UNITAS CONSULTANCY A GLOBAL CAPITAL PARTNERS GROUP COMPANY

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1 UNITAS CONSULTANCY A GLOBAL CAPITAL PARTNERS GROUP COMPANY Q Abu Dhabi / Dubai: The Two Horsemen This document is provided by Unitas Consultancy solely for the use by its clients. No part of it may be circulated, quoted, or reproduced for distribution outside the organization without prior written approval.

2 Executive Summary An examination of the Abu Dhabi and Dubai real estate market reveals that since 2012, Dubai apartments have experience superior growth rates (2x) to those of Abu Dhabi. Interestingly in the villa segment, capital gains in both cities have mirrored each other indicating that in the horizontal space there is equal value being perceived by investors. In the rental space both cities have followed the same trajectory as prices (June 2012 Feb 2017). Dubai apartment rental rates have appreciated more than 35% since that time, while apartment rates in Abu Dhabi slip back to 2012 levels. In the villa space, rental rates of both cities have moved more or less in tandem over the past 5 years. A comparison between the equity markets of both cities reveals that the ADX general index has outperformed the DFM from June The ADX has returned 35%, whereas the still DFM remains in the red. This relative stability that has been witnessed in Abu Dhabi has been against the backdrop of lower volumes as well as a more stable era of economic growth as well. In the last 5 years, performance between the two indices have converged indicating a closer knit integration between the two cities in terms of economic performance. A yield analysis of freehold areas in both cities reveals that in the villa space Abu Dhabi returns a higher yield, whereas in the apartment segment Dubai has superior returns. Dubai has various mid-income communities (ala International City and Discovery Gardens) that skew the city-wide apartment yields higher. We opine as Abu Dhabi moves towards the roll out of more affordable products, the yields in apartment between both cities will equalize. However, in the villa space the trend is inversed. Abu Dhabi has higher yields relative to Dubai as prices are lower and rental rates are similar. Given the recent wave of affordable launches in the horizontal space in Dubai, we expect yields to inch higher, mirroring those of Abu Dhabi. In 2016, Abu Dhabi expected to deliver 5,000 units in the freehold space, but delivered 3,725 units. Whereas Dubai expected to handover 27,000 units but delivered only 48%. This discrepancy between anticipated completions and actual handovers highlights the over-exaggerated fears of an over supply. The number of units launched in Dubai in the last two years dwarf those of Abu Dhabi in the freehold space. However, this dynamic is expected to change as Abu Dhabi ramps up supply in the mid income segment. It is becoming clear that the state of the freehold markets of the two cities are likely to be symbiotic, reflecting the intertwined economic performance of closer integration. Investors are likely to focus on relative locational advantages during the course of an economic cycle; however it is likely that price cycles are likely to converge in the years ahead.

3 Content 01 Abu Dhabi & Dubai: Estate and Equities Real 02 Abu Dhabi & Dubai: Yield Dynamics 03 A look into the Supply Side 04 Conclusions

4 Abu Dhabi & Dubai: Real Estate and Equities An easy life does not make men, nor does it build nations. Challenges make men, and it is these men who build nations. H.H. Sheikh Mohammed bin Rashid Al Maktoum

5 Abu Dhabi and Dubai: Prices Indices by Segment Dubai and Abu Dhabi: Apartment and Villas Price Index Price Gains by Segment (Jun 12 Dec 16) Dubai (Villas) 22% Dubai (Apartments) 44% Abu Dhabi (Villas) 21% Abu Dhabi (Apartments) Abu Dhabi (Villas) Dubai (Apartments) Dubai (Villas) Abu Dhabi (Apartments) 19% 0% 20% 40% 60% Source: Reidin The above chart examines the returns of the different segments (apartments and villas) within the real estate asset class of Abu Dhabi and Dubai. Since 2012, Dubai apartments have experienced more than double the capital gains compared to Abu Dhabi apartments. Interestingly, however, within the villa category, capital gain in both cities remain at par, indicating that in the horizontal space of the market, there is equal value being perceived by investors.

6 Abu Dhabi and Dubai: Rent Indices by Segment Dubai and Abu Dhabi: Apartment and Villas Rent Index Rent Gains by Segment (Jun 12 Dec 16) Abu Dhabi (Apartments) Abu Dhabi (Villas) Dubai (Apartments) Dubai (Villas) Dubai (Villas) 11% Dubai (Apartments) 36% Abu Dhabi (Villas) 8% Abu Dhabi (Apartments) Source: Reidin -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% Rental rates in both cities have followed the same trajectory as prices since June Dubai apartment rental rates have appreciated more than 35% since that time, while apartment rates in Abu Dhabi have slipped back to 2012 levels. Again, in the villa space, rental rates of both cities have moved more or less in tandem over the past 5 years.

