Good morning, good afternoon, and welcome to the Aldar Properties 9M 2023 financial results conference call. My name is Charlie and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can do so by pressing star followed by one on your telephone keypad. Alternatively, if you've joined via the web, you may submit a question in writing via the Q&A chat box on your screen. I'll now hand over to our host, Faisal Falaknaz, Group Chief Financial and Sustainability Officer at Aldar Properties, to begin. Faisal, please go ahead.
[Non-English content]. Good afternoon. Thank you all for joining the call today for Aldar's financial results for the first nine months of 2023. I will start with a short summary of our financial and operational performance accompanied by slides which you can see via the webcast. If you are joining through the conference call, you can access the full presentation on the IR section of our website. I would like to begin with the key highlights for the first nine months of the year on slide number three. Aldar delivered an excellent set of results on the back of exceptional sales performance, continued execution of our revenue backlog, and meaningful contributions from our recurring income portfolio. In the nine-month period, we achieved revenue growth of 21% year-on-year to AED 9.8 billion, with EBITDA rising 37% to AED 3.5 billion. Net profit increased 41% to AED 3.0 billion.
On the development front, we witnessed record sales and revenue backlog, and as a result, we are revising our guidance upwards for fiscal year 2023, which I will come to at the end of this presentation. Particularly notable is the growing and strong demand from overseas and expat buyers, a trend that highlights Abu Dhabi and Aldar's continued global appeal, which we expect to grow further as we launch our first developments in Dubai and Ras Al Khaimah. As for Aldar Investments, contributions from recent acquisitions and strong operational performance have driven cross-portfolio growth. The ongoing execution of our transformational growth strategy, backed by a disciplined approach to capital deployment, SG&A spending, and geographic expansion, continues to positively impact the bottom line. Moving on to slide number four for more detail on our development.
We are now operating at an elevated and sustainable scale with quarterly sales trending upwards since early 2022, recording AED 19.4 billion in group development sales and a development revenue backlog of AED 29.1 billion year- to- date. Overseas and resident expat buyers collectively accounted for 60% of U.A.E. development sales, a significant contribution to our total year-to-date U.A.E. sales of AED 17 billion and growing UAE development revenue backlog of AED 23.6 billion. Most notably, U.A.E. sales to overseas buyers during the first nine months reached AED 4.6 billion, representing an increase of 160% on sales to the same segment in 2022, reflecting Abu Dhabi's position as a premier investment and lifestyle destination. In Egypt, we saw healthy demand for SODIC's recent launches, which witnessed price appreciation in both U.S. dollars and Egyptian pound terms.
In Egyptian pound terms, SODIC sales are up 67% year-on-year, driven by strong demand for projects across SODIC's main markets. We maintain our long-term commitment to growing our platform in Egypt and SODIC continues to pursue growth, expanding its land bank with the addition of two new plots and entering into a new partnership with Nobu to bring the international brand to two of its projects. Overall, the Aldar Development platform continues to go from strength to strength and will continue to drive earnings growth as we deliver on our plans for enhancing scale and geographical diversification. Turning to Aldar Investments platform on slide five, the business is producing strong performance across the diversified portfolio, driven by increasing rental rates and high occupancy. Moreover, the strategic acquisitions made in 2022 have stabilized and proven to be highly successful, surpassing our initial underwriting expectations and significantly contributing to the bottom line.
Adjusted EBITDA for Aldar Investments for the first nine months was up 39% year-on-year to AED 1.6 billion. I'd like to take a moment to focus on our commercial portfolio, which is performing exceptionally well, driven by robust demand for prime Grade A space from GREs and international corporates. We have reached near full occupancy on the ADGM office towers, and are seeing strong pre-leasing activity for Al Maryah Tower, with 40% of space booked ahead of our scheduled opening in Q1 2024. Beyond Al Maryah Island, we have also witnessed strong leasing activity in HQ and International Towers. Meanwhile, the retail portfolio continues to benefit from robust consumer confidence, which has supported high occupancy and solid leasing activity. Tenant sales and footfall in our flagship Yas Mall were up 26% and 33% respectively from a year earlier, while occupancy has reached 99%.
