Aldar Properties PJSC (ALDAR) Earnings Call Transcript & Summary

Hello, and welcome, everyone, to the Aldar Properties Q1 2025 Financial Results. My name is Becky, and I'll be your operator today. [Operator Instructions] I will now hand over to your host, Faisal Falaknaz, Group Financial and Sustainability Officer, to begin. Please go ahead.

[Foreign Language]. Hi, everybody. Thank you for joining us today to discuss Aldar's performance for the first quarter. We have achieved strong momentum coming into this year. As we embark on our new 2030 strategy to drive further transformative growth. We continue to deliver cross-platform growth driven by a number of key factors: one, the successful launch of new projects in the UAE, strong sales of existing inventory, ongoing recognition of the development revenue backlog supported by solid progress on key developments and increased contributions from our recurring income portfolio supported by organic expansion and recent acquisitions. In Q1, group revenue increased 39% year-on-year to AED 7.8 billion, while EBITDA grew 36% to AED 2.5 billion, with a run rate in line with our '25 guidance. Net profit after tax for the quarter increased 22% year-on-year to AED 1.7 billion. Please note that in 2024, the UAE introduced a 9% general corporate income tax rate. And on the first of January 2025, the UAE adopted the 15% domestic minimum top-up tax. Aldar's effective tax rate for the quarter was 12.6% versus 4.1% in Q1 last year. Aldar Development has continued to experience strong demand for both new and existing developments in the UAE, particularly from overseas buyers and resident experts. Meanwhile, our strategic investments in Egypt and the United Kingdom are also performing well, with strong sales growth year-on-year. Group development sales increased 42% year-on-year to AED 8.9 billion, which is on track to meet our full year guidance of AED 36 billion to AED 39 billion. Meanwhile, our total backlog has grown to AED 55.7 billion, providing strong visibility on revenue over the next 2 to 3 years. Aldar Investment, which has grown to AED 46 billion in assets under management, reported a 10% increase in adjusted EBITDA to AED 764 million. Worth noting that excluding the one-off gains on commercial disposals in Q1 2024 and divestment of residential strata units, adjusted EBITDA rose 20%. Notably, the Masdar assets, jointly owned by Aldar as part of the Mubadala partnership are already contributing to the bottom line. We continue to leverage the strengths of both the development and the investment platforms to implement our development to hold strategy. The D-Hold pipeline now stands at AED 13.3 billion, with current projections scheduled to be completed from this year through to the end of 2028. Turning to Slide 4 for a more detailed look at Aldar Development. The platform continues to deliver robust performance while broadening its product offerings and customer base, supported by an expanded international sales network. Group sales rose 42% to AED 8.2 billion, maintaining a high and sustainable run rate with growth predominantly driven by sales of existing inventory and new launches in the UAE. Revenue increased 46% year-on-year to AED 5.7 billion, with EBITDA up 50% to AED 1.8 billion. We launched 2 projects in the UAE: Manarat Living III on Saadiyat Island and The Wilds in Dubai, which is the first development under our JV with Dubai Holding. Both of these launches performed strongly, and we have continued to see strong interest in recent weeks since quarter end, which speaks to the sustained demand for our inventory and product offering as a whole. We are equally excited about our upcoming Fahid Island, which is due to be launched in phases in the coming months. As a reminder, the full master plan with a total land bank of 3.4 million square meters comprises over 6,000 residential units spanning apartments, townhouses and ultra luxury beach and mangrove villas. Meanwhile, in Egypt, SODIC achieved a 135% year-on-year increase in total sales to AED 228 million, and the company's revenue backlog has now reached AED 6.3 billion. This is supported by strong cross-selling into the UAE markets. London Square sales were up 160% to AED 263 million, with the backlog rising to AED 2.6 billion. Furthermore, in Q1, the company acquired one new land plot and launched one new project, Nine Elms Ascenta Collection. Turning to Slide #5. You will see further details on UAE sales specifically. What I will highlight here is that during the first quarter, we saw further uptick in the trend of rising demand from resident expatriates and overseas buyers, reflecting the appeal of the UAE as a lifestyle and investment