Abu Dhabi-based real estate development company Aldar Properties has established itself as one of the major players in the Emirati economy, with the highest market value in the nation’s property sector.

With a market capitalisation of AED29.2 billion, It is seen as a key part of the United Arab Emirates’ efforts to diversify its economy.

CHANGING PLACES

This week it saw a change in shareholders as investment company Alpha Dhabi Holding bought a 12.21 percent stake in the company from Mubadala Investment Company for USD953 million.

It made the purchase through its subsidiary, Sublime Commercial Investment. It is one of the largest ever private share purchases in a UAE-listed company.

Mubadala will remain the single largest shareholder in Aldar Properties, retaining a 25 percent stake. Mubadala, a state-owned sovereign wealth fund, invests on behalf of the UAE government and has stakes in a number of major international ventures.

FAITH IN NATIONAL REAL ESTATE

The transaction represents enormous confidence in the national real estate sector, and in Aldar Properties in particular. It witnessed its net profit grow by 28 percent and its revenue by 19 percent in the fourth quarter of 2020.

The company has seen its portfolio grow substantially in recent years. For instance, it is managing AED30 billion worth of projects in Abu Dhabi alone. Recent projects include redeveloping Yas Mall to add as many as 100 more shops and significantly improve the retail experience.

INTERNATIONAL PROFILE

It is also seeking to diversify geographically. In particular, it has been identifying opportunities in Egypt, the Arab world’s most populous state, and a huge retail estate market. Three weeks ago, Aldar Properties offered to buy a majority stake in the Sixth of October for Development & Investment Co (SODIC), a major Egyptian property developer active mainly in the upscale property market.

This news also comes just months after Aldar revamped its business as a group operating structure to manage its expanding assets.

 

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Digital transformation in real estate has mostly centred around proptech, or property technology, which is an umbrella term covering technologies like AI, machine learning, and data-driven decision making. Within real estate, this means everything from Robotic Process Automation—learning how tasks are carried out in order to automate them—to virtual property viewings.

It’s a potential game changer.

BIG BENEFITS

While these are relatively small steps, they herald a massive digital transformation in real estate. As the demand for proptech grows, experts expect to see more IoT technology, 3D architectural renderings, digital twins and other new technologies become common.

The key benefit of proptech is enhanced decision-making for building managers, using machine learning to proactively respond to errors and streamline administrative tasks by teaching it how processes are carried out. It can use this information and analyse real-time data in order to automate and optimise tasks.

AI can also use this real-time data to perform predictive maintenance by identifying potential errors and breakdowns before they occur, potentially saving building owners significant sums in maintenance fees.

DUBAI AT THE FOREFRONT

Dubai’s real estate sector is leading the pack, adopting proptech as part of its growing “smart ecosystem”. The Dubai Land Department, for instance, is now using AI as part of the real estate valuation process, while UAE-based Property Finder has introduced live streaming of property viewings.

Furthermore, SmartCrowd recently became MENA’s first financially regulated real estate investments platform when it acquired a license from the Dubai Financial Services Authority in November 2019.

SmartCrowd allows people to invest in real estate, transferring rental earnings directly to a user’s digital wallet. Its investor base has already grown by 300 per cent, demonstrating the high demand for convenient, easy-to-use smart platforms like this.

 

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Contract awards inevitably slumped in 2020, decreasing by around 60 percent as movement restrictions and supply chain disruption as a result of COVID-19 caused disruption to the national economy.

The kingdom is seeking to take advantage of the global economic recovery to attract international investors and bolster construction activity.

PIF'S FIVE-YEAR PLAN

The PIF's five-year strategy aims to increase the value of its assets under management to USD1.07 trillion. It will commit USD40 billion a year to develop the domestic economy and lessen the burden on the government, which has shouldered much of the country’s capital expenditures over the last few years.

This is particularly important for the construction sector, which suffered from a severe reduction in capital expenditure over the course of the pandemic.