The hospitality business continues to recover well from the pandemic slowdown with occupancy increasing and average daily rates up 46% year-on-year. Aldar Education reported a 17% increase in the number of enrolled students driven by soaring portfolio of managed schools and complemented by the acquisition during the year. Lastly, on Principal Investments, which houses our Aldar Estates business, adjusted EBITDA for the first nine months doubled to AED 124 million, supported by contributions from the Basatin acquisition as well as the strategic merger with Eltizam. Turning to slide six, so far this year, we have made a number of significant announcements. I will give you a quick update on those announced since our last call.
On the development side, we entered into a partnership with Nikki Beach that will see three branded residential buildings built on Al Marjan Island in close proximity to the Rixos and DoubleTree Hilton hotels that we acquired in 2022. Following our previously announced JV with Dubai Holding, we are excited to launch our first residential development in Dubai, which will be branded Haven and offers 2,428 residential units available to buyers of all nationalities. Construction of the first phase is due to begin in 2024, with handovers expected towards the end of 2027. We also announced the acquisition of FAB Properties, further expanding our Aldar Estates platform following our strategic merger with Eltizam and other recent acquisitions. Turning to slide seven, we remain in a strong financial position with AED 3.9 billion of free cash and AED 5.9 billion of committed undrawn facilities.
Furthermore, during the first nine months, we signed AED 1 billion in new bank facilities and issued a $ 500 million inaugural green sukuk in May. Our robust balance sheet and liquidity places Aldar in a strong position to continue pursuing our growth agenda and expansion strategy over the next coming period. Turning now to slide number eight, I would like to spend a few minutes discussing progress to date on our growth and expansion strategy and our plans moving forward. Over the last two years, we have established a strong track record of executing against our transformational growth agenda to enhance scale and asset diversification. On development, we have grown our sales to resident expats and generated sizable streams of overseas buyers through the development of our international brokerage network.
On the investment front, we have expanded our commercial portfolio, specifically in Grade A assets through the landmark acquisition of the four office towers in ADGM. We have also taken additional steps to diversify our sector exposure through our investment into logistics, which we identified as a target growth segment. Finally, as it relates to geographic expansion, we have entered into new markets across the U.A.E., in Egypt, and the wider Gulf region. These have been significant milestones on Aldar's journey to become a leading regional real estate developer, operator, and asset manager. Moving on to slide nine. As you can see, we have established an operating model designed to deliver sustainable growth. Going forward, we will continue to build scale across these platforms, focusing on enhancing sector and geographical diversification. This will include investing in new growth sectors and achieving synergies across the businesses and markets.
Turning to slide 10. We will continue to take a disciplined approach to capital deployment, which has brought us success in the recent years. We seek to ensure the business adapts to and takes advantage of emerging trends such as e-commerce, supply chain resilience, digitized economies, aging populations, and winning cities. For example, we are exploring opportunities in segments such as student accommodation, retirement living, warehousing, self-storage, data centers, and last-mile logistics. Moving on to slide 11. To pursue these opportunities, we are starting to look beyond the U.A.E. and this region into international markets with a focus on Europe. The idea is to export our franchise and expertise, adding resilience and additional revenue streams to our platform. We also bring new offerings back to the U.A.E. market. Our expansion plans are currently in progress.
With the relevant and necessary market research and feasibility studies underway to gauge potential organic and inorganic market entry avenues. Moving on to slide number 12, our preferred geographic expansion approach is to enter new markets through partnerships by establishing joint ventures with reputable and established entities similar to our Dubai Holding JV, or through active long-term strategic investments by taking a controlling stake in strong operating platforms with an existing track record, as we did with SODIC in Egypt. This approach allows us to enter these markets in a de-risked, phased, and considered manner by working with like-minded partners. I would now like to give you a quick update on our progress on sustainability since our last call. If you can turn to slide number 13. Our continued progress on sustainability has driven improvements in our ESG ratings during the year, including both MSCI Index and Sustainalytics Index.
