Hello everyone and welcome to the Aldar Properties full year 2023 earnings call. My name is Bruno and I'll be operating your call today. During this presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you're streaming online, you can also type in your question in the text box provided. I'll now hand over to your host and CEO, Talal Al Dhiyebi. Please go ahead.
Thank you. I would like to thank you all for joining us today to discuss Aldar's financial and operating performance for full year 2023. Aldar has continued to make strong progress on the implementation of its growth strategy. And this ongoing transformation is evident in our 2023 financial results. We achieved 40% year-on-year growth in net profit, which reached AED 4.4 billion. With EBITDA rising 39% year-on-year to AED 5.1 billion. This strong performance resonated across all our core businesses, complemented by our sector and geographical diversification initiatives that have further driven significant value creation. Aldar Development recorded AED 27.9 billion in sales and a backlog of AED 36.8 billion. We've effectively doubled our sales for three consecutive years from AED 3.6 billion in 2020 to just over AED 7 billion in 2021, AED 14 billion in 2022, and AED 28 billion, as I just mentioned, in 2023.
Aldar records 14 launches across the U.A.E., among them the debut offering in Dubai where we formed a JV with Dubai Holding and launched Haven by Aldar in the same year. We also launched a new luxury product with Nobu Residences in Saadiyat, Abu Dhabi, another debut offering in [Ras Al Khaimah], all attracting strong demand. Overseas and resident expat buyers accounted for 66% of U.A.E. sales, growing significantly year-on-year, reflecting the strength of Aldar's brand and reputation for creating market-leading lifestyle communities. As our development is now delivering at significantly elevated sales run rates, supported by our backlog, we expect to maintain this momentum as we scale the platform and deliver the differentiated and community-focused master-planned developments that we are known for. Aldar Investment continues to excel as an active asset manager and reported 40% year-on-year growth and adjusted EBITDA to AED 2.3 billion.
Through disciplined capital deployment and key acquisition over the last two years, we have rapidly expanded the platform, investing significantly in Grade A commercial assets, logistics, Aldar Estates, and Aldar Education. 2022 acquisitions have ramped up, exceeding underwriting expectations, and are meaningfully contributing to the bottom line. Occupancy at the prime ADGM Towers in Abu Dhabi's financial district has increased to 96% from 76% since it was acquired in mid-2022. The repositioning of Yas Mall has been a great success, resulting in near full occupancy and increased footfall. Both assets are contributing meaningfully to fair value. Logistics, education, and estates platforms have scaled up and will continue to grow in the coming years while complementing and adding value to both our development and investment property portfolios. More than ever, Mubadala is realizing synergies across its platforms.
Our teams are collaborating closely to drive growth, created value, and deliver a progressive sustainability agenda. Turning to slide four, I'd like to touch on the progress we achieved since embarking on our transformational growth agenda in 2020. This period marked the introduction of our revamped operating model alongside an ambitious growth and expansion strategy, ushering in a transformative era for Aldar. Over the last three years, we experienced remarkable growth on a group and business level. Both group EBITDA and net profit more than doubled compared to 2020. Our development sales surged nearly eight-fold, and our revenue backlog experienced exponential growth, achieving a 10-fold increase in the past three years. Meanwhile, our assets under management have more than doubled. And finally, Aldar's total market capitalization has increased by almost 70% to over AED 42 billion.
As a U.A.E.-centric real estate company, we see substantial and ongoing commercial opportunity as our home market of Abu Dhabi builds on its status as an investment, work, and lifestyle destination. The government is implementing a clear plan to drive capital inflows, provide world-class infrastructure, and invest in renewable and clean energy to achieve net-zero emissions by 2050. An increasingly vibrant and diversified economy will fuel further demand for high-quality real estate in the coming years. As a differentiated, community-first, and experience-focused developer, Aldar is well positioned to play a central role in the country's socioeconomic progress. That is why we are and have been very focused on driving scale and enhancing diversification across our portfolio. Over the last three years, we have made strong progress adding significant exposure to commercial, logistics, and real estate services asset classes.
Through our recently AED 5 billion develop-to-hold pipeline and AED 1 billion investment in logistics, we're also ramping up our commercial, retail, hospitality, and logistics portfolios, leveraging our development and asset management expertise to drive margin expansion and returns. In parallel, we have expanded our platform into Dubai, Ras Al Khaimah, neighboring GCC, Egypt, and recently into the U.K. and Europe. We see strategic opportunities beyond the U.A.E., which provide us with exposure to low-correlated markets, and asset classes which are much more prevalent and established in more mature markets. In 2023, we acquired U.K.-based developer London Square, invested in real estate private credit alongside Mubadala and Ares Management, while also entering into a strategic partnership with Carlyle to invest in direct logistics and self-storage assets. Our international footprint will remain a relatively small but important part of our increasingly diversified business.
Turning now to slide five, I'd like to highlight our core growth drivers as we look ahead. On our development, we want to extend our market leadership as the U.A.E.'s leading destination builder that focuses on providing exceptional experiences to the communities we serve. We will do this in our home market and internationally through strategic land bank replenishment, diversifying our target customer segments and product offering. From a customer engagement and journey perspective, we continue to develop our digital offering, creating new sales channels and growing our global brokerage network to drive synergies and cross-selling. We also continue to explore key regional markets such as Kingdom of Saudi Arabia, and our focus remains on finding the right partner to gain a foothold, as we did with Dubai Holding in Dubai. Looking at all our investments, we benefit from a strong pipeline of potential deals across our target markets.
