Management (Greg Fewer, CFO and Talal Al Dhuyebi, CDO) of Aldar Properties (Aldar) held a conference call yesterday to discuss the 3Q16 results. Below are the main highlights from the call:   Backlog reached AED4.0bn in September, to be realised before 2018-19. New sales in 3Q16 came in at AED1bn, of which AED0.8bn was completed across Aldar developments and AED0.2bn at West Yas. 84% of all units launched were sold as of the end of September 2016. As of today, 90% of units in Yas Acres phases I and II are sold and 30% of phase III. The two-bedroom offering was a new addition to phase III, which was well-received by the market. As for Mayan phase I: five buildings (525 units) were launched, currently 80% sold. Selling prices at Yas Acres range between AED2.5mn/unit and up to AED8.5mn/unit, with selling prices starting at AED1,100/sqft.   Management sees no pull-back from UAE buyers on the company’s products. Saudi buyers representation has historically been immaterial so it has not been that impacted, but the uptake from non-GCC nationals has picked-up resulting in some dilution to the contribution of UAE nationals. Current buyers mix is: roughly 1/3 from UAE and GCC-nationals, another 1/3 from Arab expats and the remaining 1/3 from Western expats.   Aldar plans to continue to launch c1,500 units per year, in Yas Island and across other projects to cater for buyers’ different needs and widen the client base. Competition is benign, with other developments in Abu Dhabi of a much smaller scale vs. Aldar’s developments (with the exception of Saadiyat’s Lagoons). Further land sales may be seen in the future, owing to Aldar’s large, free-zone, infrastructure-enabled land bank, but management is unable to plan/predict land sale volumes on a quarterly basis.      Management is not concerned about the sequential drop in occupancy at Yas Mall (September: 96%, June: 98%), given that the mall is still in the stabilisation phase. AED11mn was booked in turnover rent in 1H16, while a negligible amount was booked in Q3. Management expects better inflow of turnover rent in January 2017, when the majority of the tenants will have completed one year of operations. There was some softness seen in residential portfolio, which started last quarter according to management, with the premium units the most negatively impacted. Management indicated that parts of the portfolio managed to escape the pressure and saw some rate increases.   Renewals within the office portfolio next year is estimated at c20-25% of rental space. Management has indicated that rental rates within segment is location specific, and was mostly flat. Softness in the office market was limited to the B-grade space, to which Aldar has no exposure. Average rates for renewals is between AED1,700-1,800/sqft, while some legacy long-term leases are at higher rates.  Raha Beach land transaction is behind the significant rise in development property income. Cash related to the transaction is expected to be collected over quarterly instalments through 2018. AED813mn in net revenue was reported from the transaction, which brought in AED458mn in gross profit. No further P&L effect is expected from the transaction.     The target of AED1.6bn in NOI from recurring sources may be at risk, should the performance of the hospitality segment in Q4 continue to be weak and fall short of 4Q15 performance. The segment’s performance was affected by both lower occupancy (-3pps Y-o-Y) and lower ADRs (-11% Y-o-Y) in 9M16. While the long-term story remains attractive, headwinds are seen in the short-term, including increased supply, reduced corporate travel budgets.     Margins on the investment portfolio are seen as sustainable, with GPM at current occupancy yielding 81-82%. That said, management indicated that the application of IFRS 15 has helped margins and so did some lease surrenders on the retail portfolio. Loss from adjacent business came on the back of cost overruns reported on the company’s contracting business.      Aldar Properties (AD): AED2.65 as of 9 Nov 2016, Rating: Buy, FV: AED3.46/share, MCap: USD5,677mn, ALDAR UH / ALDR.AD