Rents in Abu Dhabi fell by 10 per cent in the second quarter as supply continued to outweigh demand amidst expectations that this phenomenon will prevail for the rest of the year whereby up to 14, 000 residential units, primarily high end, will be handed over in Abu Dhabi by the end of 2011.

With regard to office supply, there is an oversupply. The total oversupply of office space in Abu Dhabi is expanding, but it is important to note that only 11 per cent of the current stock qualifies as international Grade A quality..

Several large scale office projects are expected to be delivered this year, including more buildings at Sowwah Square, Capital Plaza, Etihad Towers, International Towers, The Sky and Sun Towers, Infinity Tower, the Guardian Towers, the Capital Towers, the Marina Square, Al Bustan Complex, AL Muneera and Al Zeina projects, Yas Island Villas and Saadiyat Beach. As for office supply, Tower One at Sowwah Square and Guardian Tower at Danet Abu Dhabi.

The Al Raha Beach development, which is being completed and delivered in phases, will accommodate 120,000 residents. Aldar will also hand over Al Noor Tower, an office tower in Al Muneera during the second half of 2011.

Aldar’s portfolio of projects in Abu Dhabi is valued at more than $75 billion, (Dh275.4 billion).

Moreover, Aldar announced in July, 2011 that its 278m, 59 storey Trust Tower, one of the tallest office developments in the capital and the centerpiece of the capital’s downtown district is available for pre-lease.

The Emporium Shopping Mall will be completed in the third quarter of 2012 and the residential Domain Tower, home to 274 residential units will be finished in 2012, according to Aldar statement.

The Strata Tower will be the tallest building in Al Dana precinct once completed in 2011. The tower’s height is 160 meter high, and the Strata Tower will be the tallest building in the Al Dana precinct.

The whole Saadiyat Island Projects estimated cost would amount up to $27 billion (Dh97.2). It houses two hotels: The St Regis Saadiyat Island Resort and the AED 1 billion Park Hyatt Abu Dhabi. Both are expected to be completed by the end of 2011.

The Rocco Forte Abu Dhabi development, a joint venture between TDIC and Al Farida Investments Company LLC, is the brand’s first venture into the Middle East. It is located on Sheikh Rashid bin Saeed Al Makhtoum Street.

The Regent Emirates Pearl is a joint venture between TDIC and Atlas Group. The expected cost of the resort will be AED 500 million. The tower will stand 255 tall with 47 floors. It is expected to be finished in 2012, according to TDIC estimations.

Capital Gates distinctive futuristic design, aesthetic splendor and technical excellence made it a modern marvel and a celebration of human achievement that reflects dynamism of Abu Dhabi..

Investment bank Rasmala reckons a 20 per cent downside potential to property prices in Dubai, estimating that an additional 35,000 homes will be delivered in the emirate between 2011 and 2013 – boosting the existing housing stock of an estimated 330,000 units by about 10 per cent.

“We believe the Dubai residential market may see delivery of 30,000-35,000 units of apartments and villas combined between 2011 and 2013, upon an existing supply base of roughly 330,000 units. This translates into roughly 10 per cent incremental supply over three years, which we believe will further depress real state asset values,” the bank said today in a report on the UAE’s real estate market.

“Our house view remains that Dubai residential sales may bottom out at Dh600-650 per sq ft, hence current price levels of Dh750 per sq ft imply an additional 15-20 per cent downside potential to property prices,” it added.

On the other hand, analysts at the investment bank maintain that Abu Dhabi, which will see more houses entering the market than Dubai, will see at least a 20 per cent drop in residential prices. “We expect Abu Dhabi to lag Dubai by about nine to 12 months on the property clock, and we estimate approximately 40,000 units will be delivered there between 2011 and 2013 on an existing install base of roughly 200,000 units, hence 20 per cent incremental supply over three years,” the report said.

“Although we believe Abu Dhabi will retain a certain premium over Dubai in terms of rents and house prices, both emirates markets are largely correlated in our view, given a similarity in demographics (80 per cent-plus expat community), marginal mortgage financing, substitution effect and meaningful supply-demand mismatches between 2011 and 2013. We expect Abu Dhabi to experience at least 20 per cent declines in residential values from current levels of roughly Dh1,000 per sq ft prior to reaching a sustainable trough,” it said.

