Aldar Properties, the largest developer in Abu Dhabi, will link with outside companies on its completed projects to raise cash and outsource some operations functions. The announcement comes during a protracted slowdown for the property sector and is seen by analysts as a way for Aldar to increase its income in a depressed economic climate.
"This is not about people just putting money in and getting their name on something," said Areej al Naqbi, the director of business development at Aldar. "It's a full partnership programme, including branding, marketing, hospitality and whatever we decide to do with the business venture." Aldar said the projects that would initially be open to partnerships were parts of Al Raha Beach, the hotel and leisure attractions on Yas Island, its education venture Aldar Academies, and MotorWorld, a one-stop development for the car industry. More assets would be included in the projects open to the partnerships as they neared completion.
The arrangement would even include the ability to name some of the rides at Ferrari World, a theme park under construction on Yas Island near the Formula One circuit. But Ms al Naqbi said the initiative was geared more towards partnering with companies that would help generate business. "The benefits are not always in generation of cash," she said. "A key driver is what we can provide each other."
The idea was born about five months ago, when Aldar was finishing parts of some of its biggest projects, including the Yas Marina Circuit. "We saw that we had really valuable ground-breaking developments and assets that are coming into realisation and moving into an operational phase," Ms al Naqbi said, adding that Aldar had invited local and international companies to a presentation on the partnerships on February 21 at the Yas Hotel.
Chet Riley, an analyst at Nomura Securities, said the plan was "innovative" because other development companies had not started similar programmes. "They are just finding a way to monetise their investments in these projects," Mr Riley said. "What they are doing is increasing the level of income they receive on a day-to-day basis with little capital investment. From that perspective, it's quite a smart move."
Throughout the property sector, developers are looking to new methods to increase income. Last week, Sorouh Real Estate, the second-largest property developer in Abu Dhabi, created a joint venture called Al Sdeirah Real Estate Investment with outside investors to buy land from its Alghadeer project. Sorouh, which owns 30 per cent of Al Sdeirah, booked a Dh293 million (US$79.7m) profit on the land sales.
Developers in Dubai, including Deyaar Development, have also created joint ventures to help weather the slowdown. What could come next are more joint ventures with outside investors on the development of projects in Abu Dhabi. The sudden change in the property sector has left a funding gap of $40 billion in Abu Dhabi alone, data from the property consultancy Jones Lang LaSalle (JLL) show. David Dudley, the head of the Abu Dhabi office of JLL, said investors could be interested in infrastructure and development schemes in the capital because of its "longer-term growth story".
While investors are cautious about the property market, there is interest in income-producing assets, Mr Dudley said. "We are - seeing selective appetite for development joint ventures, particularly for projects that have solid Government backing and where infrastructure has been well progressed," he said. "The opportunity is to provide a cash flow injection to kick-start the development and partner on delivery."
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