destination. In the first quarter, resident expats accounted for 57% of total sales, while overseas buyers represented 30%, collectively totaling 87% of the UAE sales. To an extent, this is a reflection of the product mix as well as the success of our enhanced international sales network. Turning to Slide #6. Aldar Investment, which has evolved into a diversified platform of significant scale, achieved broad-based growth in the first quarter. In Q1, revenue increased 15% to AED 1.9 billion and adjusted EBITDA rose 10% to AED 764 million. As I mentioned earlier, excluding one-off gains on disposals in Q1 '24 and divestments of strata units, adjusted EBITDA rose 20% year-on-year. Our growth this quarter was primarily driven by the strong performance of our investment properties portfolio, a series of strategic acquisitions over the past 2 years and the addition of Masdar City assets. Consequently, our platform assets under management has increased to AED 46 billion. We are also very encouraged by the growing earnings contribution from Aldar Estates and Aldar Education, which I will talk about a little bit later. On Slide 7, you will see further details on each asset class within the investment properties portfolio. The portfolio continues to benefit from near full occupancy at an average of 96% across all asset classes, which is pushing up rental rates. Adjusted EBITDA for the portfolio increased 13% year-on-year to AED 498 million, supported by the addition of Masdar City assets. Comprising commercial and residential properties, these assets contributed revenues totaling AED 69 million, with an adjusted EBITDA contribution of AED 58 million in Q1. Commercial adjusted EBITDA increased by 1% to AED 212 million, influenced by disposals and the related one-off gains in the first quarter of 2024. Excluding this, the commercial portfolio's adjusted EBITDA increased 36%, driven by the strong contribution of Masdar City assets and overperformance from organic portfolio, while demand for grade A office space continued to fuel rental growth. Portfolio occupancy held strong at 98%, with ADGM towers now 99% occupied and Masdar commercial assets at 100%. In light of the tight supply, we remain focused on execution of the D-hold Pipeline to meet sustained demand. Residential adjusted EBITDA rose by 43% on strong contributions from Masdar City assets, and rental rate improvement amid 98% occupancy across the portfolio. When adjusted for the divestments of strata units, both this quarter and in Q1 '24, the portfolio's adjusted EBIT rose by 49%. Further, growth is anticipated through the D-Hold pipeline, including the Expo City JV and the recycling of strata sales income and to high-yielding income-generating assets. Retail adjusted EBITDA increased 11%, driven by high leasing rates, total occupancy stands at 90%, and it's ongoing redevelopment of Al Jimi Mall expected to complete in the second half of the year. Yas Mall continues to lead with 98% occupancy, a 14% growth in tenant sales and a 16% increase in footfall. We continue to make very good progress on the JV with Mubadala to create a AED 9 billion retail platform holding Yas Mall and The Galleria luxury collection, with completion expected in the second half of this year. Logistics adjusted EBITDA rose by 12%. Our portfolio, which is 91% occupied, recently completed an expansion of our Abu Dhabi Business last quarter. Excluding that expansion, occupancy stood at 96%. In the near term, additional scale will be driven by the developed D-Hold pipeline and DP World partnership, while long-term growth will be anchored by Al Falah logistics hub through the Mubadala JV. You will find an update on Hospitality and Leisure, Aldar Education and Aldar Estates on Slide #8. Hospitality and Leisure, while achieving 71% occupancy in Q1, saw a moderate decline in earnings. This reflects the temporary impact of Aldar's AED 1.5 billion transformation program, which involves several assets being partially or fully offline for upgrades and repositioning. Performance remains robust, with RevPAR stable and average daily rates up 10% year-on-year. Looking at Aldar Education and Aldar Estates, both platforms have scaled up considerably and are making solid contributions to the Aldar's performance. Aldar Education, EBITDA increased 13% driven by strong organic growth, with 13% enrollment increase in owned and operated schools, with a 3% fee increase across most operated schools. Total enrollment has reached approximately 37 students, with further scale expected from the opening of both Muna British Academy and Yasmina American School in the '25 to '26 academic year. Meanwhile, Aldar Estates EBITDA increased 27% on a 19% rise in