Aldar Properties PJSC (ALDAR) Earnings Call Transcript & Summary

Greetings. Welcome to Aldar Properties Second Quarter 2022 Financial Results Conference Call. [Operator Instructions] Please note that today's conference is being recorded. At this time, I'll hand the call over to Mr. Greg Fewer. Mr. Fewer, you may now begin.

Thank you. Good afternoon, and good morning, everybody. My name is Greg Fewer, and I'm the Group Chief Financial and Sustainability Officer here at Aldar Properties. We appreciate you joining the call today from wherever you're dialing in from. And we're going to be sharing some of our key financial and operating performance highlights for the second quarter of 2022. Now before running through our financial performance, I just want to highlight Aldar's significant capital deployment during the period as we continue to pursue our strategy for transformational growth. In the first half of the year, we've deployed and committed over AED 11 billion to add scale and diversification to our platform. Notably, just this morning, we announced one of the largest real estate transactions to be completed in the UAE with the acquisition of 4 prime Grade A commercial office buildings in Abu Dhabi Global Markets from Mubadala for AED 4.3 billion. We've also ramped up our expansion strategy across retail hospitality assets in Ras Al Khaimah with the acquisition of Al Hamra, Rixos Bab Al Bahr and the Nurai Island Resort here in Abu Dhabi. And we announced only yesterday our acquisition of the DoubleTree by Hilton Resort & Spa on Marjan Island also in Ras Al Khaimah. During the year though, thus far, we introduced a new very important vertical, Aldar Logistics through the acquisition of the Abu Dhabi Business Hub. We've also progressed our plan to diversify Aldar Education's portfolio and widen the choice of quality education for students in Abu Dhabi with the acquisition of the Al Shohub Private School earlier in the year. All these deals bring Aldar's total capital commitment into recurring income assets to over AED 7 billion, an increase Aldar Investments assets under management to AED 30 billion in 2022. We expect these investment acquisitions to achieve a stabilized yield of approximately 7% to 8%. And as a result of these acquisitions, our existing portfolio has been rebalanced towards the commercial segment in Aldar Investment Properties, which now account for 35% of the total investment property portfolio within Aldar Investment Properties up from the previous 20%. The Retail segment represents 37% of the portfolio with the addition of the Al Hamra Mall, while the residential segment represents 26%. Aldar Logistics just starting out forms 2% of the portfolio and with the addition of the Abu Dhabi Business Hub. In addition to expansion efforts in our recurring income portfolio, we've also accelerated investments and to bolster our strategic land bank with the acquisition announced earlier in the year of 6.2 million square meters of prime, prime land on Saadiyat Island. We've also acquired a land plot adjacent to the DoubleTree by Hilton in Al Marjan Island in Ras Al Khaimah as well as the development rights to new islands associated with the Nurai acquisition in Abu Dhabi. This strong momentum in transaction activity demonstrates Aldar's continued ability to execute on this transformational growth strategy and deploy capital effectively in value-accretive acquisitions that not only scale our platform but also diversify, enhance -- and enhance our platform's potential for future growth. And as we'll discuss later, we're not finished our acquisition strategy yet. We have another AED 5 billion of equity capital to deploy over the next 9 to 12 months. Now with that said, I would now like to walk you through some of Aldar's key financial highlights for the second quarter of 2022. So overall, Aldar delivered an exceptional performance, driven by strong growth in our core development business and solid progress across Aldar Investments' recurring income base. Net income for the quarter jumped 62% to AED 841 million. Net income for the first half of the year rose 44% to AED 1.53 billion, with revenue increasing 26% year-on-year to AED 5.35 billion. During the period, we achieved a healthy gross profit margin of 43%. Aldar Development, which is the business that develops Aldar's projects and manages government housing and infrastructure projects continues to deliver strong performance, driven by solid development and land sales. We achieved a record half year group sales of AED 5.33 billion, driven by strong local and international demand for existing inventory and new property launches in the UAE as well as a robust sales performance from SODIC in Egypt. 