Aldar was ranked 11th among the 104 diversified real estate firms by Sustainalytics and in the top 7% of 237 real estate companies surveyed by Dow Jones. On slide number 14, we look towards the rest of the year. Given our strong performance this year, particularly in development, we are revising part of our guidance. We are now expecting 2023 group sales to reach between AED 22 billion-AED 24 billion. Accordingly, we are also revising guidance for group revenue backlog to a range of AED 31 billion-AED 33 billion. Meanwhile, the rest of our guidance remains unchanged. In summary, we continue to demonstrate operational and financial strength while achieving accelerated growth both organically and through strategic acquisitions. While we remain cognizant of uncertain global macroeconomic and geopolitical environment, the company is well placed to benefit from the U.A.E.'s strong economic fundamentals. That concludes the summary of our year-to-date 2023 performance.
I'll now hand over to the operator to open the floor for questions.
Of course. Thank you. If you'd like to ask a question via the telephone lines, you can do so by pressing star followed by one on your telephone keypads. If you choose to withdraw your question, please press star followed by two. Preparing to ask your question, please ensure your phone is unmuted locally. Alternatively, if you've joined via the web, you may submit a question in writing via the Q&A chat box. Our first question comes from Nida Iqbal of Morgan Stanley. Nida, your line is open. Please go ahead.
Thank you for the call, and congratulations on the good set of results. I have a few questions. Firstly, on the strategy side, thank you for the color in the presentation on the new international strategy. Can you maybe give us some indication in terms of the sort of capital deployment and timing around that in terms of expansion into Europe that you're thinking about? Secondly, on the development side of things, you know, year-to-date growth has been very impressive in terms of backlog and sales. Have you seen any signs of a change in demand more recently over the last few weeks? How do you see the outlook for the coming quarters? What do you think are the key risks to the very strong momentum that we've been seeing in property prices in the U.A.E.? And then finally, just on the same topic, overseas demand, of course, is very strong.
Can we get some color on the nationalities that are driving this and if you're seeing any changes here? Thank you very much.
Okay. On the strategy, as you know, we don't give guidance on timing given the disciplined approach we put in terms of putting out capital. We will only transact on things if those deals are going to create value to our shareholders. We are advancing quite well. We have a decent pipeline of opportunities that we are looking at. The way I would look at it is every year we announce guidance in terms of what will our deployment quantum be. For example, for this year the guidance was AED 5 billion, which translates to AED 7 billion-AED 8 billion of purchasing power. The U.A.E. market will always be our focus in terms of deployment. The international strategy will be ancillary to that.
And then going forward, as our development backlog continues to churn profits out, we will recycle those profits as we always do and put it back into the recurring income business. Again, our focus will continue being the U.A.E. with an ancillary focus on other regions internationally. Moving on to the second question, which is on the signs of demand, we haven't seen any weakening as of yet. Actually, as we speak, we have launched our Dubai project today, our first. This is as part of the JV with Dubai Holding, which is The Haven or Jinan project, which covers 2,400 units almost. We are seeing very strong demand both from Dubai, from Abu Dhabi. Our call centers have actually broken down after we got a lot of calls from our broker. We expect this launch to be extremely successful, and we expect to get more international and more residential demand.
That's a trend I've been highlighting over the past few quarters. Now as we enter into Dubai and go into Ras Al Khaimah, you're seeing that demographic shifting in that area and one great thing that the team have been doing is growing our international brokerage network so that we can continue sustaining this momentum of sales. In terms of risks going forward, I don't have a crystal ball. I don't think anyone does. Nobody knows what could go wrong, but I'll tell you what makes me sleep at night. The fact is that the U.A.E. has implemented very strong structural reforms which will carry forward. The population is no longer transitory. The performance of our recurring income portfolio, for example, is evidence of the benefit of those reforms and the resulting strong macroeconomic backdrop. The other thing is we are pushing our payment plans.