revenue, driven by synergies and organic growth in facilities management and integrated community services portfolios. For Aldar Estates, this is the first quarter with a true like-for-like comparison of performance given the transformational M&A activity that took place at the end of 2023. Moving to Slide #9 and our key balance sheet metrics. Over the last few months, we have taken a countercyclical approach to enhancing our funding and liquidity profile. Our aim to reinforce Aldar's financial resilience and provide a significant capital cushion and support of our growth strategy. This includes execution of 4 landmark transactions at PJSC and AIP level in the first quarter totaling AED 16.3 billion. These include: one, a AED 9 billion sustainability-linked revolving credit facility, which is the largest sustainability-linked syndicated deal by a real estate company in the Middle East; two, a $1 billion hybrid capital issuance, which attracted robust demand from a wide range of regional and international investors; three, a $500 million private hybrid capital note issuance with Apollo, which replaces the Land JV as part of Apollo's initial 2022 investment in Aldar; four, a $500 million senior green sukuk issuance at AIP level, representing Aldar's third issuance as part of its $2 billion trust certificate issuance program. In the process, Moody's reaffirmed Aldar's Baa2 credit rating with a stable outlook, while AIP's Baa1 rating was affirmed, also with a stable outlook. We have maintained a conservative leverage and high interest coverage profile while enhancing our liquidity position, which stood at AED 29.5 billion at the end of March, comprising $10.2 billion in free and unrestricted cash and AED 19.3 billion in committed undrawn facilities. The average senior debt maturity has been extended to 6 years with no substantial refinancing required over the next 3 years. Looking ahead, we continue to maintain a disciplined approach to capital deployment to ensure value and strategic alignment. Turning to sustainability highlights on Slide 10 and 11. I would encourage you to view our latest sustainability report for 2024, which was published in March. The report includes an updated sustainability framework as well as the detailed commitments and targets, including energy and water usage and construction waste targets. We also outlined how Aldar continues to build greener, more sustainable places, meeting global standards such as LEED, Estidama and Fitwel on new developments. Our strong progress and commitment to ESG is reflected in industry-leading ratings. We have maintained our lowest ESG rating from Sustainalytics, with a score of 15.8, and we hold the top spot in the GCC and the top quartile globally in the Dow Jones Sustainability Index. In line with the UAE's Year of Community in 2025. Aldar will be rolling out a number of initiatives to play a key role in the nation's socioeconomic development. These initiatives will build on Aldar's existing stream of initiatives across community development, inclusion, education and humanitarian efforts. I would like to conclude with Slide #12 and a reminder of our guidance for full year 2025, which remains unchanged given the strong visibility on development revenue recognition and recurring income streams for Aldar Group, we are targeting an EBITDA of between AED 10.4 billion and AED 10.8 billion for 2025, representing an uplift of at least 35% versus 2024. In light of our strong start to the year, we maintained guidance for group development sales of between AED 36 billion and AED 39 billion, with Aldar Development targeting EBITDA of AED 6.6 billion to AED 7 billion. For Aldar Investments, our '25 guidance is adjusted EBITDA of AED 3.2 billion to AED 3.3 billion, driven by strong operational performance and the newly added Masdar assets and further transfer of D-hold assets. I would like to conclude to briefly addressing the global uncertainty stemming from external events in recent weeks. So far, we have not experienced any direct impact on our businesses. As ever, we will continue to closely monitor market dynamics and any signs of evolving sentiment. As a reminder, Aldar has proven extremely resilient through market cycles due to its financial strength, effective management of capital and risk and a strategy that has driven significant scale and diversification. Historically, the UAE has proven to be a safe haven for capital and business and the preferred destination to live and work. The country's strong macroeconomic fundamentals provide a conducive environment for Aldar to continue executing on its growth strategy. With that, we conclude the presentation and open the floor for questions. Thank you.

