The Abu Dhabi government threw indebted Aldar Properties a new 16.8-billion-dirham ($4.6 billion) lifeline on December 28, buying assets from the struggling developer and retiring a loan. Aldar, which is partly-owned by the government, has been hit hard by a real estate market downturn.
Abu Dhabi has purchased 760 housing units in Aldar's Al Bandar, Al Zeina and Al Muneera developments in its ambitious Al Raha Beach project for 3.5 billion dirhams, the company said in an emailed statement. The developer also sold assets in its Central Market project, which is still under construction, and related infrastructure to Abu Dhabi for 5.7 billion dirhams.
The government, which will forgive a 5-billion dirham infrastructure loan Aldar has outstanding, will also fund the completion cost of 2.6 billion dirhams for the Central Market. The builder of Abu Dhabi's Yas Marina Formula One Circuit will receive 4.5 billion dirhams from the government in the next two months while the rest will be paid over four years, it said.
The emirate's largest developer by market capitalisation already sold assets to the Abu Dhabi government earlier this year, including its Ferrari World theme park and the Yas Marina Formula One circuit.
Abu Dhabi bailed out the cash-strapped developer in January with a $5.2-billion rescue package in exchange for some of its key assets. Aldar also issued a $2.8-billion convertible bond to state investment vehicle Mubadala in March, part of which was converted earlier this month. In January, Aldar said it would sell assets worth $1.49 billion to the government to meet debt obligations.
Abu Dhabi, the capital of the United Arab Emirates, had fared better during the downturn than neighbouring emirate Dubai which saw a collapse in its property market that triggered the restructuring of its flagship firm Dubai World.
However, it is facing challenges now as a huge supply of high-end homes are expected to enter the market. Prices in Abu Dhabi are expected to fall another 14 percent from here, or 60 percent from their peak, a Reuters poll showed.
But Abu Dhabi, home to most of the country's oil, has strongly backed the struggling developer. "The fact that these assets are being sold directly to the government is significant as it clearly shows that the company benefits from a high level of support from both the Government directly and also via Mubadala," said Chavan Bhogaita, head of markets strategy unit at National Bank of Abu Dhabi.
Aldar said in the statement the transactions announced would immediately reduce Aldar's indebtedness by 5 billion dirhams and continue the deleveraging of its balance sheet. Aldar has repaid 14.2 billion dirhams in debt this year including the 4.5 billion dirhams convertible sukuk on November 10.