For example, our launch in Dubai is starting at 60/40. A few years back, we were somewhere between 30% during construction, 70% at handover. We have completely flipped this. We can go up to 70%-80% during construction, and what this means is we get to collect a lot more buyer equity before we actually award the project, which means This reduces our probability of default risk. If you look at our balance sheet, we continue to maintain a very disciplined debt policy, 35% LTV on the investment side, lower than 10% on the development side. On the overall company, you are talking about 28% LTV, extremely conservative. We have AED 6 billion of untapped facilities that we can get into. We have a very defensive recurring income portfolio that has been tested during COVID.
And so for those reasons, we are very confident that if there is any downturn, we can easily weather it out.
Thank you very much. That is very clear.
Thank you. Our next question comes from Harsh Mehta of Goldman Sachs. Harsh, your line is open. Please proceed.
Faisal and team, thank you very much.
Harsh, I didn't see a revision of the share price, the target. I'm joking.
Thank you. Just a few questions from my side. First is, you know, in the press release there's a comment by the chairman that you're looking for potential international expansion with focus on Europe. Just want to understand what kind of investments, whether on the development side or on the investment property side, and in terms of size and quantum and which markets within Europe specifically are you looking at? And the second question is on the group presales. They have been extremely strong, reaching AED 19.5 billion in the first nine months. When we compare this even with the upgraded guidance You know, it basically implies between AED 2.5 million-AED 4.5 million for the fourth quarter. This looks very low compared to what you've done in the past two quarters and compared to AED 5 billion in the fourth quarter. Seasonally, you know, fourth quarter is the strongest.
You've also launched in Dubai. Lagoons is doing very well, as we see from the third quarter performance in terms of sales. There's still a lot over there to sell. How should we think about this upgraded guidance, you know, given it looks like extremely low when we compare it with the trends quarter-on-quarter and even year-on-year? The last one is in terms of the new launches, in the third quarter there was just one new launch compared to, you know, 10 launches in the first half itself. Was it just because of seasonality or there was an intention to clear off inventory and then, you know, look at the market and then restart the launches? That's it. Thank you very much.
Sir. Okay. Just elaborating on our international strategy. I'll start with the strategy is very much aligned with our strategic growth plan program that we announced about three years ago, which was focused on geographic and sector diversification. This is us going into the second phase of that strategy. The other reason for going out internationally is we've been very keen to grow our alternative real estate asset exposure, and the markets there in Europe have a lot of depth and breadth, so it gives us the opportunity to be able to achieve that scale in a faster manner. The sectors we'd be looking at would be logistics, self-storage, student accommodation, senior living, even credit in line with where interest rates are at today, real estate credit. Lastly, that also covers a development component to your point.
We'd be looking at residential development opportunities, but those that would align with our sales strategy here and have synergies with the customers that we sell to. We want to have an international sales network. Where we can offer property in Dubai, in Abu Dhabi, in Ras Al Khaimah, in Egypt, and in the new markets that we are looking at. I'd just like to highlight that the approach is going to follow a very similar approach to what we did previously in Egypt, where we took control of a platform, and in Dubai, where we went into the market with a very well-known partner on the ground, which is Dubai Holding. Same thing, we'd either get a majority control of a platform and grow from there, or depending on the sector, we will partner with JV partners to enter into those asset classes.
In terms of our development sales, so if you take the higher end of that guidance, you're looking at about AED 5 billion additional sales. I think we just want to take a very cautious approach to how the markets play out. We don't want to get ahead of ourselves. Internally, obviously, we're setting more aggressive targets for ourselves. Lastly, on the launches, I'd say part of it is driven by seasonality. Summer is probably not the busiest of seasons when it comes to sales even though we had one of the strongest quarters. And the last thing was us just getting ready for those launches. Q4 is going to have the launches of Dubai, which is happening today and tomorrow, and then Ras Al Khaimah will follow very quickly with a number of new launches happening in Abu Dhabi before the end of the year.