[Operator Instructions] Our first question comes from Taher Safieddine from JPMorgan.

Taher from JPMorgan. Again, congrats on a solid set of results for the quarter. Maybe 2 questions from my side, if I may. The first one is just on the development. Again, a solid [ pri-off ] plan sales trend during the quarter. The question is really related to the Dubai portion. This is the third launch within the BH JV, and our understanding is that this is the last one. So are there any plans or visibility on what is next for your Dubai venture. Clearly, it has been a strong success with the 3 major launches. Maybe if you can just give us some clarity on that? And linking to it, is the guidance of AED 36 billion to AED 39 billion assumes that you acquire further land in Dubai and you launch through the course of the year? That would be my first question.

So on Dubai, by the way, thank you for the kind thoughts. Wilds was a very successful launch. We were not only able to sell AED 5.5 billion in a matter of a few days, we were also pushing prices up. And I think, to iterate what you said, we've been very successful at building a quite successful franchise in the Dubai market, even though we've only been there for the past 2 to 3 years. Across those 3 master plans, we've completely sold out, out of Haven. We still have some apartment product, which we need to launch on Athlon. So Verdes, which launched on Haven, is almost completely sold. We have the new apartment product that is going to come on Athlon, the second master plan. And then you've probably seen the ads around the roads. We're launching our mansion product on The Wilds. And we still have apartments there, which we still need to launch as well. So we have about, I'd say, AED 7 billion to AED 8 billion of additional products that we can sell across those master plans. And yes, the Dubai market is a very important market for us in terms of maintaining that diversification and being able to sustain that sales run rate. We're not going to pack our bags and leave Dubai. There's very strong ambition to strategically replenish the land in that market. In terms of whether more land is required to achieve our sales target in Dubai, then probably not, no. So we've already sold AED 5.5 billion on Wilds and we have more products coming throughout the year. And then obviously, we continue to launch on Saadiyat and Yas, and we have our existing inventory, and we're launching Al Fahid. So we have a busy launch calendar coming up for the remainder of the year. Any land replenishment in Dubai will probably trickle into next year, not this year.

Okay. All right. That's clear. And sorry, just my second question is again on the overall guidance. Within the guidance for FY '25, there is a AED 3 billion to AED 4 billion M&A deployment and AED 3 billion to AED 4 billion D-Hold CapEx. In Q1, it has been relatively quiet on the M&A deployment. Can you just maybe give us some more clarity on how should we think about this AED 3 billion to AED 4 billion M&A deployment? And my following question is can you achieve your EBITDA guidance without this M&A deployment? I'm talking about this AED 10.4 billion to AED 10.8 billion for the year.

So maybe before I jump to deployment, just to give an update, we're making very good progress with Mubadala on the retail joint venture. Now that will not be a capital deployment, but it's a transaction. Nevertheless, it's a merger of Yas Mall and Galleria Lux, strategically very important for us and the [ MF of Abu Dhabi ]. And you're right, we still have not had any material transactions happen. And I keep highlighting the discipline that we have. We have -- nevertheless, we have a very good pipeline on hand. There's probably, I would say, in the next quarter, transactions in the range of hopefully AED 500 million to AED 1 billion that could come through that we are very close to closing. And then we still need a significant deployment to come in throughout the next of the year. Whether we need that full deployment to meet our guidance, not necessarily because I think organically, the portfolio is performing better than what we had expected. So I think it's a little bit still early to say, but what does matter is I think we have very strong conviction about us being able to meet this guidance overall.

Our next question comes from Mohamad Haidar from Arqaam Capital.

Faisal, Mohamad Haidar from Arqaam Capital. You previously mentioned that you will focus on increasing prices in Abu Dhabi specifically. And if you look at the average unit price you sold in Q1, it's higher than last year. Is this also still a focus for 2025? And is the market helping? Is it accepting the higher prices across the board?

Yes, I think it's not just us, one thing to increase prices. I think there's just very strong pent-up demand for the unique product and destinations that we have. I think Manarat Living III is a very good example where we immediately sold about AED 1 billion even though prices were probably pushed up at least by 10%. And I've always been highlighting that Abu Dhabi is coming from a very different baseline, and so we really think there's significant upside both in terms of volume and price.

Our next question comes from Harsh Mehta from Goldman Sachs.

Congratulations on the results. So first question, I just wanted to clarify, you mentioned you had AED 5.5 billion of sales in a matter of a few days in Dubai. Is that a part of the AED 8.4 billion of presales in UAE that was reported for the first quarter?

No, some of it is carrying forward to Q2. So we only book the sales when the SPA has been fully completed. So we now do digital SPA signatures. So all of them have been booked now, but some of them have carried forward to Q2. I think around -- you find it in the back of the deck, around AED 3 billion or so was booked in Q1. So you already have the additional that's going to come through in Q2.

Got it. And then in the financials, we could see the Masdar Green REIT and the Dunes Logistics JV is pretty much completed and part of your financials. But the other 2 JVs with regard to the mall and the luxury development, is there any kind of time line in terms of when should we expect those to close out?

Before end of Q2, hopefully. What is happening.

Got it. And any update on -- perfect. And any update on the private credit front? I remember in the full year financials, you disclosed you've invested roughly 0.5 billion of the committed 1.5 billion.

