Abu Dhabi's pension fund partners with Adnoc in $900m real estate deal

Abu Dhabi National Oil Company attracted investment into its non-core real estate assets last year from Apollo Global Management and subsidiaries

Adnoc is the main supplier of natural gas to industries in the UAE and accounts for over two-thirds of supply. Courtesy: Adnoc
Powered by automated translation

Abu Dhabi National Oil Company is teaming up with the emirate's pension fund, which has become an investor in its real estate assets following a $900 million transaction.

Abu Dhabi Pension Fund, which manages the savings of UAE citizens, will take a 31 per cent share in Abu Dhabi Energy Real Estate Company, the entity created to hold Adnoc’s 51 per cent stake in Abu Dhabi Property Leasing Holding Company (ADPLHC).

ADPLHC was formed after Adnoc signed an agreement worth $5.5 billion with Apollo Global Management last year to lease some of its properties on a long term basis, as part of its plans to unlock capital from its non-core assets

Adnoc attracted investment into its non-core real estate assets last year from the New York-headquartered alternative asset manager and a group of institutional investors.

Apollo and its subsidiaries will receive rental income streams from select Adnoc properties over a period of 24 years. The deal unlocked direct upfront proceeds of $2.7bn last year.

Adnoc controls its 51 per cent interest in the real estate deal through the Abu Dhabi Energy Real Estate Company. There will be no change in the interests of Apollo and its partners, who will continue to receive rental income from their 49 per cent interest in ADPLHC.

The transaction with the pension fund would allow Adnoc "to unlock and drive incremental value" from its energy infrastructure and real estate asset base, said Dr Sultan Al Jaber, UAE minister of industry and advanced technology and group chief executive at Adnoc.

"The creation of our real estate investment partnership with Apollo last year enabled Adnoc to monetise its non-oil and gas strategic infrastructure assets and reinvest the proceeds into our core business to deliver further growth" he added.

The partnership allowed the national oil company to have "greater flexibility", while strengthening its balance sheet.

The deal is the third such transaction with Adnoc for ADPF, which has previously invested in Adnoc's gas and oil pipelines, which attracted international institutional investment.

In 2020, the fund, alongside Abu Dhabi's ADQ, one of the largest holding companies in the Gulf invested $2.1bn in the emirate's natural gas pipeline infrastructure.

Adnoc had earlier opened up its gas pipelines to foreign investment, attracting $20.7bn in the largest energy infrastructure deal last year. The transaction unlocked $10.1bn worth of proceeds for the UAE economy.

In 2019, ADPF invested nearly $300m in Adnoc's oil pipeline infrastructure. It joined some of the world's largest private equity companies, BlackRock and KKR in a $4bn transaction.

The latest investment was in line with the fund's strategy of "investing in high-quality diversified portfolios", said Jassim Buatabh, chairman of the board at ADPF.

Adnoc has looked to drive value for local investors. The company floated shares in its distribution business in 2017, in the first initial public offering within the group. Earlier that year, the national oil company also entered the debt markets for the first time, issuing a $3bn bond, which is backed by the Abu Dhabi Oil Pipeline.

In an interview with The National in September, Adnoc Group chief financial officer Ahmed Al Zaabi said the company is committed to providing opportunities for local investors as its efforts to attract foreign capital pick up pace.

Adnoc attracted a total of $16.8bn in foreign direct investment to the UAE last year from its multibillion dollar transactions with global asset managers.