88% of our launch pipeline is sold, and this robust demand reflects the positive sentiment and healthy real estate market dynamics in our core markets as well as Aldar's diversified offering and ability to satisfy strong level of demand for quality developments in desirable locations. Furthermore, we have sold 3 significant commercial land plots for about AED 756 million during the first half of the year. I also want to highlight that our group revenue backlog of AED 11.3 billion, and our Aldar Projects backlog of AED 58 billion, provides strong visibility on future revenue and profit across our UAE and Egyptian development operations. Meanwhile, Aldar Investment, the largest diversified real estate asset management platform in the region continues to be an important engine for growth and investment activity. The robust performance during the period was driven by high occupancy rates across our diversified portfolio of investments, significant growth in the retail and hospitality business and increased contributions from Aldar Education and principal investments. Likewise, the value-accretive additions of Rixos Bab Al Bahr luxury resort, the Al Hamra Mall and the Abu Dhabi Business Hub positively contributed to the overall performance of the business. In addition to our financial and operational performance, I would also like to give you a quick update on our sustainability progress. Through Aldar's in-country value program, we reinvested almost AED 2 billion into the local economy. We also invested AED 4 million in 2 social projects by the authority for social contribution, Ma'an. In addition, we installed solar hybrid power plants in the Al Gurm Phase 2 project, and we plan to implement the same in all of our site offices that are off-grid by 2023. In conclusion, our well-diversified business continues to grow from strength to strength. We expect the strong momentum to be carried forward through the rest of the year, and we remain focused on investing in organic growth opportunities as well as pursuing acquisitions that build scale and enhance our offering. Our strong liquidity position of AED 6 billion of free cash and AED 4.9 billion of undrawn committed facilities as well as the strategic capital injection from Apollo Global Management provides a significant firepower and enables us to be agile in executing further acquisitions into high-growth value and yielding yield-accretive opportunities. Over the next 12 to 18 months, we plan to deploy a further AED 5 billion of equity into our growth agenda. The focus of this deployment will be both into new geographies, particularly Dubai, Saudi Arabia and Egypt, but also across different segments, including development, education, logistics and traditional real estate. Around our development, we will focus on delivering Aldar's solid pipeline of development launches, particularly in prime locations such as Saadiyat Island and Yas Island as well as focusing on the sale of existing inventory. As such, we expect our 2022 group sales to reach around AED 10 billion to AED 11 billion, comprising AED 7 million to AED 8 billion in the UAE and EGP 14 billion or AED 2.7 billion equivalent in SODIC in Egypt. We also expect to continue the ramp-up of our project management services, Aldar Projects, with our gross profit guidance remaining around AED 400 million to AED 500 million for the year. We aim to sustain a robust growth momentum within Aldar Investment, and we expect EBITDA to grow to AED 1.9 billion for the full year of 2022 on the back of the acquisitions that we've made. We remain confident that our focused growth strategies, combined with our expertise and well diversified business and our strong balance sheet will enable us to maintain and build on our market-leading position as we continue to drive long-term value across our platform for our shareholders. That concludes my comments, and I'd be happy to open the call up to questions now.