So no, it's not 1.5 billion, I think, and I need to refresh my memory, is the total commitment from all 3 partners. We represent 30% of that commitment, assuming it was [ 1.5 or 1 ]. And we initially bought into an existing portfolio, which was about $100 million. And then we probably invested, up to date, no more than $50 million. That portfolio, honestly, is doing extremely well. And if I remind you, it's focused on top quality, top locations, senior lending, with returns somewhere between 12% to 15%. The [ walls ] on those loans are no more than 2 years. So you have quick recycling that happens. And yes, so it's mainly managed by Ares, which is the GP. So it doesn't really take significant time from us. We just sit on the investment committee and we learned how they underwrite those credit investments and we have a vote as well. But no major updates on that front, to be honest. And it doesn't represent a significant portion of the business, and you'll see that income trickling into other income on the P&L line.

[Operator Instructions] Our next question comes from [ Rowan Shaker ] from [ SICO ], and it says, what percentage of 2025 UAE sales are expected from Dubai?

I'd say probably 20% to 25%.

The next question reads, with increasing proportion of excess in the sales mix, is there any change in the payment plans? What is the current down payment installment percentage? What are the projects in pipeline in Abu Dhabi and Dubai? Which segment is the current focus?

I'd say our average payment plans today are somewhere between 60% to 70% during construction, with the remaining at handover. We don't do any post-handover payment plans. I think we're generally happy where our payment plans are. There continues to be strength in the market than maybe we push them up slightly. But I'd say we're at a very good sweet spot. And those payment plans are front loaded. So the buyer typically pays at least 20% to 30% during the first year, which is very important for us. Again, it's all about disciplined growth. We can reduce our payment plans and sell faster. But for us, it's about having a backlog that can sustain any downturn in the cycle. And so we will maintain that discipline going forward. And then sorry, the second leg of the question was? What are the next...

What are the projects...

What are the projects in the pipeline? Yes. So I already spoke about the projects in Dubai when I answered the question from Taher, I think. And then in Abu Dhabi, we'll continue launching on Saadiyat and Yas. Saadiyat, we just launched our final building on Mamsha Gardens, which is just behind Mamsha beach. And then again, the most exciting one is Fahid, which we've started doing a lot of destination building all around both Abu Dhabi and Dubai.

The next question comes from [indiscernible] from [ Aegon ] and reads, can you say more on the origin and objectives/motivation of the overseas buys of resi development? Which companies? Are these pure investors or do they use the resi units? Is there rental yield? Do they buy multiple units? Could you also elaborate on the residential expat? Why is that growing more sharply?

Why is an easy question to answer because the UAE is one of the best places to live and work in. Despite all the global turmoil, I think -- as usual, the UAE will continue benefiting from the continuous migration of population here and capital. You have the best-in-class infrastructure. You have the best living standards. You have the best health care. You have the best education, and I can continue going on. So why is very easy to answer. It's difficult to say if those investors -- overseas investors are buying to live or to invest because we still haven't handed over those properties. But we do ask them when they buy. And I say, probably 40%, 50% say they're actually going to live in it, but we will just have to wait and see. And then on the resident expat side, the point I always highlight is every time we launch, 80% of our sales is coming from new customers. We continue to acquire new customers year-on-year, either overseas or resident expats. Resident expats who are becoming first homebuyers for the first time because those people are very settled in this country, and they decide, you know what, I need to buy a house. And that trend will continue happening going forward. And then maybe one important note to highlight on the overseas, Chinese, for example. It took us a full year last year to cross AED 1 billion in sales to Chinese. This quarter, this first quarter only, we have already crossed the AED 1 billion for China. So demand is coming from all across the globe.

Our next question reads, we have -- this is split into 2 questions. So I have, number one is, development management products, what is causing the substantial gross margin decline in this segment to 23.9% in Q1 '25 versus 42.4% in Q1 '24 and 31.1% in FY '24? Is management still comfortable with their FY '25 by EBITDA guidance of AED 800 million to AED 900 million? What is a more sustainable growth/EBITDA margin profile for this business moving forward?

