Moody's raises rating for Aldar Properties to investment grade

Posted on 28th November 2014

ldar Properties PJSC’s (‘Aldar’ or the ‘Company’ ADX: ALDAR) credit rating has been upgraded to investment grade by Moody's Investors Service (‘Moody’s’), citing the reduction of its financial leverage and development risk, and the increase in recurring rental income following the opening of Yas Mall and other investment properties, according to a press release by the company.

 Yas Mall

The ratings agency also upgraded Aldar’s $750 million Trust Certificates due in 2018 to investment grade, raising the rating by two notches to Baa3 with ‘stable’ outlook. Moody’s has awarded Aldar upgrades of five notches over the last 18 months. Other than Government related and regulated financial institutions, Aldar is the only Abu Dhabi domiciled entity that carries a Moody’s investment grade rating.

Moody’s upgrade is the result of the robust business strategy that was put in place post-merger to ensure growth and stability. Over the last year, the Company has significantly deleveraged the business – total debt reduced from AED 13.8 billion at the end of 2013 to AED 9.6 billion at the end of Q3 2014 – delivered important projects; including, al rayanna, The Gate and The Arc and increased recurring income ahead of projected levels. Prior to the merger, Aldar’s annualised recurring income from its recurring revenue assets was approximately AED 420 million. As at Q3 2014 recurring income had reached an annualised figure of approximately AED 1 billion and is on track to reach AED 1.6 billion. The growth will be driven by Yas Mall, Aldar’s flagship asset that opened on 19 November 2014, which will change the retail landscape in Abu Dhabi and contribute over AED 400 million per annum to Aldar’s recurring income.

The ratings agency also highlighted the resilience of the Abu Dhabi real estate market, which it anticipates can absorb additional capacity. Moody’s believes Aldar will be able to continue selling properties and renting out units reserved for its investment property portfolio. This is evident from the two sales launches that took place earlier this year with Al Hadeel fully sold and Ansam 84% sold with the remaining units kept in the Aldar portfolio.

Mohammed Al Mubarak, Chief Executive Officer of Aldar Properties PJSC, commented:

“The upgrade from Moody’s to investment grade is a clear indication of the growing opportunity in Abu Dhabi and the recognition from the market that we are outperforming our stated plans. We have delivered 7,000 residential units into the market and opened the largest Mall in Abu Dhabi both of which have brought significant benefits to our shareholders. Following a number of refinancing initiatives undertaken in the last year, Aldar has a strong balance sheet and healthy capital position with a clear strategy in place to further reduce our debt, optimise our land bank and continue to grow our recurring revenues.”

Martin Kohlhase, a Moody’s Vice President – Senior Credit Officer, based in Dubai, said:

“We have upgraded Aldar’s ratings to reflect its success in reducing financial leverage, lessening development risk and increasing recurring rental income, following the opening of Yas Mall and other investment properties. Recurring income from investment properties tends to be low risk, stable and allows better visibility in terms of future earnings.”

As at 30 September 2014, total assets were AED 38.21 billion. Net debt to equity, excluding restricted cash, stood at 38%, down from 65% at 31 December 2013, and Aldar continues to hold a strong cash position with AED 4.03 billion of cash and bank balances at the end of the third quarter.

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