[Operator Instructions] Our first question comes from the line of Steve Bramley with HSBC.

And just firstly, just before I ask you my questions, congratulations on the results, a very good set of numbers. And clearly, you've got a lot of moving parts now. I've got a few questions. Do you want me to ask them all at once or one at a time?

Steve, why don't we go one at a time, save my memory cells.

Okay. The first thing is, you made mention in the results pack that you're intending to IPO the Aldar Investment Properties business in the next I think it's 12 to 24 months. I just wanted to get a sense as to how the Board -- you and the Board think about the trade-off as it were, with a balance between free float and value creation. The reason I ask the question is the free floats in the region, why many emerging markets tends to be a minority float, maybe a 15% to 20% free float. And the track record has not been that good. So if you're thinking of doing this, which it seems like you are, why do you think you can create value through this process where others haven't?

Well, so I guess the first premise driving all of this is that we see the Aldar Investment Properties platform as operating independently from other businesses within the group. And this is an assertation we've made for some time, and it's driven through the legal and the business model reorganization that we've executed over the last 24 months. So with this company, it doesn't rely on capital from others, it cycles capital independently, it has independent debt and dividend policies and it can be owned on its own. Now I think -- so that's just premise 1. Premise 2 is we think that it's a -- we're in the early innings of an important trend, which is more inbound investment coming into the UAE from real estate investors. That is undeniably on the increase now both on the retail side, which we're seeing deeper penetration rates from foreign investors buying retail properties, but also institutional investors. And the investment Apollo into us is a very early first but very credible and very real indication that the value that's on offer in UAE institutional real estate is there and people are going to start moving more into it. So we've organized AIP for a flotation, recognizing really that it is a -- it does operate independently, and we will do so when we think we can generate value for investors. Clearly, liquidity is an important driver of that. And we think international institutional investor interest is also a critical driver in that. And when those stars all align, we think that's the time you should expect to see some sort of a monetization coming. So that I recognize your comment, but I think I think we're in the early innings of more money coming into the market that will help underpin 6 more successful flotations that will help.

Okay. All right. So my second question is you've deployed or are in the process of deploying AED 11 billion of capital year-to-date 2022, I think AED 7 billion is probably in the recurring space. If you drew a line under it now and look at the first full year of annualized earnings accretion, which is -- connects with some of those that you've probably done, can you give us a sense as to what the earnings uplift would be from this capital that's deployed? And the reason I ask again is that within the region, you -- and rightly so in my mind, you're a more highly rated real estate company than perhaps a number of your peers. So clearly, if you're building earnings through that capital deployment, what's the sort of uplift you would get simply if you just looked at what you've done year-to-date?

So we deliberately included in our disclosure pack this quarter, a reguidance of our investments' EBITDA for the year 2020, which is now set at AED 1.9 billion. So the comparable number for 2021 would have been around AED 1.55 billion. And so that is both as a result of the acquisitions that we've made, but also just some year-on-year growth we're seeing across our existing portfolio, especially in the hotels business. So that would be -- that would help you sort of fill out a 2022 number. And then importantly, with our acquisition of the Abu Dhabi Global Market buildings that we announced this morning, these buildings are still on a ramp up. They are about 75% occupied right now and still on a lease-up scenario. So these buildings would be considered under rented from a real estate perspective, 2 of the buildings have not been entered into the market for years and just came on to the market in the last couple of years. And under our stewardship and asset management, we will accelerate the full occupancy of those buildings coming up. So the regular run rate that you should expect, we've underwritten these buildings in sort of the [ 7 ] -- the mid-7s in terms of yield on acquisition costs, and we expect that to be realized within the next 24 months.

Okay. Question number three, just on Egypt, actually. What's the purpose or what's the value in keeping the quote? It's not really, to my mind, perpetual capital or an opportunity to have perpetual capital at the sort of level that SODIC is trading at. So what's the sense or what's the reason or rationale that you would keep the quote? Why don't you just privatize the whole segment?

Sorry, can you repeat that, Steve? Do you mean the listing in Egypt?

Correct. Yes. I was just wondering what the value is in -- because it's way below what you paid, it's way below what the independent value have thought that the SODIC acquisition was worth. And just bearing in mind the way that Egyptian listed equity trades it doesn't strike me as a sort of -- you keep quotes for perpetual capital opportunities, and I get that, but not at that sort of discount. So I just wondered, is it -- what's the purpose of keeping the quote? Is there some regulatory reason or some other reason why you have to keep the thing listed?

Yes. I mean there's nothing deeply scientific about that. It was administratively problematic to execute, squeeze out, optically delisting also created some unwanted or unnecessary noise. We don't think having the minority flotation out there is at all problematic. We don't really focus on that share price. I mean the universe of buyers for that [ rumpus ] let's say, not as deep as if it was a more freely or more widely held, widely traded stock. It's not an accurate reflection of the true value of the entity. We know that. We think the market knows that. It's not really driving -- we consolidate all of SODIC, so there's not a mark-to-market issue for us. So it doesn't really get in the way of the running of the business at the same time. So I think when we ran all of that calculus, we decided to keep -- just to keep it there.