So it's important to understand the difference in the mix. So we have the cost plus, which is where we spent AED 100 million on behalf of the government, and then we take a fee. So it's prefunded by them. And then on that fee, we make 80% margin. And then you have the fixed price projects, which is the Balghaiylam. On the fixed price, we recognize -- so this is an accounting difference. We recognize the revenue. From an absolute basis, we always -- we almost make almost twice in profit. So if I was making AED 5 million of profit on the AED 100 million, and I'm saying here back of the envelope, we almost make AED 10 million on the AED 100 million in the case of the fixed price project. So while it has a 10% margin in theory, it's actually more profitable from an absolute basis. So you shouldn't look at margins. In the case of project management, you should look at the absolute project growth. So what is the sustainable margin? Again, if you have the split, and I would say, 80% for the cost plus and then maybe somewhere between 10% to 15% on the fixed price. Are we changing guidance? No. We are a little bit slower in terms of value of work done for the first quarter of the year, but we expect to significantly catch up in the remaining quarters. And then there is a tax question. You can read, sorry, go ahead.

Sorry. Does management see its Q1 '25 effective tax rate of 12.6% to be sustainable moving forward? What is management's guidance on the same?

So we have done a full tax impact assessment. And maybe this is a good opportunity to explain why the effective tax rate has gone up. So the first biggest contributor to the tax expense going up is we no longer benefit from the transitionary tax rules, which is called [ MD120 ], where we could previously expense our cost of land at book value -- sorry, at fair value. We now have to expense the land at book value, which, in our case, is sitting at a significantly low cost basis. So that has caused an increase in the tax expense. The other one, which is not as material as previously, we were not required to pay taxes on our real estate that sits in the free zone and ADGM, for example. This also goes away under the DMTT rules or Pillar Two. And then the last thing is the statutory tax rate obviously changes from 9% to 15%. However, with the DMTT rules, there are some substance-based exemptions that are allowed based on how much PP&E and SG&A you have in your home country, which is allowing our effective tax rate to go down. So I'd say we're still working through it, and there's still some clarifications that need to be done in the future. And the UAE, generally, again, takes a very pro-business approach. So we'll have to see how this evolves. But for the time being, I'd say this is pretty much close to where it has to be.

Our next question comes from Nikhil Mishra from Al Ramz.

Congratulations on a good set of numbers and having this presentation. Just a quick question on Al Fahid Island. So how much of your projected sales for this year are likely to come from this particular project? And when should we expect the first launch of this particular project?

So a very good question, but we don't usually give that kind of guidance. So I'll skip that. But the plan is to launch in the second half of the year, and that's progressing quite well.

[Operator Instructions] Our next question comes from Harsh Mehta from Goldman Sachs.

Faisal, maybe one follow-up question. When we compare most of the line items that have been reported for the first quarter vis-a-vis the full year guidance that you had shared earlier this year. It seems you're pretty much at the lower end of the guidance. In fact, in case of property development business that's towards the high end of the guidance on EBITDA. But last year...

You'll have to show me your math. I don't know how you're getting to that with just one quarter in.

Sure. No, no. I just wanted to kind of add to it. What I was going to ask you is that last year, what we noticed was every subsequent quarter was very strong. And eventually, we did also see that you had upgraded the full year guidance on certain line items. And so my question was more so that you're already at the lower end of the guidance and hoping that the subsequent quarters are stronger. Should we assume that the guidance...

How am I at the lower side of the guidance? I don't understand.

Right. So for example, when I look at -- not the CapEx number, but for example, the EBITDA number on the Aldar property is at AED 2.5 billion for the first quarter. And if I were to just kind of annualize it, it will be around AED 10 billion. I know annualization doesn't work, and that was my question, that quarterly...

This is the price flag like it's not annualized, right? So if you look at the development business, the run rate of the value of work done is going to build up throughout the year, right? It's not going to be annualized because we're going to continue awarding, construction progress is going to continue picking up. You're going to have new assets coming online like Yas place, you're going to have new acquisitions. You're going to have Jimi Mall open up at the end of the year. So I think that's where you're missing it because you're annualizing. This -- is in the first quarter, does not include fair value gain. We do fair value assessments half year, end of year. So there's a lot of factors that annualization misses.

Correct. And so that was the point that we have noticed historically that subsequent quarters are generally stronger. And we've also seen Aldar upgrading its full year guidance probably towards first half. And so is it fair to assume that the given guidance is probably conservative and you'd probably be beating the guidance even on the top end of the range? That was pretty much my question. Honestly, I agree with what you just mentioned, and that's what we kind of view it as well.

If -- I would have said we are updating our guidance if we are going to beat the guidance, right? So we are maintaining our guidance and saying we are confident that we will deliver on this guidance. And if anything changes throughout the year, then we'll come back and revert. But there's full confidence around this guidance.

