Moody's affirms Aldar Investment Properties' rating on expanding diversified portfolio

Apollo, one of the world’s largest alternative investment managers, plans to invest $1.4 billion in Aldar Properties

Bond issuance by Aldar Investment Properties will help the company to grow its investment property portfolio. Photo: Sammy Dallal / The National

Moody's Investors Service affirmed Aldar Investment Properties' Baa1 ratings, the highest credit rating for a non-government company in the region, on the back of its expanding portfolio of diversified investment properties.

The rating agency also assigned a Baa3 rating to Aldar Investments Hybrid, which is issuing proposed $500 million subordinated perpetual notes that will be guaranteed by Aldar Investment Properties, Moody’s said in a statement on Tuesday.

"The proposed hybrid will support Aldar Investment Properties’ strategy to grow its investment property portfolio, while diversifying funding sources and maintaining prudent financial policies,” said Lahlou Meksaoui, a vice president at Moody's.

“It demonstrates its good access to capital with Apollo Global Management as a strategic partner."

The issuance of hybrid notes is part of several other transactions with Apollo Global Management, and these proceeds will “primarily be used for the acquisition of income generating assets in Abu Dhabi and the rest of the UAE in 2022”, the ratings agency said.

In February, Apollo, one of the world’s largest alternative investment managers, agreed to invest $1.4 billion through some of its funds and clients in Aldar Properties. The deal represents one of the largest foreign direct investments in Abu Dhabi’s private sector.

The investment allocates $500m to a land joint venture, $500m to perpetual subordinated notes issued by Aldar Investment Properties, $300m in mandatory convertible preferred equity investment in Aldar Investment Properties and $100m in common equity investment in Aldar Investment Properties, the company said at the time.

As part of the deal, Apollo is taking a direct minority stake in Aldar Investment Properties with a $400m equity investment at its net asset value. The transaction is expected to close by the end of this month.

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Aldar's Abu Dhabi projects

The Ansam development on Yas Island. Photo: Aldar

Lea, located on the northern shores of Yas Island. Photo: Aldar

The Mayan development on Yas Island. Photo: Aldar Properties

Noya, a residential community on Yas Island. Photo: Aldar Properties

The Water’s Edge project on Yas Island. Photo: Aldar

The West Yas waterfront on Yas Island. Photo: Aldar Properties

The Mamsha Al Saadiyat development. Khushnum Bhandari / The National

Saadiyat Reserve. Photo: Aldar

The Arc, left, part of the Shams complex on Al Reem Island. Christopher Pike / The National

Meera at Shams Abu Dhabi on Reem Island. Photo: Aldar Properties

The Reflection development on Al Reem Island. Photo: Aldar

Sun and Sky Towers on Al Reem Island. Ravindranath K / The National

The Bridges on Reem Island. Photo: Aldar

The Gate Towers on Reem Island. Delores Johnson / The National

Al Muneera at Al Raha Beach in Abu Dhabi. Photo: Better Homes

Al Zeina apartment blocks at Al Raha Beach. Ravindranath K / The National

Al Hadeel apartment complex at Al Raha Beach.

Aldar’s Al Rayyana development. Photo: Aldar

Al Ghadeer residential area in Abu Dhabi. Pawan Singh / The National

The Eastern Mangroves. Photo: TDIC

A rendering of Nareel Island, one of three new residential projects being developed by Aldar Properties in Abu Dhabi. Photo: Aldar

Villas at Sas Al Nakhl in Abu Dhabi. Galen Clarke / The National

The World Trade Centre building and Burj Mohammed Bin Rashid tower. Mona Al Marzooqi / The National

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Aldar said it will receive significant cash proceeds that will be used to drive further growth.

Moody’s said Aldar Investment Properties' rating reflects the “increased size and diversification of its investment property portfolio considering the expected acquisition of income generating assets, which will result in immediate cash flow generation”.

The proposed hybrid will support Aldar Investment Properties’ strategy to grow its investment property portfolio, while diversifying funding sources and maintaining prudent financial policies

Lahlou Meksaoui,
vice president, Moody's Investors Service

The ratings agency estimates that the company’s adjusted gross debt to total assets ratio will be at 39.7 per cent as a result of these transactions in 2022.

The deals will also “strengthen” parent Aldar Properties' business risk profile as it would increase the “percentage of recurring revenue and decrease the percentage of property development revenue which is more cyclical”.

Moody's expects Aldar Properties' Baa2 rating to remain unchanged after the completion of these market transactions.

“This landmark transaction [with Apollo] is a signal to the world’s investment community that Abu Dhabi’s real estate market is on a growth trajectory, supported by significant economic and social reforms, and a world-leading response to Covid-19," Aldar group chief executive Talal Al Dhiyebi said in February.

The property market in the UAE, the second-biggest Arab economy, has made a strong recovery from the pandemic-induced slowdown.

Abu Dhabi registered real estate transactions worth Dh71.5bn ($19.4bn) in 2021, with the total number of deals across sales and mortgages reaching 14,958 last year, according to Abu Dhabi's Department of Municipalities and Transport.

Pent-up demand and improved investor sentiment have also helped drive property sales in Abu Dhabi. New initiatives, such as visas for retirees and the expansion of the 10-year golden visa programme, are expected to further support the property market, industry experts say.