Aldar Properties PJSC (ALDAR) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Aldar Properties Second Quarter First Half 2020 Results Analyst and Investor Conference Call. I must advise you that this conference is being recorded today, August 13, 2020, 03:00 p.m. And I would now like to hand the conference over to our speaker, Greg Fewer, Chief Financial and Sustainability Officer. Please go ahead, sir.

Thank you, operator, and good afternoon, good morning to all, and welcome to Aldar's Second Quarter and First Half 2020 Results Call. My name is Greg Fewer. I'm the Chief Finance and Sustainability Officer, here at Alder Properties. I hope you're all keeping safe and well, in particular, to all our friends and colleagues impacted by the goings on Lebanon. In particular, the focus of the world truly is there right now and wishing everyone the best of that situation. So I'd like to start by providing an overview of our performance for the second quarter. And then as usual, we will open up very quickly the floor to questions. First, I'd like to give you a brief update, a reminder of how Aldar is navigating through these unusual times. Since the onset of the COVID pandemic, we have prioritized the health and safety of our employees, our customers and the communities in which we serve. And in line with the government health authority guidelines and recommendations, we have taken decisive steps to implement strict hygiene sanitation measures across all our assets and ensuring strict social distancing protocols are maintained. The UAE has certainly been at the forefront with regards to COVID-19 testing and over the past several months, we've seen a measured easing of restrictions that are paving the way for an increase in economic activity. Of course, the situation remains very fluid. And then we feel very privileged to be operating within one of the most well invested, and in our view, best executed health situations from a government perspective in the world here in the UAE, in particular Abu Dhabi. So let's turn to the second quarter numbers. So during this period, Aldar achieved a very solid business performance despite the challenging COVID environment. We've demonstrated the real earnings power of our business. At Aldar, we have a very -- we have a solid business model that is unique when compared to other real estate companies in the region. We have a very good balance between our development management business and our asset management business. In addition, our adjacent businesses, Aldar Education and our property and facilities management businesses, Provis and Khidmah, are providing further revenue diversity across our asset management business. And this diversification continues to be a source of strength, especially in the challenging operating environment that we're experiencing currently. So in the second quarter, we're very proud to be posting growth in revenues, up 21% year-on-year to AED 2 billion. Gross profit also for the quarter, up 7% to AED 716 million, supported by a strong quarter from our development management business. This included good progress on the development management, the development pipeline -- excuse me, inventory sales, revenue catch up and the land plots that we've been able to sell across our land bank over the course of the quarter and increased contribution this quarter from the previously announced AED 5 billion of government contracts that we were awarded last year. Net profit came in for the quarter at AED 484 million, which is a 2% increase versus the same period last year. In the Development Management business, we recorded sales of just over AED 0.5 billion in the second quarter, driven by inventory sales in the absence of new development launches that we've deferred over the first half of the year. As at the end of June 2020, 84% of our overall development pipeline is sold. We've made good progress on our previously announced projects with handovers continuing through the quarter at Mamsha, Jawaher, Bridges and Yas Acres. In our Asset Management business, principally the income-generating assets is owned and managed by Aldar investments. These produced an operating income of AED 313 million for the quarter, down 21% year-on-year, reflecting primarily the COVID impact on our hospitality and retail sectors, the 2 most impacted quarters -- or sorry, 2 most impacted business segments from COVID during the second quarter. Occupancy remained steady at 88% across our portfolio, which includes residential, retail, commercial, all this portfolio and benefits from long-term and committed lease contracts from customers. To that end, vaults ranged between 3 and 5.2 years across our investment property portfolio as at the end of the quarter. Alder has a robust balance sheet and is, therefore, in a very strong position to weather the current challenge. Our average debt maturity today sits at 5 years with no immediate loan repayments coming up until August of next year. Our cash and liquidity also is very strong. At the end of the quarter, we have AED 5.9 billion of free cash and undrawn committed credit facilities at the end of the quarter, supporting our business and underpinning our Baa1 stable outlook credit rating. I would also like to mention another notable development across our business. That's been really taking a lot of momentum in the last 24 months. You may have noticed that I changed my title, I mentioned this last time, but I'm called now the Chief Financial and Sustainability Officer at Aldar. And this is a reflection of the direction the company is really taking with respect to sustainability and ESG. We are stepping up our commitments to sustainability through many initiatives from enhanced financial reporting. It's taking steps to reduce and acknowledge our carbon footprint and supporting Abu Dhabi's various social impact initiatives. So at Aldar, we've set a rigorous sustainability and ESG agenda over the coming years, which is outlined in our pending second sustainability report that's coming in the due for release in the coming days. We've established a new sustainability framework set out in Slide 10 of this presentation, and including a revised and updated strategy, and we'll work towards a number of commitments, including a carbon-neutral -- the development of a carbon-neutral action plan. And amongst many others, the auditing of all our primary contractors against worker welfare policy and many, many others. We are integrating sustainability into the criteria that we used to underwrite our investments. And we're also progressing the ESG ratings and ESG index inclusion over the course of the year. As one of the largest companies in the UAE, we feel it's very important to play a leading role on ESG overall and to be part of the national and global initiatives in this area. So I'd be very happy to talk to any of you separately about just how important this is for Aldar, how important it is for us as a group and the overall approach that we're going to be taking to this extremely important topic going forward. So overall, during these uncertain times, we remain very prudent in the management of our business and yet positioned and poised for opportunities that we see in the overall market. Whilst it remains very unclear, what lasting impact this pandemic will have on our business and consumer behavior, we're in a very strong position to navigate these uncertainties because of our diversified business model, our very low debt levels, our strong balance sheet, our strong cash position, and the underlying strength of what is a very well supported Abu Dhabi real estate market in a very strong Abu Dhabi economy. So with that, I'm happy to open things up to Q&A.