And through our develop-to-hold pipeline, we aim to enhance our disciplined expansion across core U.A.E. markets. We will lean into sectors such as logistics, where we are still underway, while exploring diversification into new products and alternative asset classes. Across our strategic investment platforms such as Aldar Education and Aldar Estates, we continue to pursue further growth, drive value, and broaden their respective offerings through bolt-on acquisitions. We benefit from a high-quality asset base with strong positioning. Leveraging our asset management capabilities, we are further optimizing retail assets and transforming certain hospitality assets in line with our resort destination focus. As we scale the Aldar Investment Platform, enhance earnings growth and diversification, we maintain readiness to crystallize value through corporate action or monetization.
Turning on to slide six. I will elaborate further on how we are approaching the international expansion to enable and support our sector diversification strategy. We see a number of long-term trends in mature markets that will also shape the U.A.E. in coming years, and we want to ensure that Aldar is prepared and capitalizing on emerging opportunities by leveraging our market leadership and strong brand recognition. These trends include wing cities, digitalized economies, and the rise of e-commerce, aging population, and sustainability. This approach enables us to hone our international market focus and deploy capital into key areas such as home building, real estate credit, and alternative real estate opportunities. In practical terms, on top of what we have announced today, we are exploring expansion into a number of alternative growth real estate asset classes.
One important point to make is that exposure to these sectors and markets will remain ancillary, and it's around 20% of our capital deployment. Our home markets and core sectors will firmly remain our focus and predominant destination for capital deployment. A key element of our approach is to bring benefits back to Aldar's U.A.E. business and support our future growth. So an enlarged sales network and leveraging client synergies through economies of scale from an increasingly integrated platform through strong strategic collaborations and partnerships and by building expertise and bring back know-how in trends shaping global markets. With that, I'll hand over to my colleague Faisal to talk you through the details on capital deployment, financial, operational performance, sustainability, and our guidance for 2024.
Thank you, Talal. Moving on to slide seven, we will take a look at our 2023 capital deployment. We have been fully committed to deploying capital and investing in our growth. We have always chosen to remain highly disciplined in how and where we deploy capital, despite benefiting from a strong investment pipeline. On the development front, we transacted on AED 5.9 billion of capital, bolstering our land bank through the acquisition of Al Fahid Island, and we look forward to breaking ground and delivering a unique destination offering to the market later this year. We also executed on our Dubai expansion through our JV with Dubai Holding in an accelerated timeframe. Internationally, we acquired London Square. I look forward to driving growth through land acquisitions, where we have already made some progress in that regard.
On the Aldar Investment Fund, we deployed almost AED 1.9 billion of capital, with an additional AED 1.3 billion committed for the coming years. We expanded our platform in Dubai with the acquisition of 7 Central and Kent College, further into Ras Al Khaimah with the staff accommodation, and further into the MENA region through Aldar Estates' merger with Eltizam. We also committed first-time capital to private real estate credit and a direct investments into logistics and self-storage assets alongside key partners. Looking ahead, vast majority of deployment will be on income-generating assets across our core segments and new growth centers of focus. But there will also be some development and develop-to-hold investments as we increasingly leverage our integrated platform to drive returns, diversification, and scale while introducing offerings that bridge the existing gaps in the market. Turning to slide number eight for more detail on Aldar Development.
Ahead of diving into the detail, just a brief mention on the reassessment of our operating segments in our financial statements going forward. In line with management reporting, London Square and SODIC will be presented together as an international subset replacing Egypt subsidiaries. Moving on, we continue to operate at a significantly elevated level with sustainable scale. Development sales have been doubling every year since 2020, reaching AED 27.9 billion in 2023. Additionally, our development revenue backlog reached an all-time high, AED 36.8 billion, providing strong visibility on future earnings. Overseas, the resident expat buyers played a crucial role in our success, collectively accounting for 66% or a record AED 16 billion of U.A.E. development sales. This contributed to our impressive full-year U.A.E. sales of AED 24.3 billion and U.A.E. development revenue backlog of AED 29.1 billion, increasing 141% year-on-year.
Notably, U.A.E. sales to overseas buyers tripled to AED 6.8 billion from AED 1.8 billion in the previous year, underscoring Abu Dhabi's growing appeal as a global investment and lifestyle destination. SODIC maintained its momentum in Egypt with healthy demand for recent launches, which witnessed price appreciation. SODIC sales increased 42% year-on-year in Egyptian pound terms, driven by strong demand across its key markets. We remain committed to expanding our Saudi platform in Egypt, with SODIC acquiring two new land plots and partnering with Nobu for two new projects. We also took significant steps towards geographic diversification in 2023. As Talal mentioned, we entered the Dubai and Ras Al Khaimah markets with successful project launches and acquired London Square, a U.K.-based mixed-use developer, marking our first international expansion beyond the MENA region. These initiatives position us for further growth and value creation in the years to come.
On the development platform, our development platform continues to demonstrate strength and potential, and we are confident in our ability to sustain growth, earnings growth by executing on our plans for enhanced scale. Turning to the Aldar Investment Platform starting on slide number nine. Ahead of going into the detail, a brief note on the change to the operating statements as a result of the formation of Aldar Estates. Consequently, Aldar Investment's previous subsegment called Principal Investments is replaced by Aldar Estates with pivot, and next file cloud will be represented within other subsegment alongside other unallocated items. Moving on, our ongoing pursuit of diversification and expansion has not only resulted in outstanding performance throughout our portfolio, but has also solidified our position as the prominent real estate investor and asset manager in the region.