7 Jan-06 Sep-06 Jan-07 Sep-07 Jan-08 Sep-08 Jan-09 Sep-09 Jan-10 Sep-10 Jan-11 Sep-11 Jan-12 Sep-12 Jan-13 Sep-13 Jan-14 Sep-14 Jan-15 Sep-15 Jan-16 Sep-16 Jan-17 ADX and DFM Performance ADX and DFM (2006 Mar 2017) Rent Gains by Segment (Jun 12 Dec 16) 8,000 DFM ADX 2015 to Date 7, to Date 6, to Date 5, to Date 2011 to Date 4, to Date 3, to Date 2, to Date 2007 to Date 1, to Date 0-100% -50% 0% 50% 100% ADX DFM Source: Reidin A look into the index performance of the ADX and DFM reveals that from 2006, the former has had superior gains that the latter. The DFM has been relatively more volatile than the ADX on the upside as well as the downside over the last 11 years. This relative stability that has been witnessed in Abu Dhabi has been against the backdrop of lower volumes as well as a more stable era of economic growth as well. In the last 5 years, performance between the two indices have converged indicating a closer knit integration between the two cities in terms of economic performance.

8 Yield Dynamics Maybe stories are just data with a soul. And maybe I am just a storyteller Brené Brown

9 Abu Dhabi and Dubai: Yield Dynamics by Segment Dubai and Abu Dhabi: Villa Gross Yields Dubai and Abu Dhabi: Apartment Gross Yields 8% 7% 6% 5% 4% 5.4% 5.9% 5.8% 7.0% 6.3% 7.5% 10% 9% 8% 7% 6% 5% 7.4% 6.8% 9.5% 6.8% 7.3% 5.8% 3% 4% 2% 1% 3% 2% 1% 0% Dubai Villas Springs and Meadows Arabian Ranches Abu Dhabi Villas Al Raha Gardens Al Reef 0% Dubai Apartments Dubai Marina International City Abu Dhabi Aparments Al Reem island Al Raha Beach Source: Reidin A closer look into the prevalent gross yields of freehold areas in both cities reveals that in the villa space Abu Dhabi has higher yields, whereas in the apartment space Dubai records the higher figure. In the apartment space Dubai yields are skewed towards the higher end of the spectrum, given its greater preponderance of supply at the mid end of the market (i.e. International City, discovery Gardens, Jumeirah Village). However, we expect this gap to lessen as Aldar makes its move into mid-income projects. In the villa segment, Abu Dhabi has higher yields due to the lower the prices on a per square foot rate and similar rental rates to those of Dubai. We expect Dubai villa yields to increase as well with the new wave of launches in affordable villas and townhouse in areas such as Nshama and Akoya Oxygen.

10 Abu Dhabi and Dubai: Historical Yield Dynamics Abu Dhabi and Dubai: Villa Gross Yields (Jan 2009 Jan 2017) Abu Dhabi and Dubai: Apartment Gross Yields (Jan 2009 Jan 2017) 11% Abu Dhabi (Villas) Dubai (Villas) 10% Abu Dhabi (Apartments) Dubai (Apartments) 10% 9% 9% 9% 8% 8% 8% 7% 7% 6% 7% 5% 6% Source: Reidin The above graph reveals the historical yield rates for Abu Dhabi and Dubai bifurcated by villas and apartments. Within the villa space we witness that Abu Dhabi has consistently yielded higher rental returns than Dubai, although there has been a trend towards convergence. In the apartment space, yields have crisscrossed, although Dubai appears to have the higher yields given the greater choice that it offers in the mid market segment. We expect to see a convergence in both segments between the cities going foreword as both cities adjust supply towards the affordable segment; Dubai towards the villa space and Abu Dhabi towards apartments.

11 A look into the Supply Side The price of light is less than the cost of darkness Arthur C. Nielsen

12 Number of Units Number of Units Abu Dhabi and Dubai: Supply Dynamics Abu Dhabi: Expected Vs Realized Supply Dubai: Expected Vs Realized Supply 9,000 8,000 7,000 6,000 5,000 4,000 3,000 Expected Realized Completetion Rate 80% 70% 60% 50% 40% 30% Completion Rate 30,000 25,000 20,000 15,000 10,000 Expected Realized Completetion Rate 90% 80% 70% 60% 50% 40% 30% Completion Rate 2,000 1,000 20% 10% 5,000 20% 10% % % Abu Dhabi Dubai Source: Reidin The above graph reveals the expected and realized supply of Abu Dhabi and Dubai. In 2016, Abu Dhabi expected to deliver 5,000 units in the freehold space, but delivered 3,725 units. Whereas Dubai expected to handover 27,000 units but delivered only 48%. The realization rates of supply in both cities have been systematically lower, indicating not only the flaw in analyst estimates, but also a greater sensitivity on the part of developers to adjust to market conditions.