[Operator Instructions] First question comes from Taher Safieddine, JPMorgan.

It's Taher from JPMorgan. Congratulations on set of -- solid set of numbers. Two questions, if I may. Greg, first one is on the recurring portfolio. And within the investment portfolio, can we just get some color on the developments within the retail segment in terms of rent free, how are things sitting up after the quarter end with business coming back and activity? If you can just share some color on how things are trending on the on the retail portfolio. And the second question is on the hospitality. I mean looking at Q2 occupancy, it's not 0, it's actually in the 40s, which is considered to be okay. Is this -- I mean, part of, I don't know, government reimbursement for using your hotels? Or I mean, how should we think about the hospitality business? So that's on the recurring portfolio. And in terms of the development portfolio, what's the strategy moving into the second half of the year? And specifically on cash collections, you mentioned progress on cash collections. But looking at the cash flow from operations, it's actually negative on the balance sheet, assuming that you've put some CapEx to work as you ramp up for deliveries. Can we get some color on what's the ballpark figure in terms of free cash flow you're expected to collect from handovers into the second half of 2020 and 2021, just the ballpark figure?

Sure. Okay. Taher, so in orders. So on retail first, I mean, I think we announced very quickly what our position was going to be on -- in terms of support for tenants. So we came out with our announcement of AED 190 million of support, of which AED 60 million was targeted towards retail tenants. So that's something that we came out with right away early on in the COVID crisis. And really, Q2 for us has been about just -- we have over 1,200 retail tenants across the portfolio. And it's just been meeting with all of them. And getting a temperature for things and getting the exact terms of variations to the leases really on a -- and there's been a lot of work for the team, but we're doing it on a case-by-case basis. And when we announced that AED 60 million to AED 190 million, as it's part of AED 190 million program, for our overall customer base. That was early in COVID. There's a lot of uncertainty just to how things will going to be going. We're very happy to have opened our hotel and our mall assets. We have them opened up with over one part over a month. And we're seeing decent footfall. I don't have -- I'm not going to have hard numbers for you now. It's a very new and evolving sort of trend, but you're probably aware that the borders between Dubai and Abu Dhabi, there's restricted access between those right now. And so we're seeing at our malls, a real pent-up demand, if not just for people to get out and carefully social distance, but in a catch-up on shopping, pick up on clothes that hadn't been acquired during COVID, weekend shopping that used to leak to Dubai is being retained in Abu Dhabi. So we're getting a strong captive reaction into our malls right now. And that's kind of impacting how the team is implementing some of these rental variations that are being worked through. So it's a bit early to really be talking through a firm guidance on how the retail is going to pan out for the rest of the year. I'd say, we're encouraged right now about the footfall activity we're seeing in the mall and the fact that people are -- was a captive, wealthy pent-up consumer who's now [indiscernible] and trading within our malls right now. And that's impacting how much cash we're going to be varying in those contracts and as we implement that tenant.