Okay. So I've got just 2 others because I'll then obviously hand over to people who have questions. But question number four, consolidation, I think on Slide 7 of your results pack, you make the point that there's opportunistic consolidation opportunities in the UAE across existing asset classes? Are you able to elaborate a little bit on that, please, what these opportunities are?

Yes. So look, we've called out some specific geographies that we're looking at. So Egypt's further consolidation within the UAE and even Abu Dhabi, so Dubai in particular, and Saudi. So that's where the remaining AED 5 billion of equity will be deployed. And really all -- the nice thing about our platform is that we really are strong managers and capable buyers and adjudicators of -- and managers of risk across all the main food groups in real estate. So we have an ability to execute across all of them. So notably, Logistics was one gap that was missing. We thought we were underweight in commercial office as well, so we've taken care of that as of this morning. We certainly want to target more logistics. Data centers would be the other missing asset class, let's say, from the group. So those would be targeted areas, but there are very great opportunities that do come up in the more traditional asset classes like commercial office, retail and hospitality as we've seen with some of our Nurai and the Ras Al Khaimah acquisitions.

Okay. And then I thought just lastly, just on Apollo. A fantastic deal, the optimum shareholder and investor is now on board. You are spending money and investing money, but should we expect the sort of point, I don't know, in the next -- I don't know, it's arbitrary time line, but 6 to 12 months when you say, right, this is us putting the investment capital that's being put into the business by Apollo should work. Will you attach something in the next 12 months that, as it were, justifies Apollo's investment in the business? Or does it not kind of eventuate like that because it's just part of the amalgamated capital?

Yes. I mean, look, I think this morning's announcement is a great example of the kind of stuff we're using. I mean our acquisition program has been in part funded by the surplus capital built over in the business in the last 3 years and also from the growth capital raised by SODIC. So the AED 11 billion we've done thus far, the AED 5 billion we've guided for the next 12 months, all the sources of that expansionary capital is internally generated and Apollo together. So the Mubadala acquisition announced this morning will go into Aldar Investment Properties and that the Apollo Investment, the entity that we're sharing the equity stack with. So -- but the cash is fungible as we see it. We see group-wide sources of capital that are available for group-wide deployment. And when they're deployed into the recurring revenue portfolio as investment properties than that vehicle is Aldar Investment Properties, and Apollo is a minority investor, equity investor in that as part of the capital program that we agreed with them.

Next question is from the line of Mohamad Haidar with Arqaam Capital.

This is Mohamad Haider from Arqaam Capital. I also have a number of questions, starting with the Mubadala acquisition. The price you paid for 1 square meter of GLA is higher than the existing value of your commercial assets. Is it because the quality of the new assets is better? Or have you paid above market rates for these assets?

Yes. Well, we think they're very fairly valued and it's worth pointing out that as it goes into our investment property portfolio, we do fair value these assets from third-party independent appraisers. So we're very much coming in at a fair value price. I think what we like about the acquisition is that the buildings are still in the introduction stage in terms of coming into the market. Mubadala having developed Maryah Island and taken the buildings to 75% leased. It's a great opportunity for us to come in now and exercise our platform strength and synergies in terms of leasing and property management capabilities to take the asset to the next level. So -- and then the other point to make is that the quality of the assets are exceptional. They're truly unreplicable. I mean Maryah Island was designed as an urban [ CPD ] so premium, premium asset quality, excellent sustainability ratings, high-quality assets. And globally, if you look at the price for a city like Abu Dhabi to be acquiring [ CPD ] quality assets at, let's say, AED 6,500 per square foot or per square meter. I mean these are comparably very, very favorable rates for premium commercial office buildings that are principally let to government of Abu Dhabi state-owned enterprises and departments and top-tier businesses doing business in Abu Dhabi.

Okay. That's understood. And on the development management backlog, we've seen a very big expansion this quarter to AED 57 billion and the projects in execution. Where did the increase come, from which specific projects if possible?