Full-year revenue and adjusted EBITDA both rose 40% year-on-year, reaching AED 5.8 billion and AED 2.3 billion respectively. This was driven by strong operational performance across the business and positive contributions from acquisitions made in 2022 and 2023. We took substantial strides to expand the platform, which paved way for new growth opportunities and synergies. This strategic approach not only increased our assets under management to AED 37 billion, but also further diversified our portfolio across asset classes and geographies. This year we ventured into high-growth alternative investments including private real estate credit and health coverage alongside Carlyle, while simultaneously bolstering our Aldar Logistics, Aldar Estates, and education businesses. As Talal mentioned, we also recently announced an overall combined AED 6 billion investment in develop-to-hold pipeline across a range of commercial, retail, and hospitality assets, as well as logistics assets in Abu Dhabi and Dubai.
Once these assets are completed, they will be part of the Aldar Investment Properties portfolio and will bolster long-term capital appreciation. Staying with Aldar Investment on slide number 10, our income-generating investment portfolio continues to perform exceptionally well, driven by active leasing strategies, increasing rental rates, and higher occupancy levels across the portfolio. Within our commercial property segment, we have seen continued strong demand for prime Grade A office space from GREs and international corporates. This is evident by the near-full occupancy across our ADGM HQ and International Tower, with solid pre-leasing activity for the upcoming Al Maryah Tower, scheduled to open in Q1 2024, with a 65% pre-lease rate. Meanwhile, our retail portfolio continues to benefit from robust consumer confidence, which has supported high occupancy and solid leasing activity.
As Talal mentioned earlier, the repositioning of Yas Mall has been a great success, resulting in 97% occupancy, 30% increase in footfall, 22% rise in tenant sales. We aim to replicate this achievement with the redevelopment of Al Jimi and Al Hamra malls. Aldar Education continues to perform well, marked by a 25% year-on-year increase in student enrollment in our operated schools, bringing our total student count to over 38,000 students, driven by the acquisition of new schools. This is expected to further expand with the completion of three greenfield schools this year, including Yasmina British Academy, Noya British Academy, Cranleigh Bahrain, and an additional new school in Saadiyat Island in the following academic year. Meanwhile, Aldar Estates has undergone a tremendous transformation over the past year, driven by the strategic merger with Eltizam Asset Management and a series of key acquisitions scaling our real estate services offering.
This culminated in doubling the size of the portfolio, firmly establishing the business as the largest integrated property and facility management platform in the region. Turning to slide number 11, to look at our balance sheet. We remain in a strong position with AED 2.9 billion of cash and AED 7.5 billion of committed undrawn facilities. We remain active on the treasury front during the year and successfully raised $ 500 million through an inaugural green sukuk, which forms part of our $ 2 billion program aligned with the Aldar's Green Finance Framework. Additionally, we secured AED 4.8 billion in debt funding, including AED 2.5 billion in sustainability-linked loans with leading financial institutions, further strengthening Aldar's financial strength while promoting the peer development. This has extended the weighted average of the life of debt for the group to 5.1 years with no material debt maturities until 2025.
Our robust balance sheet, financial strength, and liquidity place Aldar in a strong position to continue pursuing its growth agenda and expansion strategy centered on its core U.A.E. market. The next slide provides an update on Aldar's sustainability progress. We remain incredibly active across our sustainability efforts and initiatives during 2023, collaborate with a large number of partners to support our aim and drive a lasting and positive impact across the communities we serve. Our strong commitment to ESG is reflected in industry-leading ratings we achieved on ESG risk rating of low risk from Sustainalytics with a score of 15.9 and maintained the top spot in the GCC and top quartile globally on the Dow Jones Sustainability Index. We also retained the BBB rating from MSCI, further demonstrating financial strength and responsible governance.
From an operational perspective, we continue to upgrade our existing portfolio and have expanded the successful energy retrofit initiative while continuing to certify assets in line with LEED Gold and Platinum standards. We actively participated at COP28, unveiling strategic partnerships to support our 2050 Net Zero Plan. To eliminate, to help eliminate landfill and food waste, Ecoloop was launched, a joint venture with Tadweer and Polygreen. In the provision of solar energy to our assets, we partnered with Yellow Door Energy, and to manage cooling, we joined forces with Johnson Controls. Participation at COP also saw the launch of the Built Environment Sustainability Movement led by Her Excellency Razan Al Mubarak, UN High-Level Champion for COP28, and supported by Aldar and other U.A.E. top developers to guide the industry in their net-zero transition.
These initiatives along with our ongoing commitment to innovation and partnerships, solidify our position as a leader, as a leader in sustainable real estate, creating long-term value for our stakeholders. I would like to conclude by providing you with our 2024 guidance. You will notice we are slightly modifying our guidance metrics. In order to provide more visibility and clarity, for the group, we are targeting between AED 6 billion-AED 6.3 billion in adjusted EBITDA, which equates to an uplift of about 40% from 2023 levels. We continue to see positive sentiment in the U.A.E. buoyant real estate market and remain bullish in sustaining elevated sales run rate. Therefore, we are guiding between AED 29 billion-AED 31 billion in group development sales. Accordingly, the development business is targeting an EBITDA of AED 3.9 billion-AED 4.1 billion. For our project management services platform, we are targeting an EBITDA of AED 500 million-AED 550 million.
As our investment continues to deliver strong operations performance and will pursue further value-accretive acquisitions to drive growth. Consequently we' re guiding for AED 2.3 billion-AED 2.5 billion in adjusted EBITDA for 2024. While we remain cognizant of the uncertain global macroeconomic and geopolitical environment, Aldar is well positioned to benefit from the U.A.E.'s strong fundamentals. With that, I would like to conclude the presentation and open the floor for questions. Thank you.
Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad. To withdraw your question, star followed by two. And please do also remember to unmute your microphone when it's your turn to speak. Alternatively, if you are streaming online, you can text in your question on the chat box provided. We will now pause momentarily to gather any questions. Okay, we do have our first question coming through. It comes from Mohamad Haidar from Arqaam Capital. Mohamad, your line is now open.
Hello everyone. Congrats on the strong results. So we're looking at the capital deployment, AED 9 billion announced in 2023, another AED 6 billion on develop-to-hold. A p art, a big part of these is still not deployed. So what's your guidance on CapEx for the next three years, if possible per annum, 2024, 2025, and 2026? That's my first. And how will this CapEx be funded? Given that the available cash is AED 2.9 billion, will you be abiding by the existing LTVs for each segment? That's one. Two, what is the target NOI from these investments, especially on the international investment, given that there are many counterparties involved and ownership is not full and the tax regime is a bit different? So what NOI should we expect for Aldar parent shareholders from these investments other than the guidance provided for 2024? Thank you.
Thank you, Mohamad. So Faisal here, just to answer your first question on capital deployment, the AED 9 billion is split. I think AED 5.7 billion is development. Then the other AED 3.1 billion is investment. The largest part of development is the acquisition of Al Fahid and Dubai Holding, all of which are paid through a payment plan over the next five years. And then on the investment side, AED 1.9 billion was put up front while the rest are commitments that are going to be deployed over the next few years as they get called. Except to the CapEx guidance, this is not something that we on future projects, but on the current project. You take the AED 6 billion, which is develop-to-hold the pipeline that we announced. This typically gets developed over a three- to four-year period. You can assume an S-curve over that development.
In terms of how they will be funded, they will follow our debt policy, which on the investment side is 40% LTV in line with our financial guardrails. Moving on, ROI on the international investments. It depends on the asset class. You look at home building or development, which is London Square, we're looking at least at high-teen equity returns. Look at something such as logistics or credit, then you're looking at something between low- to mid-teens in terms of equity returns. And then on the tax side, yes, you're right, those markets do have taxes, but obviously there are ways to structure around avoid, minimizing the taxes as much as possible, as optimally as possible.
Thank you, Faisal. Any update on the CIT for, for the U.A.E.? Is it going to be 9% across the business or you're looking also for alternatives on that one?
It is 9% on the face of it. We've done a detailed impact assessment getting ourselves ready internally for its implementation. There's been a number of legislations announced by the U.A.E. government including the transitional tax rules when it comes to development. Just to reiterate, what will happen is our land bank will be assessed as of the end of 2023, and then that fair value will be used in terms of the COGs when those lands are monetized and built. So we're effectively not going to be paying taxes on the historical fair value gains recognized on those plots and unit sales. There was a legislation on REITs which we're also closely following. We're still waiting for further clarity on that. Otherwise on the global minimum tax, that hasn't yet been announced by the U.A.E. in terms of timing, so we're still waiting for the information.
Amazing. Thank you very much.
Our next question comes from Taher Safieddine from JPMorgan. Taher, you may proceed with your question.
And sir good afternoon, gents. It's Taher from JPMorgan. Again, congrats on a solid set of results and an ambitious 2024 guidance. If I can just start from the guidance and just break it down into Aldar Development and Investments, I mean, effectively what you're telling the market is you're going to do another record after a very solid 2023, right, in terms of, in term of the sales. So if I can just stop there. Is this sales number including Al Fahid Island, including also further launches in Dubai? And maybe if you can share how much of that will be in the U.A.E., that would be very, very helpful.
And I think the second question on Aldar Development, if we look at the massive growth in the backlog and how you know the P&L is transforming on the development, is it fair to assume that now we are moving into a very high-growth phase for revenues and EBITDA on the development side, just given, you know, the size of the backlog, at least in the U.A.E., which is AED 29 billion and the average tenure of 29 months. I mean, I'm just, you know, doing a calculation and we could easily see a revenue run rate north of AED 10 billion per annum. So maybe if you can share some color there on Aldar Development KPIs. And then I have another question following on the recurring portfolio, please.
Thank you very much. It's Talal. So yes, i t's been a record sales year of the size of AED 30 billion. We're looking to maintain that run rate going into 2024. There's been good momentum since the start of the year. We have been active in the market and had a couple of launches so far on Yas and Saadiyat. What's interesting is what I mentioned earlier in terms of the profile of the buyers that are different. There's been steady price increase including, you know, places like Nobu on Saadiyat. Yeah, it's a boutique development, but prices that have never been hit across the Abu Dhabi market. Sama Yas on Yas is the highest price point per square foot that Yas has ever seen. We've been selling in Yas for a number of years, and that's not even a waterfront product, albeit a parkside luxury living. So new products, new price points, new profile of buyers.
It's part of a calculated diversified strategy on how we are maximizing the value of our destination, playing in each one of those segments, some of which that we did not penetrate in the past. Some of those segments predominantly in luxury and the ultra-luxury segments like Nobu with higher margins, obviously a lower percentage of overall sales compared to the overall portfolio. But as a blend, we continue to maintain the guidance in terms of margins, at least for our U.A.E.-based developments. I will continue to be launching projects in both Yas and Saadiyat. We will, we will plan to bring product on Al Fahid Island this year as we are progressing with the master plan approval and then the product. So hoping to bring product to Al Fahid in the second half of this year.