Yes. Sorry, just to stop here. On the like-for-like, is there a downside risk for the 10% decline in like-for-like that you mentioned in the presentation? I mean should we think of this as maybe continuing into H2? Would that be a reasonable assumption within the retail portfolio?

Look, it's hard. It's really hard to guide, to be honest. And I wish I could, I'm not trying to be cute. It's just -- I see there's various outcomes. If we continue this positive trading, and people generally are still employed in Abu Dhabi, they've been at home. They've been saving a lot of money, and they're not going to divide right now. They're in our malls. It's kind of positive. And the guys are actually maybe early in COVID, but people were running out to really respond to very negative sales. I think we're just having pause right now actually seeing how consumers are behaving. And that just creates a couple of other states of the world that might have been a bit more positive than they were in the past. But look, I'm not saying we'll end up that way. I'm just saying that it's a fluid situation. It could go down if there's a second wave. We're prepared for that. If it continues to trade positively, the health -- I mean, the nice thing about the Abu Dhabi market is that the health file is very much under control here. I mean the government here is testing more than anywhere on the planet. And I think people feel good about that as they emerge out of their villas and then start to go back to work and go to the mall. So there are states of the world out there that are both negative and positive, and it's just making guidances for you guys a little bit more complicated. But we are seeing trading -- and look, on balance, it's down. So the 10% down like-for-like, you wouldn't be wrong seeing that carry on into the second half of the year. And we need to see how these guys trade and the kind of cash collection we're going to be able to see from them. So that's on retail. Hospitality. Okay. So the 47% occupancy, look, we -- because our hotels, so many of them were quarantine, that does not include quarantines population. Otherwise, the hotel occupancy would have been unreasonably high at 100%. So that 47% only represents hotels that are open and open for trading on rooms available only. So it's a slightly -- not contrite, but it's just -- it's a number that we're trying to make it like-for-like as possible, like last quarter, 66%, that percent of our hotels that were available and rooms that were available, what percent were occupied and that 47% we're showing now is comparable to that in terms of the number of rooms that were occupied. So it does not factor in the hotels that were just off-market and used for closed purposes. On hotel guidance into the second half, I mean, Q2, Q3, those were always slow quarters for us anyway. I think we're not going to be in a position to really give intelligent guidance to you guys until we get visibility on Q4. I mean that's really when everyone here makes some hay, well the sun shines and what the tourism world looks like then, what some of the events that the government starts to create, what they look like then, what F1 looks like then. I mean when we get more visibility on that, that's really going to start to drive what kind of hotel profit we can expect in that fourth quarter, which really has a lot to do with the cash generation ability of that business line for 2020. And I would go to say to the government...

Yes, from the government -- sorry. Would you be compensated from the government on this quarantine? Okay. Is there any structure in place or it's still early to discuss?

Too early to discuss, but varied concessions. I think our relationship with the government has never been stronger. We performed very well. I mean you remember the COVID really started in the country at one of our hotels. And so we've had early forged and excellent relations with agencies of all governments, and they're happy with how we behave. We're extremely proud of our staff who worked so hard during those times, and we're pretty comfortable with our arrangements. The government will -- will be positive. And then on development management, you asked about cash collection. So look, that's been a good story for us through COVID. I think one of the nice responses of business activity through COVID was that the business of construction kept going. And that was a thing that was just carefully worked on with the authorities here, where it was just much safer to the social distancing with, albeit, slightly reduced workforce on-site in the outdoors than locking people down from a construction perspective. So the good thing is that kept our projects moving. And again, with the help of our excellent staff, managing that and supervising that, we were able to move forward and actually make good collection when it comes to the development business with handovers at Yas Acres, Precinct H, Mamsha and Jawaher. You mentioned on the cash flow statement, so I draw your attention to a note that sits on that in the -- so these are condensed financial statements. So there's a -- operating activities was negative. But in that was a AED 1 billion cash payment we made in terms of monies that we manage on behalf of third parties. So government, we act as a principal and money, this is our restricted cash balances that we look after the government funds on some of their projects. So we made a payment outgoing that showed up in our operating cash flows as an outpoint. When you reverse that out, that's not our money that's managed on behalf of the government. Our cash flow operations is actually very positive, reflecting these positive inflows that we've been -- that we've been collecting year-to-date quite successfully.