Got it. Thank you very much.
Thank you. Our next question comes from Taher Safieddine of JPMorgan. Taher, your line is open. Please go ahead.
Good afternoon. Thank you, Faisal. Again, congrats on a solid set of numbers. Two questions from my side. Just the first one on the development side, you know, with this revenue backlog and the average duration of 29 months, is it fair to assume that we could see revenue recognition scaling up towards the AED 9+ billion into next year if I just do a rough math? There could be a strong growth in the development sales portfolio in terms of revenue recognition. I think the other question within that is how should we think about the EBITDA margins with your entry into Dubai? Is it a different margin profile? Is the 34% is the EBITDA margin sustainable in your view for the property development sales segment in the U.A.E.? I think that's the first part of the question. The second question is really on the recurring portfolio.
This equity deployment of AED 5 billion has been there since the beginning of the year, yet we still haven't seen any significant deployment year-to-date. I just want to get your view, should we expect something to happen in Q4 on this equity deployment? Does this target include the recent talks about entry into Europe, or we're still talking about U.A.E. and neighboring countries?
On the revenue recognition, [Bahran], the guidance for next year. We don't, as you know, provide guidance, maybe that is something we will look at for next year. We will take that into consideration, but If you take the existing backlog, back solve, like you said, for the two, three year period recognition and assume the 30%-35% margin that we generally guide on, you will see that the numbers will be significantly higher than where they are today. On the EBITDA margins, the range we typically give, like I said, is 30%-35%. We've had some increase in construction costs, which was more than offset by increase in prices. You're right, in Dubai we do have the land cost unlike our projects here in Abu Dhabi, we're still achieving very good margins given the higher property values in Dubai.
Lastly, if you remember in the previous quarter, we did the accounting change where we are now pushing the direct marketing costs above the line, above GP. Therefore, after taking all of that into consideration, just to be conservative, I would model the GP margin towards the lower end of that 30% range. Moving on to deployment, yes, we haven't deployed that AED 5 billion, we still had a busy year. We announced the acquisition of Fahid. We announced the JV with Dubai Holding at the beginning of the year. We announced the JV with Mubadala in terms of the new commercial office towers on Al Maryah. We announced the merger with Eltizam. We announced the acquisition of two schools, one in Dubai, Kent, one in Abu Dhabi, Virginia, with the expansion of the Cranleigh brand into Bahrain. Lastly, the acquisitions of Basatin.
We've been quite busy, yet, we haven't deployed a significant amount of that AED 5 billion. We have a number of opportunities brewing. Our plan is to deploy a significant amount of that AED 5 billion, assuming those deals do get concluded. The most likely scenario is that part of that AED 5 billion will be carried over into next year. That AED 5 billion also includes part of the international acquisition strategy that we are looking at.
Okay sorry, just to follow up on the international acquisition. I mean, this is the first time we really hear about Europe as a new geography. I mean, we were used to U.A.E., Abu Dhabi, then you went into Ras Al Khaimah. You talked about Dubai. You know, Egypt has been there. Saudi has always been maybe talked about as a natural progression. Why Europe? I mean , going into a mature market which is maybe more competitive. I mean, don't you see a bigger execution risk? I mean, you already have a full plate in terms of, you know, running through on the development and the recurring portfolio. I mean, don't you see that shift of international strategy as maybe too much to chew at this stage? I'm just trying to think out loud here and hear your views.
We feel that we've achieved significant scale in our market, both on the development side and on the investment side where we successfully deployed AED 7.5 billion last year. We feel part of that expertise and franchise can be capitalized on if we take it outside our region. Given who our shareholders are, we have a lot of relationships that we can leverage in terms of players on the ground which can help us get into the areas that we are interested in. Then, like I said, part of the strategy is accelerating access to asset classes that we think are not very easily accessible here and are much easily accessible in those mature markets, being again the logistics, the storage, the student housing, and credit, and et cetera. I've always gotten the question in terms of whether we're going to look beyond the markets that you mentioned.