Rasmala, nevertheless, sees a number of long-term positives for the UAE’s property market, including the receding impact of the Arab Spring on property investments, as well as the affirmative effect of new property visa rules in the country.

“In addition to regional risk subsiding, for UAE specifically visa law changes may have marginal benefits in the near term and potentially greater benefits in the long run,” the Rasmala report said.

“Increasing UAE residency visa tenures from six months to three years for real estate investors is likely a positive development for the sector and, in our view, supports broader confidence. However, a direct tangible impact on property prices is difficult to estimate in the foreseeable future. We believe current property transactions are primarily driven by supply-demand dynamics and associated risk-rewards, while visa implications are more secondary catalysts.”

The investment bank has therefore upgraded regional property benchmark Emaar Properties to a Buy and reiterated Drake and Scull International as a Buy while keeping Aldar, Sorouh and Arabtec as Holds. “We believe the regional risk profile and investor sentiment is gradually turning positive, so we reduce our risk premium forecasts across the board as we ease through the uncertain Arab uprising phase.”

The first phase of Motor World, Aldar’s custom-designed destination for new and used car showrooms and servicing facilities in Abu Dhabi, is now being handed over to retailers. All 100 shops, which are all leased, have been completed on schedule and car retailers will now begin the process of fitting out their showrooms as Motor World progresses to its official opening at the end of the year.

The second phase of Motor World’s development – an additional 100 showrooms – has begun pre-leasing to tenants with construction scheduled to complete at the end of 2012.

Designed as a one-stop-shop for car buyers, Motor World will provide all related services as well as showrooms in a modern and comfortable environment. Its location close to Abu Dhabi International Airport makes it accessible for consumers from Abu Dhabi, Al Ain and Dubai.

Motor World has also signed a Memorandum of Understanding with Al Futtaim Automotive who will bring their flagship showroom offering Toyota, Lexus, Honda, Chrysler, Jeep, Dodge and Volvo models. Motor World is also in negotiation with other leading dealerships and key players in the UAE auto industry, and Emirates Driving Company and ARMS Group Pioneer Car Auction are among the companies that have expressed interest to establish their operation in Motor World.

Monzer Al Rifai, General Manager, Motor World commented: “Motor World presents a state-of-the-art centre for the people of Abu Dhabi to find all their automotive needs in one convenient location. It has been popular with the leading automotive representatives in theUAE with the first phase fully leased and the second phase of 100 showrooms now under way.”

Aldar, Abu Dhabi’s property development and investment company, announced that the first phase of the Al Falah residential housing community is on schedule to be handed over to the Abu Dhabi Urban Planning Council (UPC) early next year.

The project is part of the Emirati Family Housing Programme, a government initiative launched by the Abu Dhabi Urban Planning Council to provide more housing for UAE nationals.

About 1,000 villas of the 4,857 will be delivered during the first quarter of 2012. However, the whole project is expected to be delivered by the end of 2012.

Al Falah, a 12.5 million square metre development, is located to the east of Abu Dhabi International Airport and the Abu Dhabi-Dubai Highway.

Yousuf Al Hosani, Project Director of Al Falah, said that so far Aldar has completed 40 to 50 per cent of its work for the first phase of the project.

The project, which is valued at Dh9 billion, is one of several projects that the UPC has launched in order to develop more than 13,000 homes for locals in Abu Dhabi, Al Ain and the Western Region.

“We have approximately eight projects which four of them are in Abu Dhabi, one is in the Western Region and three in Al Ain. We have approximately over 6,500 units in Abu Dhabi, around 6,000 in Al Ain and around 500 in the Western Region,” said Abdullah Al Sahi, director of corporate services at UPC.

Once it’s ready for accommodation, the Al Falah project alone would be able to accommodate 60,000 people.

At Al Falah, the community is divided into five villages and each village is arranged around its own village centre and neighbourhood centre. Al Falah will also feature a town centre which is currently still under the master planning phase.