Can we get any color on how much have you collected on the projects in terms of like front handover of units?

Yes. I mean year-to-date, we're over AED 1.3 billion of inflows coming from payments into our escrow accounts, so it's a very positive story from us from that perspective. [indiscernible] there's more to come. So we continue to -- if you look at our investor reports or in the investor pack with the handovers sheet in the appendix, you'll see that Mamsha, Jawaher, I mean, they're pretty much done, 80% handed over. Yas Acres is a little less than halfway. We've handed over Precinct H, then there's Precinct D and G that are coming in the second half. Bridges, it was about halfway handed over at Shams. And then we have a big one coming at the end of the year, Water's Edge on Yas Island, over 1,200 units handing over there. So again, very encouraged not only by our staff and our contractors' ability to operate during COVID. And that's only going to improve as things -- as lock down measures ease, but equally impressed with our customers who have taken handovers and our banks who have performed on mortgages and concluded payments as we handover. So that's been quite a positive story for us in this quarter.

Next question comes from [ John Munger ], International Investments.

Great. Congratulations for the strong set of results. It's quite encouraging to see the strong performance in terms of your cash flow collections. And I'm just wondering what implication that has with regards to the dividends for this particular year? Are you in a position to give any guidance with regards to that? And secondly, as you're now focusing more on your existing inventory. And what does this mean with regards to new launches? Are you reconsidering this for the remainder of the year or next year? And finally, how much of the outperformance in terms of handovers, do you think is as a result of the stimulation measures that are being introduced by the government? And whether those have had any impact on your business?

Okay. So on the first question on dividends, I mean, we're definitely not in a position to guide on a number, but I would emphasize the point that we have a dividend policy. That dividend policy remains unchanged. It's based on cash collected from our 2 main business segments. So we pay out 65% to 80% of free cash flow in the AM business. And we pay 20% to 40% of cash collected on your completed projects in the development management business. So that policy remains unchanged, and that's the policy that will operate at the end of the year. So it's really -- the big swing factors in that are going to be, how is our cash collection going to progress on the asset management side, and we're having good cash collection in residential and commercial. I mean those segments have been pretty sticky from a cash perspective. It's hotels, and my comment I referred to earlier on hotels for us, is really going to be down to Q4 performance and visibility we get on advance bookings and how open the tourism sector would be or this vacation sector will be and the event space will be in the fourth quarter here in Abu Dhabi. And on the retail side, it will be working through these variations that we've agreed -- are agreeing with our tenants right now and how they trade through the third quarter and into the fourth quarter this year. So that will have a -- everything to do with how our cash collections continue on those 2 fronts. And then obviously, we'll be updating, like the next good check in will be when we have our Q3 numbers coming out in November. On the second question, on the inventory new launches, and it's linked to the answer to the third question also on outperformance of delivery. To pick a word, we've been encouraged by the wealth, the liquidity and the willingness to deploy capital of the real estate investor here in the UAE and our prime customer has always been and as our foundation client, is the Emirati, the UAE national. And they've been very active. We have over AED 0.5 billion of sales this quarter without any new launches from real estate investors who are sophisticated and recognized value and are willing to take capital to work. And so that's informing. That's giving us encouragement in terms of the new launch window. We suspended new launches in the first half of the year. We're getting lots of great feedback from our customers. We're very close to our client base. And there's money to deploy. And people are looking past COVID into a recovery in 2021 and trying to position some capital to make money on a recovery trade. And I'll remind everyone on this call is that when that recovery happens, we're going to be showcasing Abu Dhabi real estate to the world into our region again for the first time when what is hopefully a cycle upturn that will start, and is a market for the first time we'll be showing to investors with freehold title, with reformed residency laws and a number of other reforms that we've been working so hard with our government on showcasing. So that's all informing our new launch program right now, which has vigor in it, in our motto when that team is really the development ready. So there's a ton of work going on right now on development, on design, on keeping feasibilities updated and tweaking them for the particularities of the market that we see. So would I be surprised to see new launches in the second half? I would not be surprised. I would not be surprised to see new launches come. So watch that space. And then on outperformance, the final question. Is it result of stimulus? In a sense, yes. I mean -- and I credit our team as much as the government. I mean we went out and worked with the banks for receiving liquidity support from government to make sure that our customers were getting mortgage finance when they needed it to close transactions. And that's helped a lot. Mortgage penetration isn't really super deep here in the UAE, the cash buyers dominate the market. But we're seeing that having the mortgage finance, especially for the middle-income product, is highly valuable to enable and facilitate handovers. So the work our team did getting mortgage finance programs together, waiving the property fees in terms of what government has done. So this is all definitely helping and doing what it's supposed to do, which is enable real estate transactions and provide the stimulus that employ those conditions for enabling transactions that stimulus needs to do.