My answer was yes, but we're not yet ready. I think we are ready now and we consciously decided that we don't want to go to the far west, which is the U.S., and we don't want to go to the far east, which is Asia. We decided to go with Europe given the proximity and given a lot of the synergies that we feel we can recognize. Across the different asset classes that we might pursue.
Okay, very clear. Thank you.
Thank you. As a reminder, if you wish to ask a question via the telephone lines, please press star followed by one on your telephone keypad now. Our next question comes from Mohamad Haidar of Arqaam Capital. Mohamad, your line is open. Please go ahead.
Hello, Faisal. Thank you for the call. A quick question on the development management business. I see that execution is going well, but the new additions are still lower than what's being executed. What's the strategy for this business? Do you think at some point you will be winning again big awards like we saw in 2022, or we will continue to see this execution exceeding new awards? And then on the hospitality business, I'm not sure if you have the data, is it possible to get a color on the breakdown of nationalities? Who are the main tourists flowing into your hotels? Thank you.
On the project management side, we had a slight drop in terms of profitability versus last year, but we added, I believe, AED 2 billion of new projects this quarter and AED 3.9 billion, I think, for the full year. There's going to be a significant pickup in that. There was some delays in terms of project awards that are going to happen as we speak. I think one of the most important drivers that is going to drive growth on the project management side is the Balghaiylam project. This is a fixed contract project which generally has a higher profit margin than our usual cost-plus projects. This project is expected to have somewhere between AED 800 million-AED 1 billion profit over the next three to four years. To answer your question, no, we're very confident that the project management business will continue doing well going forward. It's just a timing issue today.
On the hospitality business, I don't have the nationalities off the top of my head, maybe this is something my IR team can come back to you on later.
Thank you, Faisal.
Thank you. Our next question comes from Jagadishwar Pasunoori of NBK Capital. Jagadishwar, your line is open. Please go ahead.
Hello, how are you? Can you hear me?
I can hear you, sir. Please go ahead.
Hey, thanks. Congratulations on good set of numbers. I'm looking at your guidance for Aldar Investments. I think the guidance is between AED 2 billion-AED 2.1 billion for Aldar Investments in EBITDA. Please correct me if I'm wrong. So far, your nine-month EBITDA is AED 1.6 billion. So, if that's the guidance stays the same, then Q4 guidance EBITDA could be like AED 400 million-AED 500 million. I understand Aldar made like AED 580 million in EBITDA in Q3, and usually Q4 is better because of hospitality. So, what I'm missing here, is there any chance for, you know, beating your guidance on EBITDA and investments?
We haven't revised the guidance, you're right, but we're confident we would be able to slightly surpassed that guidance. That portfolio will continue doing well. As you can see in the commercial side, we're quite well leased up. Retail is slightly down because of the Al Jimi repositioning. Residential is almost flat in terms of organic like-for-like. Hospitality, yes, is performing better. In summary, I think we will be slightly over that guidance.
Okay, u sually Q4 is better than Q3, right, because of the hospitality? Is that right?
That's a fair point, yes.
Okay, great. I know you tried to answer on the European venture that you are talking about. Can you help understand, like, what is the exact capital that you have outlined for European investments?
Like I said, we don't give guidance. Yeah, we said the U.A.E. will be always our focus as part of the annual.
[audio distortion]
Sorry.
U.A.E., you still have AED 5 billion capital you want to commit, you're planning to.
No, the AED 5 billion is the guidance we have given for deploying into the recurring income side of the business, which if levered up is AED 7 billion-AED 8 billion. Now you have this international strategy that comes into play that will be part of that AED 5 billion, and the majority of that deployment will be U.A.E., and an ancillary part of that will go into the international expansion strategy. On an annual basis, we will always give you guidance in terms of how much we plan to deploy in general, and part of that deployment, the majority will go to the U.A.E., and the minority will go into this international expansion strategy.