The villas come in three different styles: Gulf heritage style, Andalucian style and modern style. They are available as three bedroom, four bedroom and five bedroom homes.

Emphasis on family

“We took into account the traditions and heritage of the Emirati people with an emphasis on the family, community and privacy,” said Al Sahi.

Muna Al Daheri, Head of Planning of Al Falah, said that the project has been planned to include space for schools, mosques, hospitals, and other facilities for the community.

Abu Dhabi-based developer Aldar started work on the first phase of its new Al Falah residential housing project this week.

“Approximately 20% of the 4,857 villas are scheduled to be delivered to the Abu Dhabi Urban Planning Council in the first quarter of 2012, with the remainder to be delivered by the end of the year,” the company has told OPP.

Al Falah is a 12.5 million sqm housing scheme located to the east of the Abu Dhabi International Airport and the Abu Dhabi-Dubai Highway. It has been designed to provide full community facilities and extensive housing opportunities for UAE National citizens.

“The Al Falah community forms part of The Emirati Family Housing Program,” says Aldar, “a wider government initiative launched by the Abu Dhabi Urban Planning Council to create more social housing for the local population.”

Al Falah consists of five ‘villages’ and a range of community amenities. Each of the five villages is arranged around it’s a neighbourhood centre which contains a mosque, a landscaped market square and shops.

Every centre is strategically placed within a 10-minute walk of all villas. The company is building 3, 4 and 5 bedroom units. A proper town centre is also being planned to include apartments, a shopping mall and commercial office space. A hospital and several clinics are also being designed along with 15 new schools spread throughout the community.

Talal al Dhiyebi, Aldar’s Director of Planning & Infrastructure, told OPP “we are pleased to play our role in delivering homes and new community for 60,000 people. With almost 5,000 new homes planned, Al Falah Project will be effectively creating a new town in Abu Dhabi.”.

The Al Falah project is part of UPC’s Emirati Housing Program that includes developing more than 13,000 homes for locals in Abu Dhabi, Al Ain and the Western Region. The new communities will enjoy a complete set of infrastructure and social and civic facilities developed as per world-class quality standards.

Aldar’s property portfolio includes major developments and re-developments within Abu Dhabi including Yas Island, Al Raha Beach, Central Market, Al Falah, and Noor Al Ain. The company owns a large land-bank in strategic locations throughout the Emirates.

Trouvay and Cauvin Group, the Dubai headquartered pipe and valve specialist company, has announced that it has been appointed to supply products and services for two major Abu Dhabi based projects.

Emirates Technical Associate, the MEP contractor for the Cleveland Clinic in Abu Dhabi, said that it had signed a contract worth $1.3m with Trouvay and Cauvin for products including humidifiers, strainers and steam accessories. The deal also includes technical and engineering support services.

Partnered with Mubadala Healthcare, the Cleveland Clinic Abu Dhabi is a 360 bed hospital and clinic that is scheduled to open in late 2012. The clinic is one of a number of initiatives led by Mubadala Healthcare, a division of Mubadala Development Company.

These initiatives are aimed to develop and enhance Abu Dhabi and the UAE’s private healthcare infrastructure, Mubadala said.

The second deal signed by Trouvay and Cauvin was a $3.5m deal to supply cast iron pipes and fittings for soil, vent and rainwater to Voltas and Thermo, contractors on Abu Dhabi’s historic Central Market project.

The project consists of a complex of three skyscrapers that are currently under construction by developer Aldar Properties. Two of the towers are expected to be completed by 2012.

One of the oldest districts of the city, Abu Dhabi’s Central Market is being transformed into a mixed use development consisting of markets, shops, offices, apartments and hotels.

It is set to occupy five hectares of prime city real estate and is expected to become a major commercial destination for the UAE capital.

Saudi Arabia’s index TASI hit a three-month high, led by petrochemical stocks, with the market buoyed by higher oil prices in the absence of a local catalyst.

“Petrochemicals are currently the most favored by investors with heightened oil prices keeping the sector over a solid floor despite some stock specific profit taking activity,” said Amro Halwani, a senior trader at Shuaa Capital in Riyadh.