[Operator Instructions] Next question comes from [ Jack Casini ], Franklin Templeton.

Any update on your due diligence on acquiring new real estate assets? And I would like to know your thought process behind your target identification. And is there a deadline to this? I mean where are you on the -- I just want to know the progress if there is any.

Okay. I mean, look, in terms of acquisition activity, of course, we will be updating the market as and when there's anything worthwhile to announce. So there were some speculation in some market reports that hit the wires during the quarter. And certainly, we don't comment on speculation and rumors in the market. That's our policy. On the topic in general, though, I would say that it is times like this when strong get stronger. And the way we view or certainly our asset management platform, we see Aldar investment properties and at our asset managers' and the asset management group within Aldar. We see that platform as the most efficient platform for real estate ownership in our region. We have deep talent in multiple asset classes, resi, commercial, leisure, schools, commercial office, retail, and we have got scale and we've got financial strength. We have the highest credit rating in the Middle East and in our region for a corporate. And our cost of capital is commensurably low. And these are all things that create alpha and create a competitive advantage for real estate owners like us. So at a time like this -- and we're very liquid. We've got a strong balance sheet. And it's times like this when we are in a position, and we are poised to grow in a down market when we find sellers who are willing to sell at prices that we find accretive. Now the trick in our region has always been prying away good real estate from current owners. There are very few burning platforms over the cycles here. And you don't see the kind of buying and selling activity you might see in other markets. But at a time like this, this is when you do see some activity, some people will want to sell their assets. Others will just look at our platform and realize that assets owned and managed by this platform are just worth more, and there are ways to monetize and to -- for all owners and parties to transactions to benefit. So that's the approach that we market ourselves within the real estate community as. And we're getting good traction with people in the market with that mantra in mind. So -- and we'll update the market as and when if there's anything relevant to report. We've got strict underwriting criteria. So we remained extremely disciplined investors. We only deploy capital where we can seek accretive opportunities that are accretive from a weighted average cost of capital perspective to drive value for the shareholders.

Next question comes from [ Mohammed Minali ], SICO.

This is [indiscernible] from SICO Asset Management. My question is regarding your retail portfolio, you mentioned in the presentation that the rent waiver was -- has to be amortized. If I can firstly ask you how big is the rent waiver amongst the support bucket that you mentioned in March?

Yes. So of the overall AED 190 million, about AED 60 million of that has been allocated to retail.

Okay. And over how long would it be amortized?

Yes. I mean that really depends on the tenant. So if you just look at a vault, let's say, in the AED 4 million range, let's say, around retail, we would be amending leases and straight-lining the default -- sorry, the rental reduction, straight-lining across the remainder of those leases. So it really -- it depends on the tenants we give it to, how long the lease remaining we have on it. It's generally a shorter vault across the portfolio. And again, I go back to my earlier comment, some people are actually trading well now. And in which case, we wouldn't necessarily be passing the full waiver on. We might make it a deferral instead of a waiver. And so we really need to work our way through the full portfolio with those amendments to really be perfect on what that impact is going to be.

