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Future capital
It’s Abu Dhabi, but not as we know it. While the model cityscape bears some resemblance to the UAE capital, there are some striking differences.
“This is not fiction you’re seeing,” Ronald Barrott, Aldar’s CEO, says as he motions toward the recently-launched Yas Island, a development a third of the size of Abu Dhabi City, with a whopping US$40bn price tag. “The projects you see are real projects, they’re being built right now — from our Central Market project to Raha beach to Yas Island.”
Such projects — and such grand designs — lie at the heart of Abu Dhabi’s burgeoning international reputation, and Aldar is at the forefront of this meteoric rise.
“There’s competition between all capital cities and other towns and cities within countries,” says Barrott, choosing his words carefully. “You can’t equate Dubai with Abu Dhabi. They are totally different markets, driven by different things.”
Yet despite Barrott making all the right conciliatory noises, Dubai, it seems, had best start looking over its shoulder. Today the focus is slowly shifting towards the UAE’s capital city — and one of the companies generating those column inches is Aldar Properties PJSC, a real estate development and investment company established in December 2004, through a US$400m IPO on the Abu Dhabi Securities Market.
Following the IPO, Aldar acquired Addar Real Estate Services LLC, a 100% locally held private company that was formed in May 2000. Today, Aldar has a multi-billion dirham extensive portfolio of mixed-use property developments underway embracing major residential, commercial, leisure and hospitality schemes in Abu Dhabi and, to a lesser extent, Al Ain.
“Aldar Properties was established to create valuable and prestigious real estate developments throughout the emirate, the UAE and across the region,” explains Barrott. “Essentially, though, the goal with all our projects is to offer existing residents of Abu Dhabi and potential newcomers a good environment and a high quality of life.”
Scheduled to commence construction in two phases during 2007, Yas Island occupies a total land area of 2500 hectares. Rising through two development phases — the northern hemisphere and the southern hemisphere — Yas Island will feature attractions such as a world-class motor sports racetrack, signature hotels, the Ferrari theme park, water park, and 300,000 sq m of retail area, parkland golf courses, lagoon hotels, marinas, polo clubs, apartments, villas and numerous food and beverage outlets.
Aldar’s other flagship project is the redevelopment of the Central Market along Khalifa and Hamdan streets under a 50-year concession awarded by the Abu Dhabi government. This site will be transformed into a town centre and high-rise Central Business District (CBD) destination, focused around speciality retail outlets, cultural attractions, a traditional Arab souk and a transport hub for the city. Construction work for the project began in 2005, with a completion date of 2008 or 2009.
Meanwhile, Al Raha Beach is an 8.1 million sq m development that involves the construction of more than 50 high-rise towers including a World Trade Centre development designed by the UK’s Foster & Partners. Built alongside 5.2 million sq m of natural beach front, Al Raha consists of eight mixed-use precincts, each with their own distinct personalities and consisting of several low-rise developments on the waterfront that can house up to 120,000 residents.
Smaller projects include Al Gurm Resort which comprises of 59 private luxury homes and a 161 suite five star resort and Al Raha Gardens, the first development to be offered to UAE Nationals in Abu Dhabi on an ownership basis. Al Raha Gardens is situated within the Al Raha Beach Development and has been built on 665,000 sq m of heavily landscaped area incorporating villas and townhouses, two prestigious schools and a kindergarten, an exclusive polo hotel, polo ground and equestrian facilities, community retail and dining outlets.
For Barrott, integration is clearly the operative word: “All Aldar’s projects are integrated so that they can be stand-alone communities. We even have Aldar Academies to ensure a good quality of education through all levels. We’ve also got Aldar hospitality to ensure that the hotels within our developments are run efficiently and are of the highest quality, as well as covering the complete range, from three to five star.
“You see Aldar was deliberately set up to handle the development of Abu Dhabi in a controlled way and by using best practice of town planning and design,” he continues. “We are mindful of the impact of each development on the environment and we always ensure that the infrastructure is just ahead of the development so that the people of Abu Dhabi who enjoy a 20 minute drive time today, will still have the same drive time when the development is finished. I can’t stress enough that the infrastructure is a key element.”
