be as percentage of deployment? Can you give an approximate number?
We've been pushing in terms of payment plans. We are currently somewhere around 60%-70% during construction on average. We do go up to 80% in some instances, but on average we are somewhere around 60%-70%. The latter part of the question was, just a second, allocation. The majority of the allocation, I would say, more than 50%, 60%, 70% is going to go to recurring income, and the rest would go to land replenishment.
Thank you. Our next question comes from Karim Sawabini with Moon Capital, who asks, how do you think about sales outlook in Egypt going forward, expecting some normalization post-devaluation? Also, Abu Dhabi price increase has been lagging that of Dubai. Do you expect that to catch up given Abu Dhabi is fast becoming an investment destination?
On Egypt, you'll notice Q1 was a quiet quarter where we didn't launch a lot given the expected devaluation that was coming. We started picking up in Q2 and you'll see that reflected in the numbers reported. We recently launched Ogami in the north coast and that was an extremely successful launch. We haven't publicly announced the numbers, but what we've always been seeing is there's always demand for real estate when you put it out in Egypt, and especially for a product of such offering. We expect SODIC to significantly catch up in terms of sales momentum before the end of the year. In terms of Abu Dhabi catching up with Dubai, absolutely, it's happening. You know, every time we launch a new product, we keep increasing prices.
We're getting ready to launch The Arthouse on Saadiyat Grove, which will also break new records in terms of pricing compared to the other previous launches we've done during the beginning of the year.
Thank you. Our next question comes from Ghobash Trading & Investment Co., who asks, what's management's expectation for U.A.E. pre-sales in FY 2024, and how has market share evolved so far in 1H 2024?
I refer to the guidance for the year, which is AED 29 billion-AED 31 billion. U.A.E. will probably make AED 27 billion, AED 28 billion. Of that market share, we are the dominant player in Abu Dhabi, but Dubai is a much larger market. Dubai did around AED 300 billion of sales last year compared to Abu Dhabi, which did AED 50 billion. It seems both markets are on track to break those records this year.
Thank you. Our next question is a follow-up from Nida Iqbal Siddiqi with Morgan Stanley, who asks, following up on the question about growth in Dubai, on a three to five year view , how much of your earnings do you believe will be driven by Dubai?
On the development side, probably 20%-25%, I would say, assuming we can continue replenishing land in Dubai. Yes. Probably 20%-25%.
Thank you. Our next question comes from Alister Hough with Invesco, who asks, hi, I'm sure you've looked, like most real estate companies are, any big opportunities for DCs in U.A.E. Do you have any details on YOC and economics to DCs in U.A.E.?
I'll need a translator for all those acronyms. Can we skip the question, please?
Thank you. At this time, we have no further questions, I will turn back to the management team for any closing comments.
Thank you guys again. We are really excited about what is coming for Aldar. We expect to continue growing at a very similar momentum for the next few quarters, and we feel very confident about the guidances we have given to the market. What we are most excited about is the following year. Aldar is on a very exciting journey of growth, and as management, we are really excited and confident about what is to come. Yeah, thank you very much.
Thank you everyone for joining us today. This concludes our call, and you may now disconnect your lines.