And I assume that waiver was given until June? Or have you started getting or like being relaxed in the terms beyond June?

Yes. I mean -- so the way that the cash collection model works is we get -- for most of our tenants, we get rental payments in advance. So we get checks. So we actually have checks for everyone for that quarter. They haven't been in cash. We're really -- we're working through that 1,200-unit tenant mix and a green one-off amendments to leases to agree what -- whether it will be a deferral, whether it will be rent forgiveness, whether we'll tie it to some sort of a back end. And in fact, sometimes, we extend the leases as well, which, again, will have an effect on the straight lining. So sometimes there's a short vault remaining all of a certain tenants, but in exchange for giving some rent during the COVID period, we asked them to extend their lease from 18 months remaining to 4 years or something like that. So again, the straight-lining impact is driven by that as well.

Okay. And one other thing on the receivables. I can see trade receivables increasing by almost AED 1 billion, that's around 50% year-to-date. I'm just trying to understand what's that specific increase coming from? Is it because of the delayed like rental, supposed to be collected as you repeat?

No. So across -- so the primary rationale for that movement would be coming from a development business. So when we're finishing projects, and that's the wave and the part of the cycle that we're in right now. At the cusp of handover, we would have recorded revenue on 100% of, let's say, villa at Yas Acres. The client would have paid 30% to 50% on that. And everything else that we record in those final period -- in the final months up to completion, we're recording all the revenue, and it's all being booked as a receivable pending that final handover payments. So that's -- that would be the primary cause of why you're seeing receivables move up. Secondarily, in terms of quantum, is the receivable from the retailers that you're describing. So as we're straight lining, where we're still recording revenue, but we're booking a receivable on those uncashed checks, pending the final straight-lining of an agreement on the variation. But in order of magnitude, the impact on the development business is much more significant.

Next question comes from [ Amar Malomane ] from Terra Partners.

My questions have already been answered because I was going to ask about the rumors that came out in May as well as the issue of the red wavier.

Next question comes from Archie Hart, 91 London.

Greg, it's Archie. So just a couple of things. Firstly, I'd like to commend you guys for the work you're doing on sustainability. I mean our clients are increasingly focused on things like carbon and worker welfare. So it's great to see you guys stepping up to the plate there. Secondly, question around the Emaar JV. Obviously, you've been negotiating that for a couple of years now. I wondered sort of how close you were. What the remaining issues were? And when we might expect sort of resolution there?

Sure, Archie. Good to hear from you. The -- so on the Emaar JV, I mean, I think it's fair to say that it remains unconcluded. Both parties have -- that we're negotiating for a long time. And I think when COVID came and hit, I think, the teams sort of agreed to review and focus on everyone's own portfolio that kind of changed the world in terms of priorities and that's sort of where we remain right now. So it's -- we remain in discussions with them. We have not concluded the arrangement as of yet with them on that.

[Operator Instructions] Next question comes from Anvar Khali, Al Rams Company.

I have a question. I'm looking at the financial statements note at 23.1 regarding business segments. I see revenues from leasing has dropped from AED 858 million in the first half 2019 to AED 801 million in this half. So if you can just give us some color on the reason behind this drop.

Yes. And that's primarily coming from the retail portfolio. So on Slide 6 of the investor presentation, you see a walk that will take you through the -- those are very detailed block that takes you through the main differences between last quarter and this quarter from rental and an NOI perspective. So our occupancy is down a couple of points. So there's a component of that coming from just less people. And like-for-like rents are down, just in terms of overall dirham collected across from rate and renewal and from the rental forgiveness and the straight-lining impact of the rental forgiveness that we're seeing. So those -- I would point to those as the primary reasons for the rental reduction in that segment. But there's a good breakdown on Slide 6 for that.

We have a follow-up question from Taher Safieddine, JPMorgan.