So when it comes to infrastructure does this forward planning give Abu Dhabi a distinct advantage over Dubai, where traffic problems are becoming a constant nightmare? Barrott’s diplomatic touch is to the fore again, although there is a suggestion that the chief executive is relieved to have had the opportunity to learn from Dubai’s travails.
“It’s not really for me to comment on their town planning and how they’ve gone about their development but I do think they need to be very much aware of the demand in relation to supply,” he says, adding: “They’ve been a huge success but because of that huge success, they’ve got to be very careful when moving forward not to damage the very reputation they built up. Dubai has some of the best marketing I’ve ever seen of any city in the world — tremendous marketing.”
Such faint praise is in direct contrast to Barrott’s natural enthusiasm for the capital. Abu Dhabi has, he feels, the potential to become a key Middle East destination for tourists from around the world.
“Like all great cities around the world, Abu Dhabi has many attractions. It’s now time to develop these and allow people around the world to see how beautiful a city it is,” he insists. “It’s got tremendous topography, beautiful waters on all three sides, you’ve got beaches galore and wherever you’re located, you’re within the heart of a thriving city.”
Specifically, he maintains that the projects Aldar is developing will further attract people to come and see the city, and cites precedents elsewhere. “Just look at Cape Town. Since the V&A was opened recently, Cape Town’s tourism grew exponentially,” he argues. “And if you go back far enough, you look at Florida, which was quite a sleepy place until Disney came in and put a theme park there — and the rest is history.”
And as far as Barrott is concerned, Aldar’s Yas Island will make history. “Yas Island is aimed at the global tourism market. We’re looking to build quality that hasn’t existed to date in the UAE. I’m not just talking about quality of buildings but the way those buildings are managed, the way the public realm is designed and constructed so the whole development is cohesive — it all hangs together and is a very pleasant environment in which to live and work and play.
“The government has a very clear vision and end goal. They’re approaching everything in a very professional manner and Aldar is leading the way as far as development is concerned,” he continues.
And with this increased professionalism, Barrott believes that the property market is becoming more sophisticated: “I think investors are now becoming better informed — they want more information on which to base their investments. We at Aldar are looking to keep our shareholders very much aware of what we’re doing with the company so that they get the same level of feedback as any international company would give their shareholders anywhere else in the world.”
With principal shareholders including Mubadala Development Company, Abu Dhabi Investment Company, the National Investor, Abu Dhabi National Hotels Company and the National Corporation for Tourism & Hotels, Aldar has a strong, yet demanding, shareholder base.
“I always look at the risk profile of my shareholders and we’re very keen to ensure that our stock market price tracks the performance of the business, but that’s not the case at the moment which is unfortunate,” admits Barrott.
“In more mature markets, a public company is tracked day to day by the markets and practically when the CEO so much as sneezes, it is reflected in the share price. That doesn’t happen here today but I think it will come as the markets mature.”
It will only be a matter of time before there is increased transparency in the market and Barrott is bullish in his ambitions. “I’d be happy to see progressional analysts visit our offices today and go through the company and produce factsheets for people to invest,” he insists. “After all, that’s why I’m here — we’re looking at how we’ll take the business international. I’m definitely here to run Aldar on international grounds.”
“Such ambition lays at the heart of Aldar’s recent decision to launch a joint venture with UK construction group Laing O’Rourke. The venture was established primarily for Aldar’s US$14.7bn Al Raha Beach project — for which the construction work alone is valued at over US$1.9bn — but may be employed on other Aldar schemes. Barrott explains: “We have formed a joint venture contracting company that enables us to have a contractor engaged at a very early stage of a project which is needed for projects with the size and complexity of ours.”
Aside from the venture operating as a contractor that will execute work itself, it will also engage other contractors and act as a project manager. In addition, Aldar has also awarded two ‘design and build’ contracts worth a total of US$210m at Al Raha Beach.
Coupled with this, the company will sell US$3.5bn worth of Islamic bonds in the first quarter of 2007.
The bonds will have a maturity of three to five years, and if demand is strong Aldar might look to raise the entire amount in a single issue. This would make the Sukuk the second largest in the world, alongside the bond the parent of Dubai Ports World sold in 2006.
