The Abu Dhabi National Oil Company (ADNOC) has entered into a long-term strategic investment with accounts and entities owned and/or advised by Apollo Global Management Inc. and its subsidiaries (collectively “Apollo”) (NYSE: APO), one of the world’s largest alternative investment managers, and a group of institutional investors, for an underlying real estate portfolio valued at $5.5 billion. The strategic investment will leverage the rental income streams from select ADNOC real estate assets under a 24-year master lease agreement. The investment will unlock new pools of global institutional long-term capital for ADNOC, while supporting investment in its core business and strategic growth projects.
In one of the region’s largest real estate transactions, Apollo led a consortium of institutional investors in the acquisition of a 49% stake in Abu Dhabi Property Leasing Holding Company RSC Limited (henceforth referred to as “ADPLHC”), a wholly owned affiliate of ADNOC. Notably, the transaction included no financing, and was placed entirely with insurance and pension fund investors that focus on long-term and high-quality investments. ADNOC will retain a 51% majority stake, maintaining full ownership and control over the select real estate and social infrastructure assets and responsibility for all operations and maintenance. ADPLHC holds the long-term leasehold interests underpinned by the sizeable, diversified portfolio of assets located across the Emirate of Abu Dhabi. The transaction will result in upfront proceeds of $2.7 billion to ADNOC and is expected to close before year-end, subject to customary closing conditions and regulatory approvals.
Commenting on the transaction, His Excellency Dr. Sultan Al Jaber, UAE Minister of Industry and Advanced Technology and ADNOC Group CEO, said: “We are pleased to partner with Apollo and leverage their world-class real estate asset management expertise to achieve international best practice standards in managing and driving cost efficiencies across our real estate portfolio. This strategic partnership allows ADNOC to unlock and monetize significant value from its non-oil and gas strategic infrastructure assets and reinvest into our core business to deliver further growth and realize greater returns.
“The innovative and flexible deal structure ensures ADNOC maintains full ownership and control over its real estate assets, while further strengthening our balance sheet and allowing for greater capital flexibility. This transaction builds on our highly successful and ongoing track-record of attracting leading global institutional capital into the UAE and Abu Dhabi, further solidifying the country’s position as a credible and trusted go-to investment destination for global investors, even in the current unprecedented environment.”
For Apollo, the investment presents a unique opportunity to access high-quality lease assets with a superior, risk-adjusted return profile, and lock in long-term, recurring and stable cashflows from a tenant that is one of the world’s leading and most creditworthy energy companies and a portfolio of assets which is expected to achieve strong occupancy and rental rates. Apollo originated and structured the transaction, drawing upon its ability to navigate complex global market environments and leveraging expertise across its integrated investment platform, including real estate, infrastructure and insurance solutions.
Leon Black, Apollo Chairman, Chief Executive Officer and Founder commented: “We are pleased to invest in ADNOC’s real estate portfolio, simultaneously supporting achievement of their strategic plans while presenting our investors with a highly attractive risk-reward opportunity. Sourcing and structuring a long-term institutional investment of this nature is demonstrative of Apollo’s unique ability to embrace complexity and tailor investments to a company’s specific objectives. In a market where high-quality, long-dated yield is scarce, this transaction allows our institutional and insurance clients, including Athene, to participate in a proprietary investment alongside a world-class company like ADNOC.”
Since announcing the expansion of its partnership and investment model and the more proactive management of its assets and capital in 2017, designed to unlock value for the UAE and Abu Dhabi, ADNOC has entered the debt capital markets for the first time, issuing a $3 billion bond backed by the Abu Dhabi Crude Oil Pipeline; partially floated ADNOC Distribution, the first-ever IPO of an ADNOC Group company; and entered into several strategic partnerships in its drilling, refining, fertilizer and trading businesses, amongst others. ADNOC also recently closed landmark investment partnerships with leading global institutional investors and operators in both its oil and gas pipeline infrastructure.
Today’s milestone agreement is a continuation of ADNOC’s highly successful and attractive infrastructure and real estate investment program and the ongoing delivery of its value creation strategy. The quality and unique, long-term nature of this investment into ADNOC’s underlying real estate assets attracted predominantly international insurance companies to the Apollo-led consortium, reinforcing ADNOC’s role as a catalyst for responsible and sustained investment and value creation for Abu Dhabi and the UAE.