Sorry again. Just a quick question, Greg, on the M&A rumors and talks. I mean the news that came out about you guys acquiring some assets in Emaar Island. I'm not just looking for the first of the news. But I mean, do you really want another retail addition, I mean, to the portfolio, given that overall, retail has been struggling or under pressure? I mean this has been one of the weaker parts of your portfolio. So this is my first question. If you can just give us some just snapshot on where do you want to be in terms of sectors within other investments. And the second question, there's also some news about ADNOC looking to spin-off its real estate portfolio. A big number. I mean isn't this something you want to consider, I don't know, I mean, in terms of bulk leases, you have a great A client, I mean, low-risk. Is this something that you consider? Or you're just thinking about maybe something beyond Abu Dhabi in terms of the expansion plan? If you can give us some color there.

Yes. I mean, look, I'll fall back to the most important overarching comment, which is we don't comment on rumors, and it's the public company is very important that we respect that principle. I think what I would say, I would make an observation on some of the areas where we've made the most alpha for our shareholders over the years. And they've been at those times when the deck chairs are moved. And when we can asset gather within Abu Dhabi, which is a very interesting real estate market. It's a little bit closed. But it's an extremely wealthy market with an -- one of the wealthiest governments on the planet. And there's a very interesting real estate exposure here. And when the chair -- when the deck chairs are moved around, we're a primary actor to benefit from that. We made a lot of money for our shareholders over the years doing that. So I would just throw that out there but an observation in the past. And we've always found a way to make good money as a commercial enterprise, as the leading real estate company owned by the public from real estate transactions in Abu Dhabi. So I think I would contain my comments at that.

Okay. And just in terms of sectors -- just in terms of segments, I mean, is there any interest beyond what you have today? I mean I don't know, maybe more education, logistics. I mean what kind of segments you're looking at, without just naming any specific deals or commenting on news in the press? I mean...

Yes. I mean, look, the one glaring omission in our portfolio right now is logistics, for sure. And the burgeoning space of data centers and other things like that, if we were to look at from a pure real estate perspective. When you stand back and you look at the UAE, logistics is actually one of the things that makes this place move. But I think because logistics has always been so strategically important in terms of ports and free zones and things like that. There's always been a strong government investment and incumbency in terms of ownership of assets and logistical assets, let's say. So I think that explains why it's not really in our portfolio right now. I think -- and we've been public, and the CEO was on TV this morning talking about this asset class as well. That's certainly, from a sectoral perspective, one that we'd love to add to if we can find the right opportunities to get the kind of champion assets that we want from current owners.

We have a follow-up question from [ John Munger ], International Investors.

This is John. Just looking at your cash flow statement, very good to the segment of cash flows from investing activities is a significant line item, the movement in restricted balances of around AED 1.4 billion in the interim period. Could you kindly explain as to what this relates to and whether it's something that should be looked at certain operating item?

Yes. So it has to do with the way that we contract with our -- sorry, the movement was restricted down. So there's 2 things, sorry. There's the note that appears at the bottom which is restricted cash of this AED 963 million that -- and the way we talk about it and disclose it is restricted money because it's money that we operate on behalf of the government of Abu Dhabi. And the way we can track with them, we're principal for that money, and we operate on a back-to-back basis vis-à-vis the mass of the assets that we manage for the economic benefit of the owner, which is the government. So movements in that cash actually go through our operating activities line. And so there's an outflow to that extent in the first quarter, second of the first half that's reflected in that note. You back that note out, our cash flow from operating activities were actually quite positive. And I think if that answers your question.

[Operator Instructions] We have a question from Ayub Ansari, SICO.

I have a couple of questions. First, regards your retail portfolio. Could we have a sense of how much of your GLA is dedicated to food and beverage and entertainment facilities, entities which are in the business of selling experiences? And how this is merchandising and how much is grocery? And just a breakdown of GLA. Secondly, relates to real estate development. Are you seeing any sort of change in behavior with regard to demand for real estate properties given the work-from-home culture, et cetera? Are people now looking more to invest in villas as opposed to apartments? If you can just shed some color on that.