“In terms of development, we don’t have anything abroad at the moment but we’re looking at one or two things that will be made public in the New Year that will be very interesting as far as the international market is concerned, and we will also be going into more mature markets,” he explains.
So is Aldar outgrowing Abu Dhabi? Predictably, Barrott is as tactful, and precise, as ever.
“I think the driver is that the government has a very clear vision to expand the capital in a controlled way — and Aldar is there to masterplan that expansion.”
Having sat back and observed its more extrovert neighbour attract all the headlines over the last few years, Abu Dhabi is finally securing the sort of iconic developments that will ensure its position as one of the foremost destinations in the Middle East. And with US$100bn (AED367bn) of projects in hand, Abu Dhabi is certainly ready to launch its own assault on the dynamic Middle East property market.
While it is recognised that the shift in thinking in Abu Dhabi coincided with the relaxing of property laws, allowing UAE nationals to own and trade land in Abu Dhabi for the first time (GCC nationals were permitted to do so within designated areas while expatriates could invest 99-year leases within these zones), it is worth remembering also that, as a city, Abu Dhabi has the highest per capita income in the world (US$46,185), so it should come as little surprise that it is finally manifesting this with tangible developments.
Of the raft of projects currently underway in the capital, the most high profile are the US$27bn Saadiyat Island tourism project, the US$18bn Al Raha Beach, and the multi-billion dollar Al Reem Island project featuring Sorouh’s Shams Abu Dhabi flagship project with its 83-storey Sky Tower. At a cost of US$136m, the 303,000 sq m of open space and recreational amenities will include 12 mixed-use towers, restaurants, water canals, lakes, recreational and sports complexes.
Work on the infrastructure is scheduled to begin in June, 2007, with the first phase completed in 2009 and the full project expected to be finalised by the end of 2010. The Central Park is distinguished by its central setting in the midst of other local and international developments. Its location in the special economic investment zone of Al Reem Island also affords tax free benefits on buyers as well as the ability to acquire 100% ownership.
Shams Abu Dhabi was launched as Sorouh’s first prestige development. Located on Al Reem Island, approximately 300 metres from the northeastern shore, it will occupy over 1.5 million sq m, accounting for 25% of space on the island. Residential projects total 80% of the overall space, with the remaining 20% dedicated to commercial use and recreational facilities. Home to roughly 70,000 people, the first phase of the project is expected to be completed by 2009 with the full project completed in 2011.
Mounir Haidar, CEO of Sorouh Real Estate, says: “Since it was established, Sorouh has demonstrated its commitment in adopting a comprehensive approach based on creativity in designing and developing properties. We are also committed to supporting and enhancing the growth of the real estate sector in Abu Dhabi and the UAE, which will be reflected in the development of related business sectors.”
Abu Dhabi’s other main development is the Saadiyat Island project unveiled by Abu Dhabi Tourism Authority (ADTA) at a cost of US$27.2bn. The 27 sq km island, located 500m offshore, will be executed by the Tourism Development and Investment Company (TDIC) and be a mixed-use residential and tourism development project. Half the size of Bermuda, and to be completed in 2018, Saadiyat Island will become the Middle East’s largest single natural island development.
The island will be divided into six districts: Cultural District, Al Marina, Saadiyat Beach, South Beach, Saadiyat Park and The Wetlands. These districts will include a total of 29 hotels, three marinas with berths for 1,000 boats, two golf courses, 38,000 apartments and 8,000 private villas. Two causeways will link the island to the city of Abu Dhabi, each a 10-lane freeway, with one providing light rail transport. Last month, a joint venture between Germany’s ED Zublin AG and UAE contractor Saif Bin Darwish picked up the US$184m contract to build the 10-lane Saadiyat Bridge highway.
The joint venture fended off competition from a Korean/UAE joint venture of Samsung and Al Jaber and the Japanese/Turkish partnership between Taisei and Nurol. Construction of the bridge is due to begin by the end of the month.
With so many projects in hand, Abu Dhabi is poised to receive the construction baton from Dubai and it is clear that 2007 is a very important year for the UAE’s capital city. Only time will tell whether the legislative changes and key projects are enough to attract those who until now only had eyes for the bright lights of Dubai. By Christopher Sell
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