Okay. Coming to development, as far as I understand, international consisted around 10% of your pre-sales, you know, before years. I think nine months, it's like close to 22%-23%. What actions you have taken to increase this international sales from international customers, and do you think is this sustainable going forward?
Well, the first thing is that the country's policies has made this very possible. The green visas, 100% legal ownership, the quality of life in Abu Dhabi. Dubai has always had that international market component, but I think Abu Dhabi has changed and has become very appealing to that international crowd which view Abu Dhabi as an alternative place to put their capital. The other thing that we did is grow our international network. We are building out our international network across Europe, across the U.S., across China. We are starting to realize the benefits of growing that network.
Okay, great. Thank you very much and good luck.
[Non-English content]
Perfect. Thank you. We will now move to some written questions. We have a couple here. Can you talk about the major reason for the massive drop in SODIC Egypt GM, 11% in third quarter 2023? The second, why did Aldar Investments' GM decline to 39% in third quarter 2023? Last sixth quarter, the minimum GM was 48%.
On SODIC, this was due to the unwinding of the PPA balances at consolidation. Actually, sorry, just to add to that point, the underlying margin excluding the PPA adjustment, which is an accounting thing, was actually higher year-on-year. On the investment side of the business, real estate, as you know, has a very high margin, so 70%-80% margin, whereas the other businesses being hospitality, education, and principal investments has a lower margin. We're seeing very good growth across the other three capital pools, naturally the margin is being diluted due to the growth in those segments.
Perfect, thank you. Could you give a breakdown between different overseas nationalities in 9M 2023 sales out of the 27%? The second, are all your recent projects based on 60% payment during construction and 40% on handover?
On the nationalities, it's quite a diverse mix again. We cover all regions. We have the U.K., India, Jordan, Kazakhstan, Egypt, Cyprus, China is starting to grow. We've seen uptick in Russia obviously given what's happening in the market there, but we are quite diversified, evenly distributed across most of the segments. Sorry, what was the second question?
The second question, are all of your recent projects based on 60% payment during construction and 40% on handover?
On average, yes. We try not to go below that 60%-70%. We sometimes provide some concessions if somebody pays 50%, but then you have an offsetting 70%, 80%, 90% and then you average out somewhere between 60%, 70%, 80%. It depends on the project. For example, on the luxury side of things, we can go very aggressive, and then on the more end-user local market products such as Saadiyat, we tend to be more accommodative for the local buyers who are end-users.
Thank you. What are your expectations for EBITDA margins and absolute levels for development business and in light of the new revised guidance? Is the expansion in Europe on the development or IP side? What are the sectors being considered? What are the hurdle rates you are targeting for international investments?
On the margins, like I said, let's focus on the U.A.E. business for today. We guide somewhere between 30%-35% GP margin. I'd say to be conservative, model on the lower end of the range. As part of the international expansion strategy, yes, we are looking at development, and those developments would probably have a lower margin than what you have in the U.A.E. Assuming that happens going forward, we will provide further guidance as we get into it. In terms of the returns, we'd be looking at high teens equity IRRs across those asset classes in general.
Perfect. As a reminder, if you'd like to ask a question by the telephone lines, please press star followed by one on your keypads. You may also submit a written question via the web. We have three questions here. What's the percentage of cash buyers of overall sales this year, and how this trend compared to the last year? How much are you planning to launch in 2024? The third, potential gross development value of the remaining land bank.
Remaining what, sorry?
Potential gross development value of the remaining land bank.
Okay. Cash buyers, as you know, we sell off-plan. Almost everybody is a cash buyer. Banks provide you with a mortgage. Once you hit 40%-50% of equity. Obviously we have grown significantly in terms of our backlog. We still don't have the data in terms of what is going to be the mix between cash and mortgage buyers. That will play out as we start handing over those projects that we started selling over the past two to three years. What are we launching in 2024? We don't disclose that, but obviously we are setting very ambitious targets on ourselves and we will adjust. We're very agile as an organization depending on the market opportunity at the time. I think the best example to give is what we've been doing this year. Given the strength in the market, we've been consistently upping our guidance and capitalizing on the strength of the market.