The petrochemical index was up 1.1 percent, with Rabigh Refining and Petrochemical Co up 5.3 percent, the largest gainer. It rose for a third day since Credit Suisse upgraded it to “outperform” from “neutral.”

Large cap Saudi Basic Industries Corp (SABIC) added 1.1 percent while Al Rajhi Bank rose 1.3 percent.

Oil rose above $124 a barrel on Monday, pushed higher by an escalation of violence in the oil-producing Middle East and post-election unrest in OPEC member Nigeria.

In a fourth straight gain, the main benchmark ended 1.1 percent up at 6,685 points, its highest close since Jan 26.

Qatar’s index QSI fell to a monthly low as investors pulled back in absence of catalysts.

“There is weakness in liquidity – we don’t have any news, no support,” said Hani Girgis, assistant chief dealer at Dlala brokerage.

The country’s largest bank by market cap Qatar National Bank fell 1.1 percent and Masraf Al Rayan dropped 1.8 percent.

But Qatar’s moves to make itself more attractive to the MSCI when it undergoes a second review to obtain emerging market status will likely provide a boost to the market going forward, Girgis said.

Qatar’s bourse moved to Deliver Versus Payment (DvP) system on April 11 to bolster the country’s chances.

The bourse’s expected decision to increase foreign ownership in companies from 25 percent to 49 percent will also help lift investor sentiment, if enacted, said Girgis.

The index ended 0.5 percent lower at 8,459 to its lowest close since March 31. Further selling pressure is forecast with the index closing between 8,300 and 8,500 points by April-end, he said.

Real estate stocks were under pressure in the UAE after bellwether Emaar Properties first-quarter results fell short of analyst expectations.

The developer behind the world’s tallest tower Burj Khalifa, fell 2.9 percent after saying net profit dropped 45 percent due to losses from associate firms.

But one trader said that the market should look at property companies focused solely on real estate, rather than hospitality, as a better benchmark by which to gauge Dubai’s recovery.

“Real estate companies will be interesting to look at and their performance will be more indicative of the sector’s situation and give a sense on whether we are really recovering,” said Marwan Shurrab, vice-president and chief trader at Gulfmena Alternative Investments.

Dubai’s index DFM ended 1.6 percent lower to 1,638 points, slipping from Thursday’s yearly high.

In heavy trading, developer Arabtec tumbled 4.6 percent.

Abu Dhabi’s index ADI ended 0.8 percent lower at 2,691 points, with six of its top 10 largest stocks falling. The benchmark slipped to a 12-day low.

Aldar Properties dropped 3 percent, accounting for a quarter of shares traded on the index.

Oman’s index MSI slipped to a two-week low as bluechips weighed and interest remained muted.

“Investors are sitting on the sidelines, waiting for any new results disclosure thereby pulling down market activity,” said Osama Ibrahim al-Qinna, head of brokerage at Oman Arab.

Bank Muscat and Bank Dhofar fell 0.5 and 1.2 respectively.

The benchmark fell 0.3 percent to 6,325 points, its lowest close since April 7.

A strong support level near 6,314 point should temporarily halt any further downward attempts, Al Qinna said.

Renaissance Services slipped 1 percent on selling pressure from foreign investors. Losers outweighed gainers 16 to five.

Saudi Arabia’s market TASI edged slightly higher in thin trade with stocks tracking oil prices in the absence of any catalysts to drive the index upwards, analysts say.

“The major catalyst of earnings announcements is behind us so we would expect the market to re-align with international market performances and economic catalysts,” said Amro Halwani, a senior trader at Shuaa Capital in Riyadh.

The petrochemicals index TPISI was almost flat but Rabigh Refining and Petrochemical Co led on volumes and shares rose 2.5 percent. Sipchem added 0.2 percent.

Brent crude futures rose above $124 a barrel on Monday after violence in Syria and Yemen escalated over the weekend, adding to fears that unrest may disrupt more oil supplies in the Middle East and North Africa.

The index rose 0.1 percent to 6,623 points.

Aldar Properties has elected a new chairman from the top ranks of Mubadala Development to replace Ahmed al Sayegh, the company’s departing leader.