Yes. So look, I think -- so this is the Aldar Projects backlog, not to be confused with our developed to sell backlog. This is our government franchise. And we saw significant growth, [ 50 ] -- sorry, AED 41.5 billion last quarter and has gone up to almost AED 58 billion this quarter. And it's really come from a whole portfolio of projects, some large, some small. And I think what it really -- we wanted to showcase to the investors is that this is a franchise. The entirety of the government of Abu Dhabi's civil infrastructure work when it comes to civil infrastructure, roads, national housing are going through this program to us. So sometimes there are large championship projects like Riyadh City, Baniyas, we've publicized these large national housing projects in the past. But this cohort of projects are multiple, dozens, some large ones, AED 1 billion for some infrastructure and then some small ones at the same time. But I think -- like I said, what we wanted to showcase to everyone is that this is a durable, long-term, very sticky partnership and a very successful one thus far. I think this increase in projects given to us is really demonstrating that the government is seeing value in what Aldar is bringing to the table in terms of a disciplined, organized, institutionalized approach to project supervision and delivery and execution excellence. And this government here is going to be in CapEx mode for a long time. And they see the value in that platform, delivering projects on time, on budget and in fact, engineering savings for the government with our oversight. And now that we've had this program in operating for about a year now, the government has had time to actually see some of these benefits. And then the awards that we received this quarter are a strong, strong validation of the value we're bringing and the stickiness and franchise value and annuity and perpetuity that investors should be attaching to this business line for us.

And are you happy keeping the guidance at AED 400 million to AED 450 million per annum despite the increase in the backlog?

Well, yes, we haven't changed that as of yet. And I think what we're seeing is that, especially with this new increase, the projects are very early stage and these ones will take a little bit of time to get going. And when I say a little bit of time, I only mean matters of months. So we didn't want to revise any of the guidance for 2022 or even early 2023 yet until some of these projects start to ramp up a bit more and we can be more deliberate with a growth in that commensurate with the kind of growth that we saw in the overall backlog book.

And my last question on Apollo, please. What's the progress on the remaining proceeds? When should we expect these to come in?

They'll come in, in the second half of the year. So there'll be 2 more tranches. There'll be a sale of a minority stake in the platform, AIP, and that will close in the coming days and weeks. And then we have a land JV that's also just in the final throes of conclusion. That might be sometime in August or September. But both tranches are close to closing and will conclude before the end of the year.

Our next question is from the line of Jag Pasunoori with NBK Capital.

Can you hear me?

Yes, Jag, go ahead.

Congratulations on the good set of results and then the recent acquisitions. Can you please let me know your leverage levels once the whole -- this ADGM acquisition goes on, the ones that you have announced today and yesterday?

Yes. So our leverage levels will stay identical to what they are today. So the policy in Aldar Investment Properties is 37.5% to 40% gross debt as a percent of the fair value of the assets that we acquire. And that leverage policy then is applied to the acquisitions that we've announced. So there'll be just over AED 1.5 billion of debt that will go in to support the ADGM acquisition on closing, the Abu Dhabi Business Center and the Doubletree and the Rixos and Al Hamra Mall. These all have the same policy that will apply to them. The treasury team is sort of -- because we have so much cash, some of the debt won't go in exactly on closing just to be efficient with our capital and our treasury operations. But certainly, by the end of the year in the normalized state you can expect to see the 37.5% maintained as we layer on these acquisitions.

Okay. And if I may ask you, like, so far, you have announced AED 7 billion of acquisitions. How much remaining your target?

So the remaining guidance for acquisitions is a deployment of AED 5 billion of equity. So to use the example that we just went through, if we were to buy a building for AED 100, then we would be funding it with AED 37.5 of debt with the balance in equity. So that AED 5 billion is that balance in equity, and we will be complementing and augmenting that equity base with debt, depending on what we purchase. If we purchase, let's say, a development platform in Egypt, for example, then that would be an equity investment unlevered. If we did a building in Abu Dhabi or Dubai, then we would apply 37.5% gross debt to that.