In Dubai, we, as part of the partnership with Dubai Holding, we have three sites. We launched Haven, which is predominantly sold out. We still have a number of units on hold that are pending final approval, so there's a small phase left on , on Haven, but you can consider that to be 80% sold. We'll be launching our second development in the first half of the, of this year as well. So that will contribute towards our sales launches this year as well from the Dubai market. In Ras Al Khaimah, we launched Nikki and Rosso, where that's a phased release. It's a brand new and hot market with a lot that's been going on and probably the third most attractive Emirates after Dubai and Abu Dhabi in terms of real estate and tourism performance.
We've seen, you know, much higher than we had expected sales, but other than the performance of our hospitality assets and the transformation of our retail assets in that market. Back to your question on sales perspective, that will be another contributing factor. Obviously we will have the contributions from SODIC. In Egypt, as well as London Square in the U.K. Overall, the U.A.E., we expect to remain within that overall AED 30 billion sales number, as I would say 70%-80% of those sales will predominantly be from the U.A.E., albeit SODIC has, you know, phased up in town significantly over the last few years. But over the next few years, we would see a significant ramp-up of London Square as we want to ramp up that platform and extract more value and also you know enter new segments in the London market.
So we will provide further guidance at future calls. I hope I answered your question when it comes to development. On your run rate, sorry to answer the question, we announced a week ago or a few days ago a large awards between our own projects and government projects. So a lot of what we have launched, with the exception of the last three or four projects, including Gardenia and Nobu, have all now been awarded. So there will be significant ramp-up of development work under progress and IFRS revenues when it comes to the development revenues. So on a steady state, you know, very close to the numbers that you had mentioned in terms of how you would model that going forward. I hope I answered your question on the development side.
Yes.
I think you have one more.
Yeah, this is, this is very clear. Yeah, just maybe one more on Aldar Investment. If I look at the adjusted EBITDA in 2023, it's around AED 2.25 billion, which is again above your guidance. I'm just looking at the guidance for 2024, AED 2.3 billion-AED 2.5 billion. I just want to understand the build-up of this number because it just feels it's a bit more on the conservative side given the deployment that you've done in 2023 in terms of the acquisitions. So maybe you can just help us understand, you know is this more like-for-like? Does it excludes you know the acquisitions that, that you've done? I'm assuming the develop-to-hold are, are not into these numbers. But maybe if you can just also help us understand you know Aldar Investment in terms of EBITDA guidance in 2024?
There's a few things happening, Taher. So on the residential portfolio in [Al Rayyana], we had a corporate tenant terminate, and so there was a one-off termination fee recognized this year, so 2023, sorry. 2024, you can see the ramp-up of that coming back again. That thing happening on the retail portfolio, obviously the transformation of Al Hamra and Al Jimi, which will also start picking up as those projects are completed. And then l astly, the hospitality portfolio, which has done extremely well. We are planning a major transformation, repositioning of those assets. So we will have some disruption to income on the hospitality portfolio. Otherwise, it's business as usual, the portfolio continues to perform extremely well. We have the leasing cycles kicking in on a number of those assets where rates continue to go up.
This guidance does include some capital deployment, but you'll notice that we took out the number from the guidance itself in terms of equity deployment. Because it becomes you know very subjective in terms of when we will deploy that capital. We want to make sure that whenever we put that capital out, we put it into the right assets for the right price. We don't want to be pressured just to put money out. However, I mean on the call, I'm very happy to tell you that we are committed to deploy at least AED 4 billion-AED 5 billion in terms of equity this year into specifically recurring income assets. When those will happen, I cannot say early in the year or whatnot, we do have a significant pipeline, various deals across asset classes, across geographies who are quite well advanced. So we're very confident again that we will be able to deploy.
On your D-Hold question, again, the announcement, we're very clear that the completion of that portfolio, which is at various stages, is between 2025 and 2027. So there's no contribution of the D-Hold pipeline that we announced other than obviously the repositioning and extracting value from the existing portfolio. The D-Hold income will start to ramp- up predominantly, you know, very late 2025, second half of 2025, and then rolling up into 2026 and 2027 in a different profile based on the different assets that are mentioned in that press release.
Okay. Thank you. I'm just to follow up, you said you are committed to how much in terms of deployment in 2024?
AED 4 billion-AED 5 billion of equity [inaudible]
AED 4 billion-AED 5 billion. Okay, the further deployment of for and the recurring portfolio?
Yeah, of income-producing assets, not assets that are currently.
Okay, perfect. Thank you very much.
You're most welcome, sir.
As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad. If you're streaming online, please type in your question in the text box provided. Our next question comes from Steve Bramley from HSBC. Steve, your line's now open.
Lovely, thank you very much. Congratulations on results, and clearly very impressive. I got a couple of questions, if I may. The first, just on your development, the gross margins in the fourth quarter came in, we think, at around about 33%, just looking at the materials that you've provided. Last year, your fourth quarter was low compared to the previous three quarters as well. Can you just give us a little bit of detail, a little bit of insight into why that gross margin dropped?
Sorry, Steve, we couldn't hear you well. Where did you say the margin dropped?
All right, let me pick the phone up. Can you hear me now?
Yes.
Is that any better? Yeah, okay, sorry about that. So well, anyway, I just started off by saying congratulations on results, I've just got a couple of questions. Firstly, just on your development margins, looking at the materials that you've provided, we note that your total gross profit margin for property development sales business was down to about 33%, which looking at the yearly run rate on a quarterly basis looks you know meaningfully lower. Can you just give us a little bit of an insight, a little bit of detail as to why that's coming in the low 30s?