Abu Dhabi’s largest property developer will be chaired by Ali Eid al Mehairi, a UAE national who heads Mubadala Infrastructure.

The change was announced at the company’s annual meeting on Yas Island yesterday.

“On behalf of the new board, I would like to take this opportunity to thank the departing board members who have served the company since February 2008,” Mr al Mehairi said.

Mubadala, a strategic investment company owned by the Abu Dhabi Government, holds a 27.7 per cent stake in Aldar.

This year, after Aldar posted losses of Dh12.6 billion (US$3.43bn) for 2010 following impairments and fair value changes, the developer issued a Dh2.8bn convertible bond to Mubadala. If converted, the bond would bring Mubadala’s stake to between 50 and 54 per cent, analysts say.

An appointment from Mubadala did not come as a surprise to the market, said Majed Azzam, a property analyst at Alembic HC Securities. “Given the increased ownership, it would make sense for any investor with such a substantial stake in a company to have someone on the board,” Mr Azzam said.

The shareholders of Aldar Properties PJSC held the Company’s Annual General Meeting at the Yas Hotel in Abu Dhabi earlier this afternoon.

During the meeting, all agenda items were approved including the report of the Board of Directors on the Company’s activities and its financial position for the year ended 31 December 2010.

The shareholders also elected the new board of directors of the Company for a term of three years. Made up of seven members, the elected board brings a range of specialist skills that will benefit the Company in the coming years.

Following the Annual General Meeting, a board meeting was convened during which Mr. Ali Eid Al Mehairi was elected as the new Chairman of Aldar Properties PJSC.

A UAE national, Mr. Al Mehairi is the head of Mubadala Infrastructure, a Business Unit of Mubadala Development Company. He has served on the Board of Aldar Properties for the last 3 years and is the Chairman of Abu Dhabi Finance Company PJSC, Emirates Ship Investment Company LLC and Khadamat Facilities Management LLC.

Mr. Al Mehairi also serves on the Boards of Al Hikma Development Company PJSC, Abu Dhabi Health Services Company PJSC and Emirates Palace PJSC. He holds an MBA in Finance and BSc in Accountancy from the American University, USA.

Mr. Ali Eid Al Mehairi, the new Chairman of Aldar Properties PJSC, said: “On behalf of the new board, I would like to take this opportunity to thank the departing board members who have served the company since February 2008.

In particular, we would like to pay special thanks to Mr. Ahmed Ali Al Sayegh who has lead the company with distinction since 2005 and played a fundamental role in Aldar‘s creation and development.”

There’s plenty of ammunition for taking cheap shots at Aldar Properties. For a start, the company lost more than AED1bn every month last year after a massive writedown of property assets. There’s the continued weakness of the Abu Dhabi property market. Then there’s Ferrari World. Aldar’s flagship theme park was barely a quarter full last Saturday when I took my 11-year-old nephew, who was bored within an hour.

But at the knock-down share price of AED1.66, brave investors with a long-term view might be willing to overlook these blemishes.

First, I like the bullish comments from CEO Sami Asad this week. Speaking at Citiscape on Sunday, he told Reuters that Aldar will make a profit this year. He fell short of a forecast, but said he hopes to sell 2,000 villas and apartments.

Second, the Abu Dhabi office market is picking up, according to a new report from CB Richard Eliis. That’s good news for Aldar’s rental income because its swanky new buildings – such as the giant Frisbee near the airport – are just what big international oil companies want.

Third, there’s the AED19bn bailout from the government, announced earlier this year. It was kinder to shareholders than many had feared. Yes, there’ll be some dilution from a convertible bond issued to the Sovereign Wealth Fund Mubadala. But much of the help came in cash, with the government buying assets on Aldar’s flagship Yas Island development (they’re even taking the disappointing Ferrari World off Aldar’s hands).

Finally, Aldar is winning over analysts, including Jad Abbas and Ahmed Gad at EFG-Hermes, who issued a ‘buy’ note last week. “Our concerns regarding shareholder value destruction from dilution/impairment are now priced in by the market,” they wrote. EFG expects Aldar to hand over plenty of apartments and villas from its Raha Beach project this year, and predicts a “growing and maturing recurring income stream” from renting offices, hotels and shopping malls. Their target price for the stock: AED1.84.