I'd say the same thing will follow. Into 2024. GDV of our land bank, that's a very complicated question and I don't think anybody can answer that today.
Of course, thank you. We have a follow-up audio question from Taher Safieddine of JPMorgan. Taher, your line is open, please go ahead.
Hi, Faisal again. It's Taher. Just maybe a follow-up question on Aldar Education and Aldar Estates. I know maybe we don't talk about them quite often, but clearly the growth there has been impressive. Aldar Education being the second largest private school operator, we're seeing growth, we're seeing M&A, and there's an investment plan there. I just want to maybe get your thoughts on what is the medium-term target for Aldar Education? Is this an IPO candidate? You're looking for a spin-off, or now the focus is really on scaling up and growing? If you can just also share some targets in terms of what could this business look in two to three years after the investment plan is fully committed?
Education, I always call it the hidden gem that nobody gives attention to. I'd like to highlight that Q4 will be a very strong quarter given that we have increased tuition fees in line with the guidelines from the government by 2%-3% on average across our schools. That is a direct flow-through down to our P&L. In addition, on the back of the strong macroeconomic backdrop, we've seen a very good pickup in terms of enrollments. Potential for the business, very strong double-digit growth over the next few years. Today we have about 37,000, 38,000 students. With all the greenfields that we have announced, in the next three years we're going to hit 60,000 students with a much bigger proportion of that 60,000 being anchored towards operated schools versus managed. Today, one-third of our schools are operated, two-thirds are managed. We're going to flip it and be more operated.
Than managed, which has more profit into it. In terms of a spinoff, this is the answer I always give. We are not mesmerized by the idea of IPO-ing a business. We will only IPO a business if it makes sense to create value to our shareholders. I think with the education business, it's probably not the right time today given how much greenfield we have in those businesses and the unutilized enrollment capacity that we have. The public markets will generally not give us credit for that, so the right time for the education business IPO is probably at some point when it starts to stabilize, unless we structure out the greenfield and just keep the brownfield. That's something we could look at into the future. Eltizam, I'd say yes, is also a potential for an IPO.
This is a very busy integration that is undergoing over the next 12-18 months. We have a target in terms of realizing a very good amount in terms of revenue synergies, cost synergies, leverage the relationship we have with the shareholders in Eltizam, ADQ being one of them, and IHC being the other. There's a lot of opportunity that can come out of that business.
Okay. Thank you. Very clear. Thanks.
Thank you. We have our final questions here. Aldar Investments have been growing on a consistent basis. What is the exact reason for gross margin decline this quarter on a consolidated basis? Second one here, which specific markets/countries are you targeting in Europe?
I think I answered the margin question, is the growth in the other three capital pools, which generally have the lower margin than the IP business. It's nothing to worry about, it's just the fundamentals of the business itself. Markets and countries, difficult to answer because it depends on the asset class. Each market is very different than the other, but we're going to be looking at the cities that have the strong macroeconomics, cities that people want to live in, cities that have very strong commerce activity. If we're looking at the alternative asset classes being logistics and self-storage, for example, so it depends case on case. Again, we wanted to give you guys a heads up in terms of what we are looking at, and we will come back to you with more guidance as we progress.
Of course. Thank you. We do have a last-minute question registered here. Aldar recorded an AED 70 million one-off this quarter related to the early termination of a bulk residential lease. Could this mean lower occupancy on the residential portfolio next quarter?
The lease is actually ending as we speak. I think it just happened a few weeks ago. However, before the lease terminated, we had already started on pre-leasing those units. We're trying to catch up as quickly as we can before the end of the year. One offsetting factor might be any acquisition that we do before the end of the year, so that might help offset some of the drop in the organic growth of the portfolio.
Perfect. Thank you. At this stage, we currently have no further questions registered on the call, so therefore this concludes today's event. Thank you for joining. You may now disconnect your lines.