[Operator Instructions]. I see we have a question coming in from the web. It's from Admire Mavolwane. Congratulations on new acquisitions in such a short space of time. How much of the Apollo funds have been used? How is the AED 11 billion raised to fund the acquisitions.

Okay. So as I mentioned, I guess I'd refer to my earlier answer on sources of capital for our acquisition program, which is both internally generated capital. And the AED 5 billion that we've raised from Apollo. So together, those comprise the overall program, of which AED 11 billion has been committed to date, and there's an additional AED 5 billion of capital to be deployed over the next 9 to 12 months.

We do have a question coming from the phone from Steve Bramley with HSBC.

I just had a couple of -- well, 1 or 2 quick follow-up ones. Slide 16, the AED 5 billion in equity growth that you are looking to deploy over the next 12 months into new geographies, KSA and Dubai. Are you able to give us any insight into how you might enter the KSA market? I don't think you're there at the moment, are you? So would you look at a listed entity? Is that a bit like you went into Egypt? And from a Dubai perspective, bearing in mind you recently enlisted a Dubai -- I think it was a Dubai landowner into Saadiyat. Are you likely to go into Dubai through a land purchase?

Yes. So on Saudi, most of the focus to date has been on -- and I think we've mentioned this in the past, has been on the recurring revenue side, so buildings, malls, things like that and education. So this has been our focus in Saudi to date. In Dubai -- excuse me. In Dubai, we have lots of opportunities to enter. We did discuss with [ MR our ] JV. That's one entry method, the other is land purchase. And we have an ability to execute on all of them and -- whether it's just buying buildings on the recurring side, doing partnerships with master planners, all those options are available to us. We've got great relationships and deep networks into Dubai. It's really just finding that right opportunity where you have a willing -- it's true of all real estate in our region for that fact, is to have the willing seller or willing partner. You just have to find that right opportunity to do it. So the nice thing is we're flexible and we have the ability to execute across a number of different formats. It's really just waiting for that right opportunity. And we've been very, very disciplined, being careful when choosing the right moment.

Right. The JV with Emaar is dead isn't it? Or is it not?

Yes, that joint venture has not concluded.

[Operator Instructions] We have a question on the phone from Mohamad Haidar with Arqaam Capital.

Greg, I'm not sure if it's early to ask, but should we expect a similar distribution growth when it comes to dividends that's aligned with earnings growth for 2022?

Mohamad, look, I think it's early to be predicting about dividend. I mean I would just harken back to our strong track record of progressive dividend growth and very public policies on how we think about dividends. So like every year, we go into that final Board meeting to approve the year-end numbers. We see which way the wind is blowing. We apply our policy blindly. So that's the most important constraint or premise that goes into that meeting. And I don't think that value set has changed at all. We remain in growth mode. So I think that's the only other thing I'd overlay on top of that, and that was an active sentiment last year. We remain in growth mode as we speak. So look, I expect all those stars to swim around when we when we get together in February to make that recommendation.

We have a question from the web. In the Q1 presentation, the cost of the notes is around 5.625% and the assumption was that assets yielding around 8% will be acquired. The latest ADGM transaction had a higher acquisition yield. Is that because of the new market dynamics?

[ Can you repeat the question, please? I just want to make sure I understood the first reference to 5.625%. I think it was to the Apollo transaction. But could you repeat it?

Yes. This is in the Q1 presentation, the cost of the notes is around 5.625%, and the assumption was that assets yielding around 8% will be acquired. The latest ADGM transaction had a higher acquisition yield? Is that because of the new market dynamics?