I think last year we had a bit of delay when it came to the award of some projects, that sometimes adds a little bit of volatility to the quarter itself. I wouldn't focus too much on the quarter. I would focus on the yearly results. You'll notice that our overall margins are in the high 30s. Usually that margin creation is driven by land sales, which have a high margin, and our development land bank in Abu Dhabi is obviously sitting at a low cost basis, which is also driving that higher margin. We have started paying for land now, both in Abu Dhabi and Ras Al Khaimah, which is why we are guiding for 30%-34% gross profit margin on average over the long term.
Right, okay. Thank you. Thank you for that. The other question I had, more alternative investments, which I think always sounds interesting when real estate companies start talking about deploying capital into alternative investments. And I realize for your business it's this percentage, quite a small percentage. But having covered U.K. and European self-storage companies, and there are some big companies out there in those markets, one of which is tied up with Carlyle, I don't know why you're bothering because it's a highly fragmented market. It's very difficult to deploy capital. IT systems, complicated, expensive, and mandatory within the self-storage space. So what's your thinking? Are you actually thinking about being a bit more aggressive from an M&A perspective? Because from a ground-up perspective, I think it would take you quite some time to build a meaningful platform. So can you just give a sense as to why you're going down that route?
So Steve, just on the strategy, not finance capital allocation. It's not passive the way we're doing it, like London Square, either by acquiring a platform or doing it with a JV partner who's an expert in this space. On self-storage, we found it interesting because part of the strategy is bringing that know-how. So we want to build similar asset classes here in the U.A.E. Self-storage is one of them, obviously, with the strong macroeconomic backdrop that we have in the U.A.E., we see that this is something that can have a lot of potential here. Senior living, for example, with the change in regulations we've seen on the visa front, is also starting to become extremely interesting. I go back to what Talal said. Our strategy will always be focused majority in the U.A.E.
But we did decide that this was the time to go out internationally, allocate some capital there, where to be honest, we did struggle so much deploying into alternative asset classes here. It's a function of the market itself. The market is still maturing. We think this strategy, given where the market is there today in Europe, will pay off over the long term.
Right. Is the, is that. Thanks, thanks Faisal. I mean, is the thinking as well similar for logistics? Because, again you know, your pan-European markets are much more mature in terms of yield structures than you've got out here. So what's your thinking there with logistics? Or have I misunderstood? Is your logistics focus more in the Middle East, or are you also looking to deploy capital in pan-European markets?
Hi, Steve. It's Talal. Thank you for your question. I mean, when we looked at the high stake, when we look at the overall logistics sector, we're looking at in this alternative asset classes, it's logistics, it's, you know, warehousing, self-storage, purpose-built facilities, there's labs, there's lots of things that are happening in space in different markets. We think globally and historically the way it is in many markets is you're absolutely right. It has been a very, very fragmented market. There's been a lot of focus on it lately with some, you know, big purpose-built facilities. But the majority of the market has been very very either fragmented and where it's not fragmented, it's non-transactable. So it is not easy and it does take time. That's what we started over here in, in the U.A.E. I'll come back to the U.K. and how it works.
But in the U.A.E., we started by an acquisition of Abu Dhabi Business Hub. We went into a number of partnerships with key port operators that had a lot of existing clients and needed a development partner to come and build purpose-built facilities for them. We're also, you know, sort of more speculatively building warehouse and storage facilities in key areas that we can underwrite. As Abu Dhabi and Dubai is growing, so predominantly in that corridor between Abu Dhabi and Dubai that are only an hour away. But in fact, the Abu Dhabi port, the KIZAD, and Jebel Ali Free Zone are only 20 minutes away. We own a lot of land within that corridor that we are focusing on. Obviously, the opportunities over there with a partner, well, in that particular space, it's Carlyle.
Have a team that's been very active in the ground in terms of deal origination, underwriting, coupled with our expertise in terms of what we can do. Some of those sites, when it comes to warehouse and logistics, have some greenfield opportunities that can go out and expand close by as well, which is something that we're actively looking at. And also when we talk to a lot of the clients, that we currently have or that we're targeting, this concept of becoming a regional landlord for logistics is what we think quite a compelling one. So when you talk about Saudi and even other emerging markets where some of their currencies may have been under pressure, a lot of these international players do not mind contracting in more stable currencies being dollars or euros. I'm talking about outside Europe, in emerging markets.
You see this in India, Türkiye, you see it even in Egypt. So this concept of, you know, maybe in the past, you know we saw retailers from the region coming and building up capability and becoming regional shopping mall landlords, not an aspiration that we necessarily had, but we have that sort of aspiration and bottom-up thinking when it comes to the logistics space. And we think we could generate a lot of alpha given our sort of win-win approach with customers. So it's still an area that we have not deployed as much capital as we would have liked to. It's a sector that we significantly believe in, and we would really like to grow significantly so that it has a proportionate weight and distribution alongside, traditionally, the resi, commercial and, and retail portfolios.
I hope that answers you sort of more at the macro level, Steve, but happy to have any follow-up questions on that.
Yeah, yeah. That was very helpful. Thank you very much to that. Just, just a closing sort of question on that then. From a point of view of management time, you know, what is the incremental impact in order for you to run these sort of what will start off as fairly disparate businesses in alternative assets? Do you have to spend much management time doing this or is it relatively little?