13 Number of Units Abu Dhabi and Dubai: Launches in Freehold areas 2015 & 2016 Abu Dhabi and Dubai: Units Launched ,000 Abu Dhabi Dubai 25,000 20,000 15,000 10,000 5,000 - Source: Reidin The number of units launched in Dubai in the last two years dwarf those of Abu Dhabi in the freehold space. However, this dynamic is expected to change in the next 2-3 years, as Abu Dhabi begins to ramp up supply especially in the mid income space. This is expected to increase secondary market activity as well as investors have an increased number of options to choose from. In Dubai, the continuing increase of supply in the freehold space indicates the aggressive pace of urbanization throughout the city as new master planned communities continue to proliferate in the run up to World Expo 2020 event.

14 Conclusions Abu Dhabi & Dubai: Real Estate and Equities Abu Dhabi & Dubai: Yield Dynamics Since 2012, Dubai apartments have experienced more than double the capital gains compared to Abu Dhabi apartments. However, within the villa category, capital gain in both cities remain at par A comparison between Abu Dhabi and Dubai real estate prices over a 11 year period reveals that the latter experienced twice the growth in the apartment segment. While in the villa segment both cities capital gains mirrored each other indicating that in the horizontal space there is equal value being perceived by investors. A look into the index performance of the ADX and DFM reveals that from 2006 the ADX returned 35%, whereas the still DFM remains in the red. In the last 5 years, performance between the two indices have converged indicating a closer knit integration between the two cities in terms of economic performance. A yield analysis of the different residential segments in the two cities reveals that in Dubai apartments have a higher gross yield, whereas in the villa space Abu Dhabi has higher returns. In the apartment space Dubai yields are skewed towards the higher end of the spectrum, given its greater preponderance of supply at the mid end of the market We expect to see a convergence in both segments between the cities going foreword as they adjust supply towards the affordable segment; Dubai towards the villa space and Abu Dhabi towards apartments A look into the Supply Side Conclusion In the rental space both cities have followed the same trajectory as prices (June 2012 Feb 2017). Dubai apartment rental rates have appreciated more than 35% since that time, while apartment rates in Abu Dhabi slip back to 2012 levels In 2016, Abu Dhabi had completion rate of 75% whereas Dubai had 48%. The realization rates of supply in both cities have been systematically lower, indicating not only the flaw in analyst estimates, but also a greater sensitivity on the part of developers to adjust to market conditions. The number of units launched in Dubai in the last two years dwarf those of Abu Dhabi in the freehold space. However, this dynamic is expected to change in the next 2-3 years, as Abu Dhabi begins to ramp up supply especially in the mid income space. Investors have already started to perceive similar economic value in the villa space between the two cities. As Abu Dhabi ramps up supply in the mid income space, it is likely that the price cycles of the two cities will start to converge, reflecting the symbiotic economic performances of the two Emirates. Although relative locational and regulatory advantages may be something that investors focus on during price cycles, the overall market dynamics indicate that prices should start moving in tandem between the two cities in the coming years.

Abu Dhabi / Dubai: The Two Horsemen GCP believes in in-depth planning and discipline as a mechanism to identify and exploit market discrepancy and capitalize

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15 Abu Dhabi / Dubai: The Two Horsemen GCP believes in in-depth planning and discipline as a mechanism to identify and exploit market discrepancy and capitalize on diversified revenue streams. Our purpose is to manage, direct, and create wealth for our clients. GCP is the author for these research reports REIDIN.com is the leading real estate information company focusing on emerging markets. REIDIN.com offers intelligent and user-friendly online information solutions helping professionals access relevant data and information in a timely and cost effective basis. Reidin is the data provider for these research reports Indigo Icon, 1708 Jumeirah Lake Towers, PO Box Dubai, United Arab Emirates Concord Tower, No: 2304, Dubai Media City, PO Box Dubai, United Arab Emirates Tel Fax Tel Fax info@gcp-properties.com info@reidin.com

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DEVELOPMENT MANAGEMENT

Operational Review DEVELOPMENT MANAGEMENT The principal activities of the development business are property development and development management. 2017 HIGHLIGHTS Two major off-plan development launches;