Moody's affirms Aldar Properties' Baa2 rating; stable outlook
Moody's has affirmed Aldar Properties’ Baa2 issuer ratings, with the rating outlook remaining ‘stable’, driven by strong property development revenue with unit handovers and inventory sales, illustrating its market leadership position in Abu Dhabi and a resilient buyer profile.
Despite the coronavirus outbreak, Aldar reported solid credit metrics in 2020. As of December 31, 2020, Aldar had an adjusted gross debt to EBITDA of 3.6x and an adjusted fixed charge coverage ratio of 8.0x. Both ratios are well within Moody's guidance for a Baa2 rating. Net operating income from recurring revenue was only down seven per cent mainly due to the impact of closure in retail and hospitality assets in Q1 and Q2 2020. However, in Q1 2021, net operating income from recurring revenue was flat and margin remained stable at 80 per cent.
In 2021, Moody's expects an adjusted gross debt to EBITDA of 3.5x and an adjusted fixed charge coverage ratio of 8.1x. Development management revenue will continue to be supported by the fee based contracts with the government of Abu Dhabi on key public housing and associated community infrastructure projects. Moody's expects rental income will slightly recover in 2021 but downside risk exists if the spread of the virus is not contained.
Given worldwide travel restrictions, hotels are continuing to suffer from weaker international demand. Organisers have rescheduled the World Expo to October 2021 which may help boost tourist numbers again and could increase hotel occupancy rates during the last quarter of 2021.
The resilience of the residential and office portfolio will support rental income in 2021. In the office segment, assets are predominantly Grade A, 63 per cent of GLA is leased to government and government-related entities. Overall, Moody's believes that income generating assets are of good quality which will help the company attract and retain customers.
Aldar Properties' (Aldar) Baa2 rating reflects Moody's view that the company has built a solid business foundation and maintained a conservative financial profile over the last few years. The risks associated with its real estate development business is balanced by its portfolio of recurring income assets. In September 2018, Aldar Investment Properties (AIdar Investments, Baa1 stable) was established as a subsidiary of Aldar to hold and manage its recurring revenue properties.
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