So Steve, a great question. And this has evolved significantly from 2020. We announced our operating model change, which if you look at the impact of that change compared to our peers on the development business, on the investment business, education, estates, more recently with logistics both domestically and internationally, education business moving into Dubai, into Ras Al Khaimah, acquiring new schools, repositioning them. That operating model is, and again when you talk about management, the way it's driven, so myself, Faisal, our capital allocation functions at the group look at capital allocation across. So the businesses, whether they're 100% owned like Aldar Development or Education or Hospitality, or majority owned like Aldar Investment Properties, follow a few years ago, are all fighting for capital. And we want to have that right risk reward and that right capital allocation on where we believe the market is going. At some degree, we're also a, also market maker.
Other than that, in a very disciplined way, allocating capital to these businesses is that suit our transformation growth agenda, it is then putting the right management team with the right incentives and clear direction on what they need to do. If I take any one of our businesses, even if I take SODIC in, in Egypt, and we look at the impact of that business with where we started from a sales perspective when we bought that EGP 7 billion or EGP 8 billion, EGP 28 billion a few years ago. We came in, we made management changes, we restructured the business, we established the right governance. We sit on the board, we do not manage that day-to-day even though we, we control 85% of that listed company. On Aldar Logistics, we bought, you know, 70% of that platform. From the previous owners. We kept them. They have some management capability.
Brought in our financial engineering to restructure some of the debt over there and to accelerate their growth, optimize their facility management costs through our platforms. At London Square, we're going to be doing the same from incentivizing management team through long-term incentives to go out and acquire land that we think is in the right areas because they were capital constrained in the past, putting our disciplined growth that we have over here, but also flexing our muscles and our balance sheet, okay, compared to many others sort of here in the U.K. and elsewhere, where we are able to significantly drive synergies when it comes to even the debt side. So we're really about value creation. This is a big transformation of Aldar World. But in each one of these businesses, this is not something that we want to have the right competent incentive management team that work together.
And part of what we do at the group as well, and you see it a lot coming across in everything that we say, is making sure that they are then revenue and cost synergies and cross-selling across the group in everything that we do, whether we are handing over a unit, launching or doing a sales campaign with a major social global influencer, leveraging all of the brands together. And that's how we think we're able to extract more value out of each one of those, and that applies to every part of our business.
So that's where, as you know, I would say the executive management team, we're focused, but it is very much having competent chief executives of each one of these sort of half a dozen key business units that are very not only P&L focused, but P&L, customer, sustainability, operationally focused to drive the value creation in their respective businesses. That's what allowed us to where we are today, and that's what's going to be the key ethos of how we grow sustainably in the future.
Okay, thank you. That's very, very clear. Thank you very much.
Thank you, sir.
Our next question comes from Mohamad Haidar from Arqaam Capital. Mohamad, your line is now open.
Thank you. Normally when you acquire an income-generating asset which is full or complete, the target yield used to be 7%-8%. You enhanced it to 6%-6.5%. Given that you are developing the assets today on the AED 5 billion or AED 6 billion in the coming few years, should we expect like a gross yield in the range of 10%-11% and eventually like gross profits about AED 500 million from these assets?
I'd say 9%- 10% rather than 11% is what we generally guide across that for the ones that we are developing on a stabilized basis. Obviously there's significant, you know, you'd see cap rate compression based on the quality of those assets, the quality of the tenants and how fast we can ramp it up and so on. Really driving yield compression. What we still think is a significant value creation. This applies to the D-Hold, but it also applies to our wider investment portfolio because we still see opportunities for significant further sustainable yield compression, given how attractive the market has been from foreign buyers. We still need more institutional buyers, and that will help drive value in that developed world, but also in our existing portfolio, Haidar. I hope that answers.
Excellent. Excellent and Talal, given that, these will be developed on existing land which was residual, now it will be developed. Will that trigger immediately like a revaluation of assets or gains on the P&L?
They move, yeah to our IP. They go from land for sale into IP, and a lot of it becomes IP. Once the asset is operational. So yes said once the asset stabilizes, yes, because we fair value our IP, you will see a fair value gain kick in.
One thing I'd like to add on.
Thanks.
For, you know, connecting the dots with some of the things that you guys are saying. The majority of this developed-to-hold portfolio is on Yas and Saadiyat. At the same time where we are going through our largest wave of handovers at Yas and then soon at Saadiyat.
That rise in population as well as incremental benefit and the attraction of having retail, hospitality, and office assets in both Yas and Saadiyat also creates value for our existing destinations in general our existing assets like Yas Mall, our existing, you know, hospitality assets on the island that will benefit from the increase in office. We always talked about in the past we had, you know, leisure and residential. We added the office when we built the media zone. We don't own that, we earn development fees, but that changed the dynamic by adding a thing, and we've seen a significant increase in F&B. We're now going to benefit from, for example, the Yas office building or the Saadiyat business park. That will also have incremental impacts on Yas Mall or Saadiyat growth in the future, which is part of the value creation story.
We always talk about being a destination lifestyle integrated developer. Same applies to our schools.
Excellent. So Talal, this will be reflected in higher price points? For your residential components in these islands.
We can see that today. It's whether it's in price point based on the products that we're doing, but also in terms of the attractiveness of what we give. The lifestyle offering on Yas Island or on Saadiyat Island today from an amenities perspective, from an infrastructure perspective, from a safety and security perspective, I say this with all humbleness, is second to none globally. You may get a beautiful view or beautiful weather elsewhere in the world, but it may not be safe. Or it may be safe and you may have significant traffic. Or if you don't have the traffic, you will not have the high quality of asset and activation that you've seen where, you know, you have Hamilton show, Mariah Carey, you know, at the same time. 3 km away from each other.