Yes, I think -- if I understand the question correctly, and I'm just reading it again in the Q1 presentation, the cost of notes is around 5.625%, assumption was that assets yielding around 8% will be acquired. The latest ADGM transaction had a higher acquisition yield. I mean the ADGM acquisition, because it's only 75% let, we underwrite these to -- on stabilization to be in that mid-7s overall yield. The 5.625%, I think, is a reference to the Apollo sources of capital. And so for Apollo, what was nice about what we did with them is that it's the extremely flexible, long-term permanent capital. And that is, in our view, we use as growth, so that's equity to drive to drive the further growth. So -- and important to note that we raised all this capital, even the notes at 5.625%. They all made -- the group maintained its Baa1 credit ratings through all of that. So -- everything we do is accretive, especially when we layer in senior debt on top of that. So we expect the ADGM, as I said, to hit eventually our underwriting case yields in that mid-7s range by year 2.

Thank you. We have a question over the phone from Harsh Mehta with Goldman Sachs.

Congratulations on the results. Just 2 questions. One is on the SG&A cost, that's kind of now trending at around 8% of revenues for the first quarter and the second quarter. It used to be under 5% earlier. So is this the new norm we should kind of expect going forward as you acquire more assets and you kind of spend more in terms of marketing and leasing them out? And the second question is on the interest cost. So again, when I look at the interest cost for the first quarter and the second quarter, they're very similar. I would have generally expected an increase over there given the hybrid perpetual debt that was taken up at -- towards the end of the first quarter. Is this something which will be accrued later on? Or is it included somewhere else in the financials? If you could just help us understand that.

Yes. So SG&A, this would be the new norm and a couple of things happened in 2022, Harsh, when you compare it to 2021. There was a small reclassification that we did mostly from our subsidiaries that we implemented after we put our new business model in place. So some costs annualized maybe just over AED 150 million moved from above the line to below the line. So that's the first point. The second point is we consolidated SODIC, who has a slightly different cost base to ours. So those are 2 sort of changes in 2022 versus the comparative that you're looking at. But the run rate that you're looking at now for Q1 and Q2, we would see it increasing marginally as we scale and grow, and we are investing a bit now to grow the platform further. But Q1 and Q2 is a good basing to focus on as opposed to 2021 numbers. And then the second question on interest rates. I guess the first thing to point out on the hybrid is that those coupon payments don't go through the P&L. They go directly to equity, which is in accordance with the hybrid accounting standards for security to qualify for it. So you'll see it in the cash flow statement, but you won't see it in the P&L. We are exposed to floating rate debt, just under half of our debt stack is floating rate, so it is as EIBOR evolves that you should expect to see some of our interest costs go up. But at the same time, we've had such strong cash balances and then the team does a good job getting decent deposit rates. Our interest income has been pretty high for the last few quarters as well. And that will start to go down a bit as we deploy the cash into more accretive investments.

Understood. And just one follow-up question. So in the press release, it was mentioned that one of the towers, I think Al Mamoura Tower, that kind of saw an expiry of the lease contract. So again, should we assume there's going to be a renewal very soon? Or it will probably take time because it's the entire tower that needs to be leased out?

Yes. So these are our short leases. So we've got a number of properties in the portfolio. Mamoura is by far the most significant that we didn't have the freehold for. We have a short leasehold for. So that's what it refers to. So actually, the building drops out of the portfolio entirely and reverts back to the freeholder. So that's the reference there. So you'll see -- we talk every quarter, Harsh, about what we call the forest march, fair value losses every quarter. We have the same sort of fair -- so when these buildings fall away, those amortizations also fall away at the same time. So the income will go, but those costs will go as well. So from an EBITDA perspective, it doesn't really -- it won't really change that much.

We have a question coming from the webcast from Anwaar Khaled with Al Ramz Capital. Congratulations on a good set of results. Would you please update us on the Madinet Nasr? Is this acquisition still potentially on the map?

Yes. So look, that process is very much ongoing. We put in an offer that we wanted -- or seeking due diligence. Due diligence has not been offered yet, and we remain in discussion with our counterparty there. And we will update the market when we have something new to share.

[Operator Instructions] Mr. Fewer, we're showing no additional questions at this time. Would you like to make some further remarks?

Thank you, everyone, for dialing in. Enjoy your summer break. And we look forward to connecting again for Q3. Thank you.

Thank you. This will conclude today's conference. Thank you for your participation, and have a wonderful day.