Irfan Ellam at Al Mal also rates Aldar a ‘buy’. Back in March he pointed out that Aldar had a price/book ratio of just 0.23 – less than half the average for regional developers, and tiny compared to the Asian average of 1.6. Aldar stock has jumped a bit since then, but the basic argument still holds – it’s cheap.

(Of course, analysts aren’t always right. While doing my homework for this column, I came across an old Aldar tip from analysts at EFG Hermes. Dated June 2008, it had a Long-Term Fair Value target – wait for it – AED44.90!)

More broadly, it’s worth thinking about the bigger picture in Abu Dhabi. If you buy into the government’s grand Vision 2030 plan – and I do – then there’s an awful lot of work to be done to transform Abu Dhabi from a sleepy oil town into a glittering 21 century metropolis. Who’s the biggest state-backed builder in Abu Dhabi? Aldar Properties. The stock is down some 80 percent from its peak in 2008, with a market value today of just over $1 billion. In the context of Abu Dhabi’s trillion dollar ambitions, that could prove a bargain.

Armchair Insight: Turnarounds are inherently risky. But if you believe in the Abu Dhabi story, Aldar shares are worth a look at this price.

Tuesday April 19: Getafe? Get real

Royal Emirates Group certainly made headlines when it announced plans to buy a Spanish football club: the story was the ‘most read’ on ArabianBusiness.com for much of the week. But can the Group makemoney? Surely not if the target is lowly Getafe, for a reported price of €90m.

We’ll get to the challenges, but first let’s look at the potential upside. Getafe plays in La Liga, the top flight of Spanish football that’s home to the world’s two richest clubs, Real Madrid and Barcelona. Each has annual revenue of more than €400m, according to the Deloitte Football Money League. Buying either of these giants is out of the question. On the surface, then, perhaps it makes sense to buy a second tier club at a knockdown price and nurture it into a top team.

In theory yes, in practice near impossible. The stadium has just 14,000 seats, which Getafe doesn’t always fill, so matchday revenue is small. Ditto commercial revenue from sponsorship and shirt sales. Then there’s TV money.

For small clubs in the lucrative English Premier League, this is a honeypot. That’s because the league negotiates one deal, then shares the cash equally among all 20 clubs – champions Chelsea get the same as minnows Stoke City. Not so in Spain, where clubs do individual TV deals. This is great for Real and Barca, with a global TV fan base, but tough on the Getafes of this world.

Finally, there’s the small matter of playing football. Getafe aren’t very good at it, and never have been. They haven’t won a trophy of note, and were only founded in 1983 from the merger of two smaller clubs. When investors from Abu Dhabi bought Manchester City, they bought a sleeping giant with a rich (albeit 40-year-old) heritage of winning, a new stadium, and 40,000 loyal fans. That’s proving tough enough. Getafe will be an even bigger call.

Armchair Insight: How do you make a small fortune a football club? Start with a large fortune.

Wednesday April 20: Tamweel returns

Mortgage lender Tamweel will need a strong investor relations team when it returns to the Dubai Financial Market. Investors will have so many questions before they buy shares in the company that suspended trading in late 2008, after the credit crunch and Dubai property market conspired against it.

On the plus side, Dubai Islamic Bank is now a strong parent, having taken a majority stake in Tamweel for AED375m. So it will have access to funds that it can lend to new homebuyers.

But I want answers to a number of questions before I buy Tamweel. More clarity on the balance sheet: the DIB deal valued Tamweel at about AED1 per share, yet Tamweel puts is book value at more than AED2 per share. Just how much are those big home loans – granted at the peak of the market – worth today?

Other questions include: exactly where will Tamweel get its funding, and at what cost? What’s the quality of the management team? What corporate governance structures are in place to make sure we don’t see any more mishaps?

Armchair Insight: Long-term, mortgage lending in the UAE and the Gulf is a surefire winner. But we need transparency.