Our next question comes from Taher Safieddine from JPMorgan.

Just maybe one more -- a bit more maybe detailed question, if I may. Just looking at the investment properties, commercial, residential and retail. Clearly, occupancy is at a very healthy level. So just speaking organically, without any new M&A or contribution from acquisitions, but just organically, is it fair to assume that the upside in commercial and resi should come through from rental rate revision, given that both assets are today at around 98% occupancy? Is that -- this is the first part of the question. Just trying to think how should we look at organic growth for these 2 segments.

So Taher, yes, absolutely. So reversion to ERV is absolutely a theme. So I think rents in the last quarter were up like 7% year-on-year on the new leases that we've done, and that will continue. We still have some vacancies we need to fit. But predominantly, yes, I'd say, rental reversion will be a main theme into the organic growth for the commercial and the residential portfolio. On the residential portfolio, we been pushing rents up by almost 5%, which is the rental cap here in Abu Dhabi as well.

Okay. All right. And then just moving maybe quickly to the 2 other interesting assets, which we don't talk about a lot, which is Aldar Education and Aldar Estates. I mean these continue to outperform, if that's the right way to look at it, in terms of revenue generation and in terms of EBITDA. Just maybe help me understand, is Aldar Education now fair to assume this is more mature asset? Or you still see room for further growth when it comes to EBITDA margins? And the reason I'm asking this is because the capacity utilization is still at 70%. So clearly, there is room for that. So just maybe just help me understand how should we think about Aldar Education over the next 2 years? Is it still going to be a high-growth asset? Or do you think it's coming closer to maturity as a business?

Super high-growth asset. I think our utilization today is in the low 70s. We added 1,750 students, I think, in the last academic year, 13% year-on-year growth in enrollment, 6% was excluding the new schools that we opened in Noya. We're opening up 2 new schools, as I noted. The margin -- I'd say this is not a margin play. I think we are trading at quite healthy margins. So as you add more enrollments, your costs will have to go up slightly as well. So maybe there's a little bit 1%, 2%, 3% margin accretion, but I wouldn't say significantly, but there's surely very good growth potential on the top line, both organically on the existing capacity and especially on the greenfield capacity going forward. And we've given the market an indication of around how many students we're targeting to reach in the next 2 to 3 years, and that's more than 60,000 -- yes, yes, there's a significant room for growth going forward, absolutely.

Okay. All right. I'm just sorry, the final question. Aldar Estates, I mean, again, this business has been in a super hyper growth phase. There has been a lot of M&A, as you mentioned, in 2023. And now we're moving into a like-for-like picture. So can you just maybe also share with us similarly on that, is that the run rate we should be happy with in terms of high teens on the revenues? And do you see any room for margin expansion? And the reason I'm asking is because it has quite different subsegments. Property management looks like a high-margin business compared to maybe facility management and the community service. So maybe just a bit of color from your side would be helpful on that.

Margin expansion is a little bit difficult to answer, given it depends on which business grows faster than the other. But I would say this business will also grow at double digits on the back of a lot of captive business that they get from the group, either from the development business when it comes to owner associations with all the new residential communities that are coming up, they're doing a lot of district management work across Abu Dhabi. They're managing the commercial and residential portfolio of AIP, landscaping, security, like all that captive businesses, majority FM -- majority is going to Aldar Estates. And then those guys have a decent business to third parties, including the government. Again, which continues to invest on both CapEx and OpEx programs across the ecosystem. So no, I'd say this is still not stabilized. There's still room for further growth.

Our next question comes from Alister Hough from Invesco.

Alister Hough from Invesco. Very impressed on the continuation of the presales growth and momentum in the UAE. Just a quick question with regards to sort of market. It's probably more so in Dubai than necessarily in Abu Dhabi, but typically, when presales get a certain level of GDP that they normally peak out, and I understand the dynamics in terms of people moving to Dubai, it could be an exceptional situation. But I think total presales values as a percentage of the GDP is close to 300% or 400% now with Dubai, which is quite high. Just wondering what your thoughts are around that maybe a cause of concern in terms of an overheating market? Or do you think it can carry on?