Roshn, a company launched by PIF last year to develop urban communities, is already leading the charge. It started awarding contracts at the end of 2020, working on its first new communities in the capital, Riyadh. Roshn was launched to help Saudi Arabia realise its goal of increasing home ownership to 70 percent by 2030.

NEW OPPORTUNITIES FOR INVESTORS

Saudi Arabia is awash with major new construction projects that will present big opportunities for real estate investors.

One of the biggest is Neom, the kingdom’s innovative sustainable city; the Red Sea Development Project, the Qiddiya entertainment city and the Diriyah Gate project are also in the pipeline. These so-called “gigaprojects” are all backed by the PIF, and hope to make Saudi Arabia extremely attractive to investors, multinationals and tourists.

They are part of the country’s push to wean the national economy away from oil exports, which account for more than half its national income.

 

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It can be a lengthy but rewarding process. Firstly, you buy a property using bank loans or hard cash; then you refurbish it to make it more livable; then you rent your property out; then refinance it. After this, you can cash out on your first rental property in order to fund the acquisition of your second.

Unlike the traditional method of property buying through financing, the BRRRR method is a quicker method for building a property portfolio and earning money on your investment.

The key to the method is buying properties under market value—perhaps by targeting properties in need of heavy refurbishment—and building equity during the rehab phase.

PROS AND CONS

One of the major issues with the BRRRR method is the potentially prohibitive expense. It may require expensive loans in order to purchase a property and further costs when refurbishing it.

Furthermore, there are always risks inherent to relying of refinance. For instance, your property could be appraised for a much lower value than anticipated, while some lenders require lengthy “seasoning” times before a lender allows a cash out refinance.

REAP THE REWARDS

Using the BRRRR method can be time-consuming and even risky, but if done properly the final product is a long-term investment in a property in excellent condition, leaving you to pick up the rewards.

Eventually, once you have invested in properties, you’ll be able to reap to rewards of economies of scale that help you lower your overall costs.

If you’re planning on investing in real estate in the Middle East, the BRRRR method may be an option for you to create a long-term passive income. Be careful, however, to check local laws on property investment to make sure you’re not falling foul of any restrictions.

 

 

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Here are six ways cities in the Middle East are doing just that:

1. UTILISING KINETIC ENERGY

Abu Dhabi Airport is one of a few locations around the world utilising a kinetic-energy system that captures the energy produced by pedestrians. An energy harvesting walkway between two of the airport’s terminals generates clean power with no impact on the environment. This technology could one day appear throughout cities.

2. REDUCING CAR USE

Many cities inside and outside the MENA region are reliant on cars. Projects like Dubai’s high-tech Sustainable City seek to change this by banning cars from most neighbourhoods and relying instead of electric, driverless cars to ferry passengers to and from their workplace.

3. RELYING ON GREEN ENERGY

Abu Dhabi’s Masdar City is an example of a city totally reliant on clean energy. The city is entirely powered by solar and renewable energy, using a 22-hectare field of 87,777 solar panels and utilising efficient rapid transport. It is also a hub for clean technology companies.

4. CREATING WALKABLE CITIES

In its revolutionary Neom project, Saudi Arabia aims to create the city of the future. This innovative new city will be built around pedestrians, relying on 100% clean energy, enabled by modern tech, and integrated with nature. Cars will be totally prohibited, and everything an inhabitant needs to work and live will be just a five-minute walk away from their home.

5. FARMING INDOORS AND UPWARDS

To meet the region’s food needs in a more sustainable way, many cities are turning to vertical farming. MENA’s first vertical urban farm opened in Kuwait in August 2020, producing high-quality and sustainable crops indoors. It uses 90 percent less water than traditional farming, 60 percent less fertilizer, and zero pesticides.

6. EMBRACING LEED CERTIFICATION

LEED certification is an internationally recognised standard for sustainable building practices. Qatar has made it the cornerstone of its eco-friendly “Downtown Doha” project, featuring shaded streets, solar panels and LEED-certified buildings that demonstrate its environmental credentials. Other cities should follow suit!

 

To know more about LEED Certification, click here