Okay. So just in terms of the real estate behavior, I mean, there's definitely been a knee-jerk reaction into villa product. I think it's most noticeable in the multifamily segment of our Asset Management business. We've seen good legit demand for people who want to get out of high rises and into more horizontal development during lockdown. I think that was very much a short-term measure, though, in response to the practicalities of lockdown. Now whether or not that's going to translate into more permanent demand for that kind of product. It's definitely a trend. I think it's one of those sort of question-mark trends that the guys are evaluating right now. But what's nice about our land bank is that we've got more than enough products and land out there to take advantage of opportunities like that. So I alluded earlier, just to being very close to our clients and some leading edge, sophisticated real estate investors here, we're definitely looking at that opportunities with subdevelopers. And in fact, you saw that opportunity monetized in the second quarter. I mean part of the profits we're booking for land sales to subdevelopers who are going to be developing horizontal -- who are going to be developing horizontal developments that are taking advantage of some of these trends. Now I missed a little bit of what you're saying on your first question, the hospitality, can you repeat that?

It's [indiscernible] side. It's your retail portfolio. The breakdown of GLA, how much is food and beverage and entertainment facilities? How much is merchandising and how much is grocery? Can we have a sense of that? And as a follow-up -- as a follow-up to that, how have the sales been of, say, these food and beverage outlets post lockdown given the social distancing rules?

Okay. So on the hospitality side, the majority of that GLA is hotel rooms. So we'll have the ground floor, maybe the first floor of some of the hotels will be space for restaurants. Some of the larger hotels will have 2 or 3 restaurants per hotel. But on a 10-story hotel, you're looking at 10% of the GLA being F&B-related. We've got one Beach Club in the portfolio that is predominantly F&B and leisure, and its composite makeup, but we've got very little grocery. So there's -- the only grocery exposure we have would be in the asset management and the retail portfolio where we rent to anchors like Carrefour and others at Yas Mall and within our community retail. So we've very limit exposure ourselves, too.

Okay. Fine. Fine. So grocery would be -- it would be less than 10% of your total non-REIT GLA? Is that a fair assumption?

Of the no-REIT -- oh, yes, I mean it will be hardly any -- and even within the REIT, and I'm just -- I'll have to follow-up on that detail for you in terms of what percent of our tenants are grocery by GLA. It is very few tenants, but they carry a lot of GLA. I don't have the number off the top of my head right now. I can follow-up and get that for you after.

[Operator Instructions] We have a question from Zohaib Pervez, Al Rayan.

Congratulations on a good set of results. My question is more related to further impairments that you might be looking at considering that like-for-like sales are down, occupancy is slightly lower. And you said that this like-for-like is going to be continuing at least for the second part of this year. Do you think you will be taking on more impairments because of this?

Well, so, I guess, important to note that we haven't taken any more impairments this quarter. I would also flag that we were pretty quick, out of the gun, taking impairments last quarter. So we took some prudent impairments reflecting some of the cash incentives that we were announcing at that time immediately. So that had already conditioned the book a little bit. I mean, look, preparing these financial statements, we actually doubled down on our third-party data points. So I mean, the conundrum for anyone that owns real estate in our markets is, it's a relatively illiquid market in terms of buying and selling and buildings, especially institutional-grade buildings. So assessing fair value can be difficult. I'm going to third-party appraisers. So that's how people like us get comfortable with what fair values are. We thought it’s prudent to actually get more data points. And so we actually had all our assets valued twice this quarter. So with that massive data set actually in mind, we have not taken any impairments this quarter, partly being informed from that data. And -- sorry, that would be point number one. Point number two is that we don't want to overreact down. We also don't want to overreact up in terms of making statements about value when there's still a lot of uncertainty in terms of the future. So I think our numbers now staying where they are reflect the fact we took a hit, we took a hit in Q4. And let's not forget in 2019, we took a hit. We followed that up in Q1 with a COVID hit. And we haven't taken anything this quarter. So I think that's really management saying, look, there's good valuations in the books right now. We want to wait and see how things develop in the -- in Q3 and Q4 in terms of trading at the malls, in terms of tourism recovery and with respect to our assets that are most exposed to some future volatility before making a definitive statement on value up or down relative to our current valuations for those -- in particular, those to asset classes at this time.

We have no further questions at this time. I now give back the floor to the company. Thank you.

Okay. Operator, thank you for that. And thank you, everyone, for dialing in, and we look forward to speaking to you at our Q3 call. Thanks for dialing in. Talk you soon. Bye.

This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines. Thank you.