I'd be -- so I don't have the numbers off the top of my head, but I'd be very surprised, Alister, about that statement, that sales are 300%, 400% of GDP in Dubai because Dubai's GDP, to my recollection, is at least $200 or $250. And prime off-plan sales, excluding secondary transactions, are around $50, $60, $70. I've never seen that comparison, maybe -- that's a little bit too sophisticated for me, to be honest. The way we look at it, as you have existing supply and you have future demand. And we project how much the population is going to grow for the next few years, which many market analysts estimate to be at least 2% to 3%. And on that basis -- and again, Dubai is very different to Abu Dhabi. Abu Dhabi has a much bigger GDP, if that's the benchmark to look at, and has 1/6 of the sales that Dubai has. So I'm not sure how to comment about this metric.

Okay. I'll keep looking into it, because it's normally quite a good metric for looking at overheating markets, but it's definitely Dubai that's more overheating probably than Abu Dhabi. That's definitely good. And maybe just a bit more on the cap rates that you use for your valuations. Which obviously, different parts of the world have different systems and methods. Some are more aggressive, lowering them and increasing them. Yours tend to be reasonably stable. Certainly on the residential leasing part, I mean those cap rates are pretty attractive. I mean, do you see they're going to continue to trend down because they are materially higher than other parts of the world with such quality assets.

So we are conflicted about this because we love buying assets at 7% to 8% yield and having our cost of debt that is sub 5% today and expected to go down. And you're right, for a AA economy, having cap rates that have this much credit spreads to sovereign just doesn't make sense. And that's been our thesis for quite some time. Eventually, they have to compress, which means capital values will go up. But until they do compress, I hope we can buy as much assets as we can before that happens.

Good luck with that. Definitely good spread. And maybe just one quick last question. A lot of real estate companies are looking at data centers. Is that something you've looked at or explored? Or is there already established players in the market that you can't compete with? Or what's the situation of data centers in your company...

It's not an easy one for us. We've looked at it. Especially with data centers, it's not only about the real estate. It's about the OpCo, about the operating and technical experience that comes with it. And then in the UAE, you have the likes of the telcos, the G42s. You have some private players that have been successful like Gulf Data Hub, which was partially acquired by KKR. But very niche operators, tightly controlled. So not something that we are actively focusing on today. Is it something we'd consider in the future? If available, without those barriers to entry, then yes, probably, but nothing in the immediate time line.

Our next question reads, how should we expect leverage to evolve moving forward?

Leverage should evolve in line with our debt policy. And the #1 priority for us is to maintain our investment grade credit rating, and that is something that we will never compromise. And maybe a good time to highlight the benefits of that credit rating. We issued lately our sukuks, which had a spread of 110 basis points to treasuries. And maybe you've seen in the markets today, some issuers that issued more than 400 basis points to treasury, now not comparing like-for-like because it's a slightly different business, but nevertheless, the investment-grade status pays off. And on the hybrids that we issued was also a testament and a benchmark that we set in the market. Our hybrids were just over 200 basis points over treasuries, and that spread between senior and subordinated is unprecedented for us. So other than you guys, the equity investors being hopefully behind us and supportive about the equity story, I think, the credit investors are also voting in favor of Aldar. And we appreciate that acknowledgment, and we will continue maintaining the discipline to maintain this going forward.

Our next question comes from [ Neha Tule ] from Alpha Dhabi Holding and reads, what is your view on rental yields and capital appreciation trends for the next 6 to 12 months?

If I had a crystal ball, I would tell you that, but unfortunately, I don't. I'd say, in general, we are very optimistic about the fundamentals of the business. We expect strong growth. What that growth is going to be, only God knows.

Our next question comes from Indarpreet Singh from SICO, and reads, would there be some seasonality in Aldar Estates earnings? Trying to understand the sequential drop in revenues and gross profits.

Very good question. I assume you're referring to the drop from Q4 to Q1. There is some seasonality in the sense that there are some capital projects that dropped up from Q4 into Q1. There is a lot of spending, especially from the government side, that happens towards the end of the year, because they want to consume those budgets before the new calendar year starts. So from Q1 onwards, you're going to see that run rates starting to go up. But if you compare it like-for-like, Q1 to Q1, then you'll see there's good year-on-year growth.

We currently have no further questions. So I'll hand back to Faisal for closing remarks.

Thank you, everybody, for your support and for taking the time with us today. And yes, we look forward to seeing you again in the next quarter with another set of positive results [Foreign Language].

This concludes today's call. Thank you for joining us. You may now disconnect your lines.