Dubai: The Abu Dhabi Government yesterday came to the rescue of Aldar Properties with a multi-billion-dirham support package to help recapitalise the emirate's biggest developer so it can continue with its projects.
A company spokesperson said, "This deal is consistent with an element of Aldar's business model under which the company has supported the long-term objectives of the emirate of Abu Dhabi by building and developing strategic assets and transferring them to the government upon completion."
Aldar yesterday announced a series of steps, including a Dh10.5 billion asset value impairment charge it said was "designed to solidify the company's position for long-term, sustainable growth".
Infrastructure assets
Aldar also realised Dh10.9 billion from "reimbursement and sales" for the transfer of certain infrastructure assets on Yas Island including the recently opened Ferrari World Abu Dhabi theme park, roads, bridges, marine infrastructure, and land.
It confirmed placement of a convertible bond worth Dh2.8 billion with Mubadala Development Company. Aldar also raised Dh5.5 billion from sale of residential units and land to the Government of Abu Dhabi.
"The measures are focused on addressing current market conditions and on boosting the company's capital structure," it said.
Confirming the deal, Abu Dhabi Finance Department said, "The Abu Dhabi government has approved buying some of the company's [Aldar] assets deemed important for the economy of the emirate."
Mubadala has approved buying stock reversible bonds from Aldar, the statement said. "The financial framework approved by the board, including the convertible bond issue, will strengthen our capital structure and provide us with a stable and sustainable platform from which we can continue to capture commercial opportunities to deliver value to shareholders," Aldar chairman Ahmed Al Sayegh said in a statement.
Sustainable growth
"The impairment recognition reflects the adverse conditions that have affected the real estate market, but is an important step in allowing Aldar to achieve long-term sustainable growth."
The steps, the statement said, "come along with the government's conviction that purchasing a convertible bond will strengthen Aldar's capital and assist it in achieving its goals and contributions in building Abu Dhabi's economy."
The move comes as the real estate market softened because of a number of factors, including reduced company housing allowances and landlords being flexible with rates. "Due to the increasing amount of supply, apartment leasing rates have steadily declined over the last three months of 2010, dropping by an average of 7 per cent whereas on-island properties have only reduced 6 per cent during the same period," Asteco said.
Blair Hagkull, Mena chairman of Jones Lang LaSalle, told Gulf News: "Most developers are undergoing challenging times. This indicates a strong government support and I see it as a step in the right direction.
"Aldar will remain a strong player in Abu Dhabi and this support will go a long way in ensuring that the developer continues to deliver homes."
Elaine Jones, CEO of Asteco, said: "Buyers and tenants will have a wide range of choices shortly, as the long-awaited first phases at Reem Island come on to the market, together with new supply at Al Raha Beach.
"This will undoubtedly add further downward pressure on resale and rental rates throughout the capital moving forward."
