Adnoc signs $5.5bn property deal with Apollo Global Management

Dr Sultan Al Jaber on Sunday chaired the first meeting of the new board of the Emirates Development Bank’s. Courtesy: Adnoc

Abu Dhabi National Oil Company signed an agreement worth $5.5 billion (Dh20.2bn) with Apollo Global Management to lease some of its properties on a long term basis, as part of its plans to unlock capital from its non-core assets.

The New York-based alternative asset manager and its subsidiaries will receive rental income streams from select Adnoc properties over a period of 24 years.

The investment, which follows a $20.7bn transaction involving Adnoc’s gas pipelines this year, will “unlock new pools of global institutional long-term capital,” the company said on Wednesday.

Direct upfront proceeds of $2.7bn will flow to Adnoc from the transaction. HSBC and Moelis & Company acted as independent financial advisers on the transaction.

Apollo will take a 49 per cent stake in Adnoc affiliate, Abu Dhabi Property Leasing Holding Company.

“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,” said Dr Sultan Al Jaber, UAE Minister of Industry and Advanced Technology and Adnoc Group chief executive.

"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,” he said.

Adnoc’s latest transaction has "no financing” and was placed entirely with insurance and pension fund investors focusing on long-term and high quality investments, the company said.

The state oil company will retain a 51 per cent stake and hold full ownership and control over the real estate and social infrastructure assets included as part of the deal. Adnoc will also be responsible for all operations and maintenance. The transaction is pending customary closing conditions and regulatory approvals.

Apollo “originated and structured the transaction”, tapping its ability to navigate a complex set of market environment and leveraging its expertise across an integrated platform that includes "real estate, infrastructure and insurance solutions”, Adnoc said.

"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,” said Leon Black, Apollo chairman and chief executive officer.

Apollo joins a long list of global institutional investors who have participated in Adnoc’s efforts to unlock new sources of capital from various infrastructure assets.

Earlier this year, Adnoc also attracted a group of investors to its midstream sector. A consortium of the world’s leading infrastructure and sovereign wealth funds signed an agreement worth $20.7bn in June to invest in Abu Dhabi’s natural gas pipeline infrastructure. The infrastructure deal, which followed a similar transaction involving Adnoc’s oil pipelines in 2019, is the largest in the energy sector so far this year.

Investors such as Global Infrastructure Partners, Brookfield Asset Management, Singapore’s sovereign wealth fund GIC, the Ontario Teachers’ Pension Plan Board, South Korea's NH Investment & Securities and Italy’s Snam bought into the infrastructure deal, which resulted in upfront proceeds of $10bn for the company.

In 2019, a $5bn transaction involving Adnoc’s oil pipelines, attracted leading global private equity players such as BlackRock and KKR.

Adnoc also agreed to form a joint venture with Abu Dhabi holding company ADQ earlier this year to hasten the development of chemicals manufacturing at Ruwais.