Aldar: losses, a resignation, and bad debt
As Aldar posts its fourth consecutive quarterly loss (this time of 731.2 million dirhams), Kipp takes a closer look at Abu Dhabi’s largest real estate developer.
November 9, 2010 4:18 by Eva Fernandes
“Dubai is over. Abu Dhabi is the future.”
You know it must be true, if it’s endorsed by Sex and the City [the movie] writers. Okay, not really, but the notion is accepted not only in the world of fluff cinema but also in serious business circles, and it marks a shift in the focus of prosperity in the UAE from Dubai to its older, more conservative brother, Abu Dhabi. From the Dh10 billion Abu Dhabi came to the rescue with a year back, to (symbolically) changing the name of the Burj Khalifa (nee Dubai), general opinion has it that Dubai is the reckless planner blown up by a steroid-induced growth spurt, which now pales in comparison to the plans of its wealthier, greener, and more culturally conscious neighbour Abu Dhabi.
Which is why the news that Abu Dhabi’s largest real estate developer, Aldar, has reported a third quarter of losses this year (the fourth in a row), is a little unsettling. Kipp takes a closer look at the property giant, in the news for mostly the wrong reasons.
Launched in 2005, Aldar is primarily concerned with developing residential, commercial, retail, and hospitality projects. The company also deals in the construction, management and operation of hotels, schools, marinas and golf courses. According to Zawya.com, despite its recent significant losses (see below), Abu Dhabi’s largest real-estate developer has completed a considerable number of projects this year, including:
– The Ferrari World Abu Dhabi theme park
– The new Souk at Central Market (opened in August)
– Al Bandar residential development at Al Raha Beach (handover commenced)
– All major infrastructure work at Yas Island including Yas Tunnel
How do we put it nicely? Despite these completions, things aren’t looking rosy for Aldar. Bank of America Merrill Lynch said last week Aldar would need Dh9.8 billion by 2011 if it was to simply “survive.” And according to Bloomberg, the company currently has an outstanding debt of Dh.26 billion. Aldar reported a nine month loss of Dh1.52 billion, posting its fourth consecutive quarterly loss this week at Dh.731.2 million. Aldar put these losses down to “lower property sales, provisions for bad debt and lower gains from fair valuations of the investment properties.” In other words, the real estate market is still on its knees.
Aldar’s CEO for the past two years, John Bullough, resigned just last week. Shortly after news of his resignation emerged Arab News reported Aldar shares to have plummeted 6.2 percent. Aldar claims the move was just a “long-planned retirement.”
Aldar has moved fast to steady the ship, however; no doubt prompted by its impending earnings announcement today, it managed to have Sami Asad, former chief operating officer, bumped up to CEO by yesterday.
Abu Dhabi barometer:
According to the National, as new real estate sales dry up the company is transforming from an off-plan developer to an asset and development management company. Such transformations are costly and take time, which could account for some of its difficulties. The question is, how many?
In other words, is recent news about Aldar a cause for concern for all things Abu Dhabi? Some think the property company could well be a barometer. The Financial Times reports an unnamed real estate analyst to have said, “I’m more worried about Abu Dhabi than Dubai at the moment, as Dubai’s bad news has largely been priced in, and I think there’s still bad news to come out of Abu Dhabi.”
Using Aldar as a judge for the whole of Abu Dhabi is of course a bit of a leap. But given that 40 percent of the company is government controlled, the business’s woes should certainly ring a few alarm bells in the industry and beyond.