So yes, that's why people from around the world have been coming and wanting to live here. That's why we went into Dubai, or Ras Al Khaimah, as our debut. People respect what the Aldar brand is, which is customer-centric. Okay so we are a people-centric, we are a people-focused business, and that's what we thrive on, and people that are connected to their customers. So when we went into Dubai, we're not on the most prime and highest strip in Dubai, yet we achieved price points on that corridor in Dubai, on the Mohammed bin Zayed Highway and Emirates Road, that our competitors in that segment have not hit before. We hope to do that again in our next two, in our next two launches. So it's the product, but it's also what we bring and, and that lifestyle offering even in the more competitive markets.
Very clear. Thank you very much.
Our next question comes from Taher Safieddine from JPMorgan. Taher, your line is now open.
Yes, hi. Thanks, [Jan]. Sorry, I don't mean to hijack the call, but maybe just a follow-up from, from my side, I guess it's two, two-phase the question. The first one is more of an ask. I mean, if I look at, you know, the business, how it has transformed over the last couple of years, the huge amount of capital deployment, is there any possibility that we can get a better disclosure on, you know, these different assets? I mean, clearly you are expanding investment property, education, estates now is shaping up to be a next big business. There is these international, you know, alternative assets, in funds and so on and so forth.
So would it be possible maybe to get, not today, but you know in the future, just further clarity on NOI or EBITDA or any kind of metrics that also helps us you know, you know or the market to really price in these acquisitions and capital deployment? Because I think you know the problem is today, yes, you have a very full plate and you seem to be continuing to push on, on these, on these opportunities. So maybe if we can get an improved level of disclosure on that, this would be very helpful.
Definitely, Taher, we'll work on something. We always look, we listen, and we will respond and see how we can help you understand this area better in terms of the assets and also the sectors and any other, you know, comparables around it, thing that will make you extract further value that is reflected in our growth also. So h appy to do so.
Okay.
And happy to [audio distortion]
Perfect. Thank you. Okay, thank you. Much appreciated. The second one is more of a question on the core business growth driver. You mentioned value extraction. So I just want to maybe get a bit more details. Is this something that you are really talking because I remember in the previous calls you said you're not, you know, super stretched on, you know, monetization. You have it, you have a different view on that. We know that, you know, Apollo came in, you know, you put a price tag on maybe Aldar Investment Properties, you've deployed capital. But today when I read, you know, recycle non-core and mature assets and also ensure readiness for monetization, are you opening the door that, you know, potentially we could be looking at some kind of a corporate action within Aldar Investment Properties or Aldar Education or Aldar Estates?
Because, you know, along the same lines, maybe, Faisal, you know, if I look at the education business today, almost at AED 200 million EBITDA, and you have further runway in terms of opening new schools, you know, clearly the private education market in the U.A.E. has shown very strong results. And then you have a listed peer which is maybe trading at 14x EV/EBITDA, 26x PE. You know, your education business maybe could be worth, you know, AED 1 billion or something like that. You know, within this holding, maybe this is masked because we don't give it, you know, maybe the proper airtime. So I just really want to hear your thoughts on, on that angle, please.
So Taher, thank you. And look, everything that we do is about value creation. What, what you need to understand is, so, no , yes, there has been an IPO frenzy and a lot of activity that's happening in the market, and everyone has their reasons. For what they do. We're in a very privileged position where we don't have to IPO to pay off a shareholder or, you know, for any particular reason except, you know, our number one thing is how we can extract value for our shareholders. On education as an example, that business is worth AED 1+ billion today.
The growth rate that they've had over the last 10 years, five years, three years, one year shows that, you know, if I went out today and IPO'd it on last year's multiple, forward multiple, I will be leaving money on the table because we know how long it takes to ramp- up tools or tools that we bought that need to be revamped and optimized as the portfolio grows. We see significant growth in this. It also is part of the overall value creation story of what we are doing all around. Post-completion of the merger of Eltizam with our estate business, the property and facility management, we will be, you know, realizing some serious cost synergies and then in future revenue synergies.
But more importantly, building up capability in what traditionally the market has not really picked up in both Abu Dhabi and Dubai in terms of, you know, key active horses when it comes to this space, which is very, very important as the real estate market matures. We have not been very active in the past. We sold a lot of assets, including, I'm trying to remember the name of the residential building. It will come back to me. And the Westin Hotel, the golf course, and a few other assets. Whether the district cooling assets, both ones that we owned and some that we acquired as part of the TDIC transaction in 2018. The residential building was in Murjan. At the time we sold at a 6.6% cap rate and the market was valuing us at 8% for our blended resi portfolio, but we don't have enough of those.
Today we think it's important to monetize some of the assets that w e think, you know what, they are there. We have seen the real value creation. Where it makes sense to sell something entirely, we will. Where it makes sense to sell something partially, we will look at that. Whether it is M&A and corporate activity at some of those businesses, we're always open. I'm not ruling it out, we don't have a plan of I want to IPO two businesses every year for the sake of doing it. It has to make sense. We are seeing values get closer to where they need to be, but we still see significant upside and extraction of value, to summarize what you said at the start, in a very disciplined way, as we have promised you and as this management team has continued to demonstrate for quite a few years now.
Okay, clear. Thank you.
You're most welcome, sir.
We currently have no further questions, so I'd like to hand the call back to the management team for closing remarks. Over to you.
I want to thank you all for dialing in. It's been for a while, so good to connect with all of you. I thank you for your time, for, yeah for coverage and commitment as always with Aldar, and we promise you the same level of discipline, governance, and transparency as embedded in our DNA. So thank you very much. Stay safe and stay well, and see you guys soon.
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you.